Cairn Energy had asked courts in nine countries to enforce its $ 1.4 billion arbitral award against India, which the company won after a dispute with the country’s tax administration over a tax on overhead. -values applied retroactively.
Among these, the award rendered on December 21 by a tribunal composed of three members of the Permanent Court of Arbitration of the Netherlands has been recognized and upheld by courts in the United States, the United Kingdom, the Netherlands. Bas, in Canada and France, said three people with knowledge of the case. .
Cairn started the prize registration process in Singapore, Japan, the United Arab Emirates and the Cayman Islands, they said.
Registering the award is the first step towards enforcing it in the event that the government does not pay the company.
Once the court has recognized an arbitration award, the company can then ask it to seize Indian government assets such as bank accounts, payments to public entities, airplanes and ships in those jurisdictions, in order to recover the assets. sums owed to it, they declared.
So far, the government has not commented directly on compliance with or challenging the Cairn arbitration award, but Finance Minister Nirmala Sitharaman said last week he was going to appeal.
Cairn shareholders, which include the world’s largest financial institutions, want the company to take enforcement action if New Delhi doesn’t pay it.
While the company’s spokesperson was not available for comment, Cairn said on Sunday that he would “begin meetings this week with shareholders in the UK and the US, with the international arbitration award in top of the agenda “.
“The company met with the Indian government last month and is taking all necessary measures to protect the interests of its shareholders,” he said.
The court ruled on December 21 that the government had violated an investment treaty with the UK and was therefore likely to return the value of the shares it had seized and sold, the dividend confiscated and the tax refund stopped. to adjust a ₹Tax request of 10,247 crore.
Cairn, in his documents filed with the courts of the nine countries, seeks “to confirm this final and binding award under the New York Convention and to initiate enforcement proceedings to recover the losses caused by the unfair and inequitable treatment ( of India) of their investments “.
After losing before the Supreme Court a case against the taxation of capital gains realized on the sale by Hutchison in 2007 of its activity in India to Vodafone for 11.2 billion USD, the government had enacted legislation in 2012 which gave it the power to tax these transactions retrospectively.
Subsequently, the tax department raised claims with Vodafone as well as Cairn about the alleged capital gains it made during the reorganization of its business in India prior to its listing.
But unlike Vodafone where no coercive action was taken, it seized and sold Cairn’s residual stake in the Indian unit, confiscated the dividends owed to that stake and stopped the tax refund owed to it.
The Hague panel found that a 2012 law passed by the Indian Parliament was a new tax and not a clarification of the previous law that could be applied to previous years.
Officially, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the document supported by the United Nations, obliges the courts of contracting states to authorize private arbitration agreements and to recognize and enforce the resulting awards of other states. contractors.
The United States and other courts have the power to enforce arbitration agreements under the convention.
On March 5, Finance Minister Nirmala Sitharaman indicated the government’s intention to appeal the sentence when she said it was its “duty” to appeal in cases where the sovereign authority of the nation to be taxed is called into question.
But the Dec. 21 ruling specifically made it clear that the basis for the judgment was not a challenge to the 2012 law, which gave the government the power to tax agreements retrospectively, or India’s sovereign right to tax.
“The question at stake is therefore not a question of internal tax law; it is rather whether the tax measures taken by the State, valid or not under its own tax laws, violate international law” , had declared the court.
Sources said the award is final and the merits cannot be appealed, and that under Dutch law the grounds for setting aside an arbitration award are extremely narrow. These reasons include the absence of a valid arbitration agreement, the rules of composition not respected, the tribunal exceeding its mandate, an unsigned or unjustified award and the order being contrary to public order or morality.
The Cairn Prize was unanimous, with all three judges, including one appointed by the Indian government, consenting. The 582-page ordinance gave detailed reasoning on the very point of the Indian government’s challenge, including the fact that taxation was not part of bilateral investment treaties.
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