InvestorQ : Why is India planning to file an appeal against the Cairn arbitration award?
Dilmini Mercia made post

Why is India planning to file an appeal against the Cairn arbitration award?

Answer
image
Dawn Cherian answered.
4 months ago
Follow

Indian government has decided to officially file an appeal against the Cairn arbitration award. It may be recollected that towards the last week of December, the Arbitration Tribunal had ruled that India must refund the $1.2 billion of Cairn it had withheld along with interest and penal charges as applicable.

In the meanwhile, there have also been attempts from the Cairn to smoothen things out considering their long-term interests in the India economy. In fact, Simon Thomson the CEO of Cairn Energy even met the Finance Secretary A B Pandey on Friday to discuss ways and means of sorting out the issue amicably.

For the time being, the government is quite clear that it will contest suits filed by Cairn Energy at various other international forums. As of now, Cairn Energy has already filed cases in the US, the UK, and the Netherlands on executing the December 21 award. The idea is to force India to treat the tribunal order as enforceable akin to any top court order.

Indian government continues to hold the view that Cairn had conducted transactions and routed funds via tax havens to evade taxes. Hence while they could be FDI in form, in substance it was just a transaction to route money through tax havens which is against the basic spirit of the Indo-UK treaty. India has a window till 21 to file an appeal under the 90-day window.

While the Indian government may be having multiple legal options, Cairn Energy is under pressure from its investors and shareholders to recover the money quickly as it was affecting the cash flows and the valuations of Cairn Energy PLC. A court order would give Cairn powers to seize Indian assets like bank accounts, aircraft, ships etc. However, this is usually avoided as it has larger diplomatic implications.

The case pertains to the Rs.24,500-crore demand as capital gains tax that the Indian government has imposed on Cairn Energy at the time of reorganization in 2006-07. Against these dues, the Indian government has seized dividend as well as tax refund and also sold some of their shares to recovery part of the amount
0 Views