British oil company Cairn Energy plc said Sunday that its shareholders, including the world’s leading financial institutions, expect the company’s “strong enforcement powers” to be used to win back $ 1.4 billion from the Indian government should it not Keep his word to honor international retroactive tax arbitration awards.
Cairn has already relocated courts in the United States, United Kingdom, the Netherlands, Canada, France, Singapore, Japan, the United Arab Emirates and the Cayman Islands to register and recognize the December 21 international arbitration award – the first step before the Indian one Government may seize assets such as bank accounts, payments to state-owned companies, planes and ships in these countries in the event that New Delhi fails to return the value of the seized and sold stocks, the dividend is seized and the tax refund is stopped to meet a tax claim of 10,247 rupees adjust with retrospective legislation raised.
Cairn CEO Simon Thomson, who met with Treasury Department officials for three days last month, said the Indian government should keep its word on the recognition of arbitral awards and return the $ 1.4 billion an international arbitration tribunal is asking Abolition of a retrospective tax has ordered demand.
“Our shareholders are watching,” he said in a Twitter post. “They expect India to honor its commitments and get this matter to a close quickly. If India doesn’t and India delays, our shareholders expect us to use our strong enforcement powers that we must do.”
Treasury Secretary Nirmala Sitharaman announced the government’s intention to appeal the award on March 5 when she said it was her “duty” to appeal cases in which the country’s sovereign tax authority is challenged.
Interestingly, the December 21 arbitral award made it explicitly clear that the ruling was not based on a challenge to the 2012 law that gave the government the power to tax business retrospectively or the sovereign tax laws of India.
“So it’s not about domestic tax law, but about whether the tax measures taken by the state, which are valid under its own tax laws or not, violate international law,” the tribunal said.
Also read: Government appeals arbitration award in Cairn Retro Tax case
After losing a Supreme Court case against capital gains taxes, which Hutchison sold to Vodafone for $ 11.2 billion in 2007, the government enacted laws in 2012 giving it the power to tax such transactions retrospectively . Thereafter, the tax department said Vodafone should have withheld tax on the deal and issued a notice requesting Rs 11,218 billion, which was later increased by Rs 7,900 billion in fines.
In January 2014, the department assessed that Cairn had also made an alleged capital gain from restructuring its India business prior to going public in 2006/07 and filed for taxes of Rs.10,247 billion. Unlike Vodafone, where no enforcement action was taken, the Cairns Company seized and sold remaining stake in the Indian entity, seized dividends on that stake, and stopped tax refunds on that stake.
Claiming that its restructuring was in accordance with the laws of the time and approved by the government and regulators, including Sebi, Cairn challenged the tax claim in an international arbitration tribunal which overturned the claim and ordered a $ 1.4 return Billion.
“The award is now complete and it is time for the Government of India to recognize this award as they have said several times over the years that they would,” said Thomson. “India now needs to swiftly close this matter, honor its commitments and honor the award.”
And the Cairn shareholders want nothing less. “This is what our shareholders expect. These global financial institutions expect this. This is what they need,” he said. “I believe that if India does this it will reaffirm these shareholders that India can be a positive destination for investment.”
Shareholders include large financial institutions such as BlackRock, Fidelity, Franklin Templeton, Schroders, and Aviva.
Last year, Vodafone also won an arbitration award against the retro tax, which the government challenged in a court in Singapore – the seat of the arbitration tribunal.
Also Read: Cairn Arbitration: Tribunal Quotes PM Modi, Jaitley To Overturn India’s Tax Claim
In the Cairn case, the seat of the arbitration tribunal was The Hague and any challenge must be brought there.
Sources said the award is final and the merits cannot be challenged, and under Dutch law the grounds for setting aside an award are extremely narrow. These grounds include not having a valid arbitration agreement, rules for noncompliance with composition, the tribunal exceeding its mandate, an unsigned or unfounded arbitration award, and the order violating public order or morality.
The Cairn Prize was unanimously accepted by all three judges, including one judge appointed by the Government of India. The 582-page decision contained detailed justifications on the very point of the Indian government’s challenge, including the point that taxation was not part of the bilateral investment treaties.
Cairn had challenged the tax claim under the UK-India bilateral investment treaty, which contains strict rules for enforcing a successful arbitral award, and the tribunal’s decision is final and binding on both parties.
“We have clarified our position on retroactive taxation. We have repeated it so far in 2014, 2015, 2016, 2017, 2019, 2020. I see no lack of clarity,” Sitharaman had said, referring to the modes The Point of View Government not to make a new tax claim under 2012 legislation.
“If I find an arbitration award that challenges India’s sovereign tax law … If there is a question about sovereign tax law, I will appeal, it is my duty to appeal,” she said. “I will address an arbitration ruling that questions the tax authorities.”