Cairn says final drafting of arbitration award against retro tax in process
Cairn said it is seeking monetary compensation of USD 1.4 billion from the Indian government in the arbitration proceedings.
New Delhi: British oil firm Cairn Energy Tuesday 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, did not say when the award was expected.
In an operational update, Cairn said it is seeking monetary compensation of USD 1.4 billion from the Indian government in the arbitration proceedings.
Cairn Energy's 4.95 per cent stake in mining major Vedanta were 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 USD 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 added.
In January 2014, Cairn received notice from the Income Tax Department of India, requesting information relating to the group reorganisation in 2006. The Income Tax Department attached the 10 per cent shareholding in Cairn India, which was subsequently merged with its parent Vedanta. Cairn Energy held 4.95 per cent stake in Vedanta post that move.
Cairn Energy received a draft assessment order from the Indian Income Tax Department in March 2015 and subsequently filed a notice of dispute under the UK-India Investment Treaty in order to protect its "legal position and shareholder interests."
"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 UK-India Investment Treaty which seeks the restitution of the full value of our assets," it says.
The final arbitration hearings were held in August 2018 in The Hague. The Arbitral Tribunal will issue a binding and internationally-enforceable award.