The British energy company assures Center that it will only freeze assets if India does not discuss paying the amount awarded by the court
The British energy company assures Center that it will only freeze assets if India does not discuss paying the amount awarded by the court
A month after British company Cairn Energy Plc won a $1.2 billion international arbitration award against India in the retrospective taxation case, it was threatened with possible forced seizure of Indian assets, including bank accounts in various capitals around the world, unless the government solves the problem.
In a letter to the Indian High Commission in London this week, which was also sent to the Prime Minister’s Office, the Foreign Office and the Treasury Department
The Hindu Cairn Energy’s top leadership said the “necessary preparations have been made” for the court decision to be “enforceable against Indian assets in numerous jurisdictions around the world” if India does not speak about paying the awarded amount.
Attaching aircraft, ships
According to sources, the assets already under consideration could include embassy bank accounts, non-diplomatic premises, Air India planes and state-owned ships in several locations including the UK, Holland, France, Canada and the US, similar to similar measures taken against the The Plane of Pakistan International Airlines (PIA), which was seized in Malaysia earlier this month over a dispute with an Irish company, or the Venezuelan ship seizure ordered by a court in 2018 in favor of US company ConocoPhillips.
However, the letter stressed that Cairn would only consider this extreme option if the Indian government does not respond, as it is under pressure from its shareholders who “expect a solution soon”. The letter also cited clauses in the UK-India bilateral investment treaty, the UNCITRAL Arbitration Rules and the New York Convention to which India has signed that would be breached if India failed to pay the fees, which are reported to be around $220 million accrued Interest on top of the $1.2 billion premium. When asked, Cairn Energy CEO Simon Thomson said the company’s legacy and partnership in India “have been severely damaged by the post-tax dispute over the last seven years”.
“The Government of India has stated on several occasions that it would respect the legal process – our international shareholders now expect India to recognize the award,” he said in a written response
The Hindu .
The three-person arbitral tribunal of the Permanent Court of Arbitration (PCA) in The Hague, which rendered its judgment on December 21, 2020, had ruled unanimously in favor of Cairn Energy Plc and against the Indian government, ruling that the tax levied had failed the bilateral Investment Pact and also awarded Cairn $1.2 billion in damages for the tax authorities’ decision to seize the company’s shares by force and then sell them and freeze dividend payments and tax refunds to collect disputed tax fees.
Despite several petitions to the NDA government, Cairn had been unable to reverse the penalties and decided to go to The Hague.
‘Considering’
The MEA did not respond to a request for comment from
The Hindu , but it is understood the government has told Cairn Energy officials that the “matter is under review”. In response to the PCA ruling in December, the Treasury Department said the government would carefully review the award and all its aspects in consultation with its lawyers and “take a decision on how to proceed, including appeals in appropriate forums”.
In a similar arbitration it lost against Vodafone, the government has appealed to a Singapore court to defend the back tax claim against the telecom company, and officials have emphasized that the government’s sovereign right to levy taxes in cannot be called into question within the framework of bilateral pacts.
However, sources said that under the arbitration rules, Cairn Energy could proceed to enforce the award even if India files a challenge.
The issue was scheduled to be on the agenda during British Prime Minister Boris Johnson’s visit to India this month, which had to be postponed due to the coronavirus pandemic, and had been discussed at length between former British Prime Minister Theresa May and Prime Minister Narendra Modi during his visit in London in April 2018. Cairn officials also met with Indian High Commissioner to the UK Gaitri Issar Kumar on January 20 to advocate for a resolution, citing former Mr Modi (now deceased) Finance Minister Arun at every opportunity Jaitley and other senior officials had promised to respect the outcome of the case.
“The money in dispute and now in arbitration ultimately belongs to Cairn’s shareholders, so the impact of the award and India’s recognition extends far beyond Cairn and spreads further in the international investor community,” Cairn’s letter to the government and said specifically mentioned their shareholders, which included global investors BlackRock, Fidelity, Franklin Templeton, MFS, Schroeders, Legal and General, Aviva and Aberdeen Standard, noting that their actions would not only harm India’s reputation if high quality assets being forfeited or frozen bank accounts could affect future foreign investments in the country.
