Cairn Energy, based in the United Kingdom has identified USD 70 billion in Indian assets abroad for possible seizure, in order to collect USD 1.72 billion owed to the government. If successful, India will join Pakistan and Venezuela in facing similar enforcement action for failing to pay arbitration verdicts. According to three people acquainted with the situation, the assets mentioned include Air India planes, Shipping Corporation of India, state-owned bank properties and PSU oil and gas cargoes. They stated the assets are spread across a number of jurisdictions but didn’t elaborate. In the absence of the Indian government’s unwillingness to honour an international arbitration award, Cairn aims to relocate the US courts to Singapore, for the seizure of the assets.
“Naturally, the Indian government will contest the seizure, but in order to save the assets, it may have to pawn money equivalent to the assets’ worth in some form of financial security, such as a bank guarantee. If the court finds no validity in Cairn’s petition, the court will return the guarantee to India. However, if the court determines that India has failed to meet its obligations, the surety would be transferred to Cairn” according to a source. Cairn has an international arbitration award lodged in the US, UK, France, the Netherlands, Singapore, Mauritius, Canada’s Quebec province, Japan and the UAE, which rejected the assessment of retrospective taxes and ordered New Delhi to repay the value of shares it had sold, dividends seized, and tax refunds withheld to recover such taxes. It has now begun seeking a declaration from the courts that state-owned entities are India’s alter egos and that they should be held accountable for the discharge of the arbitral award if the government fails to pay. Cairn filed a lawsuit in New York on May 14, to have Air India recognised as India’s alter ego and to have Air India held jointly and severally accountable for India’s debts, including any judgement coming from acknowledgment of the award. Once a court recognises Air India as the Indian government’s alter ego, Cairn can seek attachment or seizure of Air India’s assets in the United States, including aeroplanes, real estate and bank accounts, in order to recover the money awarded by the arbitration tribunal.
A British Virgin Islands court ordered in December last year that hotels held by Pakistan International Airlines in New York and Paris be used to settle a claim against Pakistan’s government by a Canadian-Chilean copper firm. Elliott Management, a buccaneering American hedge firm that held distressed Argentine assets, hijacked a beautiful tall ship from Argentina’s navy in 2012. A stifled creditor may recently grab a business jet belonging to the government of Congo-Brazzaville while it was being serviced at a French airport, as well as USD 30 million from the country’s state oil company’s bank account, according to French judges. While India’s finance ministry has yet to respond to the Cairn move, insiders said the country will take all necessary efforts to defend itself against any such “illegal enforcement action.” India would dispute the move, they claimed that the government has appealed the arbitration ruling in the relevant court in The Hague and is convinced that the verdict would be overturned.
