Britain’s Cairn Energy Plc freezing of Cairn assets in 2014 to enforce a retrospective tax measure has been extremely painful for all parties, and the company top executive had stated earlier that they are very keen to be able to put this legacy matter behind and move forward positively.
CEO, Simon Thomson in his twitter post had writter earlier, Cairn Energy has enjoyed a long and successful history operating in India, investing billions of dollars, bringing employment and benefitting local communities. The business we created in India has generated more than $20billion in revenues from the Government of India.
Cairn Energy had moved in multiple jurisdictions overseas to recover the amount due by seizing Indian government assets in France. According to reports from France, the company today secured a French court order to seize about 20 Indian government properties in France to recover a part of $1.7 billion arbitration award, according to reports emerging from France on Thursday.
The dispute dates back to 2015 when the Indian government sent a notice to Cairn Energy Plc regarding a retrospective tax demand. Five years later, on December 21, 2020, India was ordered to return up to $1.4 billion (with interest) to the UK company after an international arbitration overturned India’s retrospective tax demand.
However, the government has filed an appeal against the arbitration verdict in favour of Cairn Energy at The Hague in March. The ground for the appeal was based on India’s sovereign right to tax an entity and on grounds of tax avoidance by the UK oil major.
Based on the appeal, the government has sought a stay on enforcement of the award filed by Cairn in a lower Dutch court, and it is also ready to contest the enforcement in at least eight other jurisdictions including the UK, Canada, the US and France.
The Hague and constituted under the terms of the UK-India Bilateral Investment Treaty has ruled conclusively on the matter and issued a final and binding award in Cairn’s favour ordering the refund of the value of the assets taken according to Cairn Energy in a series of tweets in Feb 20, 2021.
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Cairn India began its operation in the country over two decades ago and finally merged with mining giant Vedanta Ltd in an all-share deal in 2017. The oil exploration and development company is credited with discovering many onshore oil fields in the country.
The initial tax dispute case dates a long way back to 2006-2007 when Cairn UK had transferred shares of Cairn India Holdings to Cairn India. It may be noted that this internal reorganising of assets happened before Cairn India was listed in Indian stock markets.
On June 11, the French court had ordered Cairn Energy’s take-over of Indian government properties, mostly comprising flats; and the legal process got completed on Wednesday evening.
An arbitration panel had in December ordered the Indian government to return USD 1.2 billion plus interest and penalty to Cairn Energy after reversing a retrospective tax demand.
