India firms up grounds for appeal in Cairn Award, to file appeal this week

Times Now News - 08 March 2021

India firms up grounds for appeal in Cairn Award, to file appeal this week
By Ruchi Bhatia

Cairn CEO Simon Thomson met top finance ministry officials last month took to Twitter and said that the company expected India to honour its obligation.

India will be filing an appeal at The Hague this week against the $1.4-billion arbitration award against British oil firm Cairn Energy. The appeal assumes significance after the company said that they will kickstart meetings with shareholders this week and warned of strong powers of enforcement to recover the award from the Indian government.

ET Now learns that the Union government has finalized the grounds for appeal against the award and is in the final leg of discussions with the Dutch counsels. It will also contest the enforcement in eight other jurisdictions including the US, UK, Canada and France against the multiple cases filed by Cairn Energy.

Finance Minister Nirmala Sitharaman had said last week that it was the government’s "duty" to appeal in cases where the nation’s sovereign authority to tax is questioned.

Following the December 21 arbitration award, Cairn Energy filed multiple cases in the US, the UK, Netherlands, Canada, France, Singapore, Japan, the United Arab Emirates and Cayman Islands to press India for the award. The company even threatened to seize Indian government assets such as aircrafts, ships, bank accounts to recover the award.

“We are ready to file an appeal, based on which we will try to get a stay on the enforcement of the award and contest the case in other jurisdictions. It is not going to be easy to get sovereign assets seized as India is not a signatory to the International Centre for Settlement of Investment Disputes (ICSID) convention,” said a government official.

In the appeal at The Hague, India is expected to take a stand that the government has the sovereign right of taxation and private individuals cannot decide on that. Besides, it falls outside the domain of a bilateral investment treaty and beyond the jurisdiction of international arbitration. Also, the government is likely to invoke international public policy, arguing that Cairn did not pay tax in any jurisdiction across the globe.

Cairn CEO Simon Thomson met top finance ministry officials last month took to Twitter and said that the company expected India to honour its obligation. “Our shareholders expect India to honour its obligations and to quickly bring this matter to a conclusion,” he said.

The government had lost an international arbitration case to Cairn Plc under the retrospective tax legislation amendment. The case pertains to the Rs 24,500-crore tax demand on capital gains made by the oil major in reorganising its India business in 2006-07.

source: Times Now News