The registration of the arbitration award was acknowledged by New Delhi on January 19
Under Dutch law, the grounds for setting aside an arbitral award are extremely narrow
India has time till mid-April to file an appeal against an international arbitration tribunal ordering it to repay UK's Cairn Energy Plc USD 1.2 billion-plus interest and cost, but the challenge can only be on limited grounds such as procedure not being followed.
The award from a three-member tribunal at the Permanent Court of Arbitration at The Hague invalidating India's ₹10,247 crore tax claim on Cairn Energy and ordering the government to return the value of shares it had sold, dividends seized and tax refunds withheld, was registered in the Netherlands on January 8, two people aware of the matter said.
The registration of the arbitration award was acknowledged by New Delhi on January 19, they said adding an appeal against the award can be filed in 90-days of those two dates.
Under Dutch law, the grounds for setting aside an arbitral award are extremely narrow, tax experts said.
An arbitral award may only be set aside if the panel had not followed due process such as not giving enough opportunity to either side to present their case.
In the Cairn arbitration case, the tribunal, which constituted of one neutral judge and the other two being named by Cairn and India, concluded formal hearings and submissions in 2018 and allowed parties to make written counter-arguments for more than a year thereafter and for months studied claims and counterclaims before delivering the judgment on December 21, 2020.
They said the award, under Dutch law, can also be set aside on grounds of there being no valid arbitration agreement, rules for the composition to the tribunal not being observed, tribunal exceeding its mandate, the award not being signed or not reasoned, and the order or the manner in which it is arrived at is contrary to public policy or public morals.
The Cairn award runs into 582 pages giving detailed reasons as to how the company wasn't in violation of any prevalent law when it 2006-07 it reorganised its India business prior to its listing, and how the government used a 2012 retrospective tax legislation to raise the tax demand.
Finance Minister Nirmala Sitharaman had earlier this month indicated of government's intent of appealing against the award on grounds of it questioning the sovereign powers of India to levy taxes.
Her ministry feels taxation is not a subject of bilateral investment treaties, like the UK-India Bilateral Investment Treaty under which Cairn had sought rescinding of the tax demand raised, and so the award should be appealed.
It is of the opinion that Cairn set up a tax abusive structure and did not pay taxes anywhere in the world on the gains that it made in India, they said adding India had made an unsuccessful case of tax not being part of the treaty before the arbitration panel as well.
The arbitration award specifically made it clear the base of the judgment was not a challenge to the 2012 law or India's sovereign right to tax.
"The issue at stake is thus not a matter of domestic tax law, it is rather whether the fiscal measures taken by the state, valid or not under its own tax laws, violate international law," the tribunal had said in a unanimous verdict.
The Hague panel found that a 2012 law passed by the Indian Parliament was a new tax, not a clarification of prior law that could be applied to earlier years.
Tax experts said the award may be revoked if after the award is made it is discovered that the order was based on fraud committed during the arbitral proceedings or was based on forged documents, or a party obtained documents that would have had an influence on the tribunal and which were withheld as a result of acts of the other party.
Cairn has moved courts in nine countries to enforce the award against India. The award has already been recognised by courts in the US, the UK, Netherlands, Canada and France and the same is in the process in Singapore, Japan, the United Arab Emirates and the Cayman Islands.
The registration of the award is the first step towards its enforcement in the event of the government not paying the firm.
Once the court recognises an arbitration award, the company can then petition it for seizing any Indian government assets such as bank accounts, payments to state-owned entities, airplanes and ships in those jurisdictions, to recover the monies due to it, sources said.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!