New Delhi: Courts in five countries including the US and the UK have given recognition to an arbitration award. The arbitration award has asked India to return USD 1.4 billion to Cairn Energy plc. This development opens the possibility of the British firm seizing Indian assets in those countries if New Delhi does not pay, sources said.
Cairn Energy had moved courts in nine countries to enforce its USD 1.4 billion arbitral award against India, which the company won after a dispute with India’s revenue authority over a retroactively applied capital gains tax.
Of these, the December 21 award from a three-member tribunal at the Permanent Court of Arbitration in the Netherlands has been recognised and confirmed by courts in the US, the UK, Netherlands, Canada and France, three people with knowledge of the matter said. Cairn has started the process to register the award in Singapore, Japan, the United Arab Emirates and Cayman Islands, they informed.
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, officials said.
So far the Indian government has not directly commented on honouring or challenging the Cairn arbitration award. However, Finance Minister Nirmala Sitharaman had last week indicated of going in for an appeal. She indicated the government’s intent to appeal against the award when she said it is her ‘duty’ to appeal in cases where the nation’s sovereign authority to tax is questioned
Cairn’s shareholders include top financial institutions of the world. They want the company to go for enforcement action should New Delhi fail to pay it.
The company’s spokesperson wasn’t reachable for comments. However, Cairn had Sunday stated that it will ‘begin meetings this week with shareholders in the UK and US, with the international arbitration award high on the agenda’.
“The company met the Government of India last month. It is taking all the necessary steps to protect their shareholders’ interests,” Cairn had said.
The tribunal had December 21 ruled that the Indian government breached an investment treaty with the UK. It was therefore liable to return the value of shares it had seized and sold, dividend confiscated and tax refund stopped to adjust a Rs 10,247 crore tax demand.
Cairn in its filings to the courts in the nine countries is seeking ‘to confirm this final and binding award under the New York Convention and commence enforcement proceedings to recover the losses caused by (India’s) unfair and inequitable treatment of their investments’.