Courts in five countries including the US and the UK have given recognition to the arbitration award that asked India to return $ 1.4 billion to Cairn Energy plc – a step that now opens the possibility of the British firm seizing Indian assets in those countries if New Delhi decides not to pay.
Cairn Energy had moved courts in nine countries to enforce the award against India, which the company won after a dispute with the country’s revenue authority over a retroactively applied capital gains tax.
Of these, the December 21 award from a three-member tribunal at the Permanent Court of Arbitration in the Netherlands has been recognised and confirmed by courts in the US, the UK, the Netherlands, Canada, and France. Cairn has started the process to register the award in Singapore, Japan, the United Arab Emirates, and Cayman Islands.
The registration of the award is the first step towards its enforcement in the event of the government not paying the firm. Once the court recognises an arbitration award, the company can then petition it for seizing any Indian government assets such as bank accounts, payments to state-owned entities, airplanes and ships in those jurisdictions, to recover the monies due to it, they said.
So far the government has not directly commented on honouring or challenging the Cairn arbitration award, but Finance Minister Nirmala Sitharaman had last week indicated of going in for an appeal. Cairn’s shareholders, who include top financial institutions of the world, want the company to go for enforcement action should New Delhi fail to pay it.
The tribunal had ruled that the government breached an investment treaty with the UK and was therefore liable to return the value of shares it had seized and sold, dividend confiscated and tax refund stopped to adjust a Rs 10,247 crore tax demand.
Cairn in its filings to the courts in the nine countries is seeking “to confirm this final and binding award under the New York Convention and commence enforcement proceedings to recover the losses caused by (India’s) unfair and inequitable treatment of their investments.”