A month after a tribunal at the Permanent Court of Arbitration in The Hague ordered India to return $1.2 billion to UK’s Cairn Energy Plc, the company on Wednesday said it is engaged with the Indian government on implementation of the ruling.
The three-member tribunal, which comprised a judge appointed by India, last month unanimously overturned a ₹10,247 crore retrospective tax demand on the British oil and gas company and asked the government to return shares it sold, dividend it seized and tax refunds it stopped to enforce the tax.
In an update ahead of announcing its preliminary results for 2020, the company said it is taking all necessary steps to protect its rights to the award. “In December, the tribunal established to rule on Cairn’s claim against the Government of India under the UK-India Bilateral Investment Treaty found in Cairn’s favour.
“The tribunal ruled unanimously that India had breached its obligations to Cairn under the Treaty and awarded to Cairn damages of $1.2 billion-plus interest and costs, which are now payable,” the company said.
The tribunal, in a 582-page judgment on December 21, had ordered the return of the value of shares that the Income Tax Department sold as also the dividend it seized and tax refunds it withheld to recover tax demand that was levied following a 2012 amendment to the Income Tax Act that gave authorities powers to seek taxes on past deals.
It ruled that the 2006 reorganisation of Cairn Energy’s India business prior to listing on local bourses was not “unlawful tax avoidance” and ordered tax authorities to drop the tax demand.
“A significant milestone was achieved in December 2020 with a unanimous award in favour of Cairn in its arbitration with the Government of India,” chief executive Simon Thomson said.
“We have engaged with the Government of India regarding adherence to the tribunal’s ruling and are taking all necessary steps to protect our rights to the award,” he added.