Cairn Says Final Drafting Of Arbitration Award Against Retro Tax In Process
Cairn is seeking a compensation of $1.4 billion from the Indian government in the arbitration proceedings.
British oil firm Cairn Energy today said an international arbitration tribunal is in the process of drafting a final award in its challenge to the Indian government using retrospective legislation to seek Rs 10,247 crore in taxes.
It, however, didn't say when the award was expected.
In an operational update, Cairn said it's seeking monetary compensation of $1.4 billion from the Indian government in the arbitration proceedings.
Cairn Energy's 4.95 percent stake in mining major Vedanta was attached by the Income Tax Department shortly after issuing Rs 10,247-crore tax demand in January 2014 on alleged capital gains the British firm made on a decade-old reorganisation of its India business.
The Income Tax Department, beginning May 2018, has sold most of the Cairn shares to recover tax dues.
The share sale happened during the pendency of the challenge Cairn had mounted against the retrospective tax demand with a three-member arbitration tribunal. One member of the panel has been named by the government of India.
"All submissions and procedural steps for the international arbitration under the UK-India Bilateral Investment Treaty are now complete," Cairn said in the update. "Drafting of the final award by the tribunal is ongoing."
The company said it is seeking under the treaty a monetary compensation of $1.4 billion—the sum required to reinstate the company to the position it would have been in, but for the actions of the Income Tax Department since January 2014.
"Cairn continues to have a high-level of confidence in the merits of its claims in the arbitration," it said.
In January 2014, Cairn received notice from the Income Tax Department, requesting information relating to the group reorganisation in 2006. The department attached the 10 percent shareholding in Cairn India, which was subsequently merged with its parent Vedanta. Cairn Energy held 4.95 percent stake in Vedanta after that move.
"We strongly contest the basis of the tax assessment order, supported by detailed legal advice on the strength of the legal protections available under international law. As such, the company has a high level of confidence in its case under the U.K.-India Investment Treaty which seeks the restitution of the full value of our assets," the company said in a statement.
The final arbitration hearings were held in August 2018 in The Hague. The Arbitral Tribunal will issue a binding and internationally-enforceable award.