Cairn Energy to sue US and other countries to seize Indian assets of PSU to enforce $ 1.2 billion arbitration award

NEW DELHI : Britain’s Cairn Energy Plc plans to take legal action in the United States and other countries to pierce the corporate veil between the Indian government and its owned companies, such as the oil and gas, shipping, shipping, airlines and banks, to seize their assets abroad to recover $ 1.2 billion ordered by an international arbitration tribunal.

The company has moved courts to the United States, United Kingdom, Canada, France, Singapore, the Netherlands and three other countries to register the arbitration tribunal’s decision of December 2020 that overturned the demand for 10,247 crores from the Indian government in back taxes and ordered New Delhi to return. $ 1.2 billion in shares he had sold, dividends foreclosed and tax refunds withheld to recover the tax demand.

With the government so far refusing to honor the arbitration award and choosing instead to challenge it, Cairn seeks to enforce it by seizing Indian assets overseas, Dennis Hranitzky, head of the sovereign litigation cabinet at Quinn Emanuel Urquhart & Sullivan, a law firm representing the company, said PTI.

These assets may be potentially non-diplomatic and those belonging to entities or companies controlled by the Government of India in these nine countries.

“Cairn plans to take legal action in the coming weeks to pierce the corporate veil to establish that (certain) public entities are India’s alter ego under Bancec” for the enforcement of the arbitration award, a he declared.

Bancec’s guidelines deal with determining when a judgment against a foreign state is enforceable against its agencies.

The lawsuit will be similar to that brought by Crystallex International Corp to seize the property of Petroleos de Venezuela, SA (PDVSA), Venezuela’s state-owned oil company, in Delaware a few years ago after the Latin American country failed. failed to pay the company $ 1.2 billion that an arbitration tribunal had ordered to pay in lieu of seizing gold deposits in 2011 owned and developed by the company.

“Indian assets in several jurisdictions have been identified that Cairn will seek to seize to enforce the sentence,” he said, declining to name any assets the company may seek to tie up to recover the $ 1.2 billion. plus the interest and costs that the arbitration tribunal ordered.

“Until we have initiated proceedings to seize the assets, this information is proprietary,” he said.

Cairn makes every effort to recover damages, including hiring a team of asset recovery experts.

Sources said assets that can be attached could range from airplanes and ships, to oil and gas cargoes and government entity bank accounts.

Cairn is moving forward with its implementation plans with deliberate swiftness. The timing of asset seizure procedures varies from country to country. Under the laws of some countries, these procedures can begin immediately, while in d ‘others, we will have to wait until after the award is recognized,’ he said without giving details.

Cairn had previously said the money ultimately belongs to its shareholders – which include big investors such as BlackRock, Fidelity and Franklin Templeton, and that the ramifications of India not honoring the price “will spread. more broadly in the international investment community “.

Its management team organized three rounds of face-to-face discussions and a video conference with senior officials from the Ministry of Finance.

India appealed against the arbitration award on the grounds that tax-related issues are not covered by its bilateral investment treaty with the UK under which the case was filed and that, therefore, the arbitral tribunal does not have jurisdiction to rule on the matter, sources said.

However, the appeal to the Dutch court does not prevent Cairn from taking action in other jurisdictions to recover the full amount of the arbitration award, which stands at $ 1.7 billion after including interest and costs in December 2020.

The company will seek to establish that state owned entities / companies are India’s alter ego under Bancec regulations i.e. piercing the veil between the Indian government and them.

“Piercing the Corporate Veil” is a way to impose liability on an underlying cause of action against a third party who would otherwise not be liable.

By this, Cairn will seek to pierce the veil in order to transfer the responsibility for the payment of an existing judgment against the Republic of India to a third party which is not otherwise responsible, namely companies or public banks.

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