An arbitration tribunal ruled in favour of Cairn Energy in a six-year-old retrospective tax dispute in December and ordered the Indian government to pay the UK firm damages of $1.2 billion plus interest and cost, which at the end of 2020 amounted ...
By ET Bureau | Updated:
Agencies
Cairn said the tribunal ruled that the dispute was within the scope of the Treaty and other relevant legal parameters.
Cairn Energy is pursuing the option to monetise the arbitration award it won against India by potentially transferring the award to third-party fund or pledging Indian assets, the company said in an earnings statement that showed India's liability at $1.7 billion.
An arbitration tribunal ruled in favour of Cairn Energy in a six-year-old retrospective tax dispute in December and ordered the Indian government to pay the UK firm damages of $1.2 billion plus interest and cost, which at the end of 2020 amounted to $1.7 billion. The Indian government is preparing to appeal the award.
"Cairn's engagement with the government of India on its arbitration award will continue in parallel with pursuing options of enforcement and monetisation of the award in order to safeguard shareholders' rights," the company said in its earnings statement on Tuesday.
The award is enforceable against India-owned assets in over 160 countries that have signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the company said. "Cairn has already taken steps to have the award recognised in certain major jurisdictions in which Indian sovereign assets have been identified."
In a separate investor presentation, the company said the award could be monetised by potentially transferring the award to third-party funds or pledging the assets against 'recourse or non-recourse financing'.
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"Cairn is extremely confident that satisfaction of the award will be achieved either by negotiated settlement or by enforcement against Indian assets (with potential financing and risk sharing options available to accelerate access to cash recovered through enforcement)," it said.
Cairn, however, also sounded a note of caution by counting "inability to promptly and fully secure or repatriate value from India" as one of the principal risks for the company.
The UK firm has already registered the award at courts of some countries and is in the process of registering it in some other countries, a first step before it can seek to enforce the award against Indian assets overseas.
The dispute with Cairn started six years ago after the government demanded capital gains tax of Rs 10,200 crore plus interest and penalty for a reorganisation of assets that Cairn undertook at its India unit in 2006, ahead of the listing of its shares in 2007.
