Cairn tax case: Govt appoints Christopher Thomas as arbitrator

New Delhi: Just before Prime Minister Narendra Modi began his UK visit, the government named a Singapore-based lawyer J Christopher Thomas as its arbitrator for resolving the Rs 10,247 crore tax dispute with London-listed Cairn Energy.

"We have appointed J Christopher Thomas as government arbitrator in the Cairn Energy matter," a senior Finance Ministry official said here. "We have not changed our stand that arbitration is not the best recourse to resolving a tax dispute but in the interest of getting closer to a solution we have named an arbitrator."

Cairn has already named former Bulgarian minister Stanimir A Alexandrov as its arbitrator in the tax dispute arising from a 2006 internal business reorganisation.

The two arbitrators will now have to appoint a neutral presiding judge of the three-member Arbitral Tribunal.

Emails sent to Thomas, who is of Canadian origin, seeking comments remained unanswered.

The British firm had last month written to Finance Minister Arun Jaitley seeking an appointment of the arbitrator by November 11 failing which it would press the International Court of Justice to name an arbitrator on behalf of the Government of India.

Cairn on March 10 sought arbitration under the India-UK Bilateral Investment Protection Agreement disputing the tax demand raised on a 2006 internal business reorganisation, but the government initially refused to join it, saying tax disputes are not covered under the bilateral treaty.

The British firm in September moved The Hague-based ICJ seeking appointment of an arbitrator on behalf of the Government of India.

At this stage, the government said it will appoint an arbitrator soon.

The Income Tax Department says Cairn Energy allegedly made a capital gain of Rs 24,503.50 crore in 2006 while transferring all its India assets to a new company, Cairn India, and getting it listed on the stock exchanges.

Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for USD 8.67 billion, still holds 9.8 percent stake in Cairn India. But it has been barred by the I-T Department from selling this stake.

The value of the shareholding in Cairn India has halved since attachment.

Disputing any capital gains made out of an internal business reorganisation, Cairn wants the Tribunal to scrap the notice, give it cost of arbitration and compensate it for the loss of value of its shareholding in Cairn India which the Income Tax Department had attached following the January 2014 tax assessment notice.