Five countries in courts including the US and the UK have given recognition to an arbitration award that asked India to return $1.4 billion to Cairn Energy plc. It is a step that opens the possibility of the British firm seizing Indian assets in those countries, if New Delhi does not pay.
Cairn Energy had moved to courts in nine countries to enforce its $1.4 billion arbitral award against India, which the company won after a dispute with the country’s revenue authority over a retroactively applied capital gains tax. The company has started the process to register the award in Japan, Singapore, Cayman Islands, United Arab Emirates. The registration of the award is a step towards its enforcement in the event of the government not paying the firm.
Once the court recognizes an arbitration award, the company can then seize any Indian government assets such as airplanes, bank accounts, payments to state-owned entities and ships to recover the monies. Still the government have not directly commented on challenging the Cairn arbitration award but Finance Minister Nirmala Sitharaman had indicated of going for an appeal last week. Shareholders of Cairn want the company to go for enforcement action if New Delhi fails to pay.
Cairn company’s spokesperson said “BNiegin 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 and is taking all the necessary steps to protect their shareholder’s interests.” The Cairn award was unanimous with all three judges including one appointed by the Indian government consenting. The 582-page order gave detailed reasoning on the very point of the challenge brought by the Indian government, including the point that taxation did not form part of the bilateral investment treaties.
