After discussions with the government over the last few days, Cairn Energy Plc said on Sunday it was hopeful that an acceptable solution to its tax dispute with the Indian government can be found, in order to avoid further prolonging and exacerbating the “negative issue” for all parties. However, the company said it was clear that it should continue to take all necessary steps to protect the interests of its shareholders.
It also said it was looking forward to being able to move on to further opportunities to invest in India, which continues to import the majority of the energy sources it consumes assuming a resolution to the dispute can be achieved. “Notwithstanding and without prejudice to our rights under the international arbitration award, we have discussed a number of proposals with the aim of finding a swift resolution that could be mutually acceptable to the Government of India and the interests of Cairn’s shareholders. Assuming such a resolution can be achieved, we look forward to being able to move on to further opportunities to invest in India which continues to import the majority of the energy sources it consumes,” Cairn Energy said in a statement.
The Indian government had lost an international arbitration case to energy giant Cairn Plc under the retrospective tax legislation amendment in a verdict on December 21.
The company said the freezing of its assets in 2014 to enforce a retrospective tax measure has been extremely negative for all parties, and that it was “very keen to be able to put this legacy matter behind us and move forward positively”.
An international arbitration seated in 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, being $1.2 billion, plus significant interest and costs, noted the company. “That arbitration also ruled decisively that this matter falls within the jurisdiction of the UK-India Treaty, having heard arguments from the parties on that subject. We have had cordial and constructive discussions in Delhi over the last few days with officials from the Ministry of Finance.”
Cairn said it enjoyed a long and successful history operating in India, investing billions of dollars and the business it created in India has generated more than $20 billion in revenues for the government.
While both the sides had hardened their stands by Cairn Energy filing for enforcement of a December arbitration award against the Indian government, India’s revenue department has been preparing to file an appeal against the award. It is likely to file an appeal at The Hague by around March 10 and is in talks with senior Dutch lawyers. New Delhi has time till March 21 to file an appeal in accordance with a 90-day window.
The award will likely be contested on two key grounds – jurisdiction and international public policy. Thomson had, however, in a video message last week, expressed willingness to meet Sitharaman though the minister passed it on to the finance secretary.
Cairn Energy has filed a case in a US district court to implement the arbitration award. Earlier, the Edinburgh-based company had filed a similar case in a Dutch court.
In the appeal, India is expected to take a stand that the government has the sovereign right of taxation and private individuals cannot decide on that.
According to the Centre, the award 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.