With the Indian government challenging an arbitration tribunal verdict in a court in The Hague, the multi-national company Cairn Energy has decided to do a step further.
The Permanent Court of Arbitration at The Hague ruled in the favour of Cairn Energy stating that India’s move to call for retrospective taxes was not right. Thus, the court ordered the Indian government to pay up USD 1.2 billion in damages to the company.
The Indian government second time in three months has refused to accept an international award against retrospective tax.
With the government so far refusing to honour the arbitration award and instead choosing to challenge it, Cairn is looking to enforce it by seizing overseas Indian assets, stated Dennis Hranitzky, head of the sovereign litigation practise at Quinn Emanuel Urquhart & Sullivan, a law firm representing the company.
How is Cairn Energy planning to make the Indian government pay?
- The company has approached multiple courts in the US, UK, Canada, France, Singapore, the Netherlands and three other countries to register the December 2020 arbitration tribunal verdict. The ruling rejected the Indian government's Rs 10,247 crore demand in retrospective taxes and ordered the government to pay USD 1.2 billion in value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand.
- The assets non-diplomatic in nature but are owned by public-sector companies or entities controlled by the Indian government in the nine countries, will be attached to this case.
- Cairn has already identified Indian assets across several jurisdictions that Cairn will be seeking to seize to enforce the award. These assets will range from planes to ships, to oil and gas cargoes and bank accounts of state-owned entities.
-The company is leaving no stone unturned to fight this out. It has hired a team of asset recovery experts to help them with the recovery process.
- The company will seek to establish in various courts that state-owned entities/firms are India's alter ego under Bancec regulations, that is, to pierce the veil between the Indian government and state entities. 'Piercing the corporate veil' is a means of imposing liability on an underlying cause of action against a third-party which would not otherwise be liable. The Bancec guidelines deal with determining when a judgment against a foreign state is enforceable against its agencies.
- Cairn is moving forward with its enforcement plans with all deliberate speed. This is mainly because the timeline for seizing assets varies from country to country.
(With input from agencies)