French court backing: Cairn Energy gets order to attach India assets

If the corporate manages to connect the Central Paris properties, will probably be the primary asset freeze software to succeed amongst many filed by Cairn in numerous nations to implement the arbitration award.

India’s high-profile tax dispute with Cairn Power took an embarrassing flip for New Delhi on Thursday, with the Scottish power firm reportedly securing a French court docket order to grab about 20 Indian authorities properties in Central Paris.

The properties, that largely comprise flats valued at greater than €20 million, are utilized by the Indian authorities institution in France, PTI reported, quoting individuals with “direct information of the matter”.

The corporate’s transfer is in step with its declared plan to get better $1.7 billion ‘due’ from New Delhi by attaching assorted Indian property abroad, together with actual property and Air India planes, following a December 2020 worldwide arbitration award overturning levy of Delhi’s retrospective taxes.

Nevertheless, Cairn stored the choices open for a conciliatory settlement of the tax dispute with the Indian authorities. Calling the most recent transfer a “vital preparatory step” in direction of taking over the possession of the properties, an organization spokesperson pressured the agency nonetheless most well-liked to succeed in an “agreed, amicable settlement” with New Delhi to shut the matter. The corporate has submitted plenty of proposals to the federal government since February, she stated. “Nevertheless, within the absence of such a settlement, Cairn should take all vital authorized actions to guard the pursuits of its worldwide shareholders,” the spokesperson advised FE.

Responding to the report, the finance ministry stated the federal government had not obtained any discover, order or communication, on this regard, from any French court docket. “The federal government is attempting to establish the details, and every time such an order is obtained, acceptable authorized treatments will likely be taken, in session with its counsels, to guard the pursuits of India,” the ministry stated.

The federal government additionally said that the CEO and different representatives of Cairn had approached it for discussions to resolve the matter. Constructive discussions have been held and the federal government stays open for an amicable resolution to the dispute inside the nation’s authorized framework, it added.

If the corporate manages to connect the Central Paris properties, will probably be the primary asset freeze software to succeed amongst many filed by Cairn in numerous nations to implement the arbitration award. “Whereas Cairn is unlikely to evict the Indian officers residing in these properties, the federal government can’t promote them after the court docket order,” PTI reported.

Earlier, throughout discussions between finance ministry officers and Cairn Power CEO Simon Thomson and his group right here in February 2021, the federal government had requested Cairn to settle the dispute utilizing the Vivad se Vishwas scheme; below the scheme, the corporate should pay round half the quantity due sans curiosity and penalties in circumstances the place the tax division has misplaced a case in a discussion board and filed an enchantment, as the moment one.

Even earlier than the arbitral award was pronounced, India had seized and offered shares of Cairn in its erstwhile India unit, confiscated dividend due and withheld tax refunds (totalling Rs 7,600 crore) to get better the taxes it felt have been due.

Delhi’s 2012 legislation empowering itself to make tax calls for regarding cross-border offers all the best way again to 1962 citing ‘underlying Indian property’ was uncovered as a misadventure for the second time in a bit of over three months, on December 24, 2020. On that day, the Everlasting Courtroom of Arbitration at The Hague not solely invalidated India’s $2.74 billion 2015 tax declare on Cairn Power Plc, but in addition ordered the federal government of India to return as much as $1.4 billion in funds withheld, curiosity and prices, to the agency. An analogous September 2020 verdict was delivered by the identical tribunal in favour of telecom main Vodafone (Now Vodafone-Thought in India) in a high-profile retrospective tax dispute with India. The Hague Courtroom held in each circumstances India was in breach of the related Bilateral Funding Treaties (BITs).

The federal government, in fact, filed an software in The Hague court docket on March 22, 2021, in search of the setting apart of the arbitral award that favoured Cairn. Nevertheless, for the reason that tribunal has affirmed its jurisdiction over the Cairn case regardless of the existence of the India-UK BIT, the possibilities of a reversal of the order in a assessment is distant. Nearly, a reversal is feasible provided that mala fide within the award is established.

Cairn has reportedly recognized $70 billion of Indian property abroad for potential seizure. If the strikes succeed, it will put India in league with Pakistan and Venezuela which confronted comparable enforcement motion over failure to pay arbitration awards. Cairn has additionally filed a lawsuit with the US District Courtroom for the Southern District of New York, claiming that Air India is managed by the Indian authorities a lot that they’re “alter egos”. It sought course from the court docket to carry the airline firm chargeable for cost in direction of the arbitration award.

Final 12 months, India’s Supreme Courtroom turned down a authorities enchantment to cease a $476-million award that Vedanta and Videocon had gained approach again in January 2011. And whereas listening to the federal government enchantment towards the $672-million arbitration award that Devas Multimedia gained in 2016 towards Isro-arm Antrix Company, the truth that the SC requested Devas whether or not it will be keen to waive off the curiosity part of the cash owed to it suggests the problem might not maintain.

There are, alternatively, circumstances the place the SC has dominated towards implementing arbitration awards on grounds that they ran opposite to India’s public coverage; this was the argument the federal government made within the SC whereas asking for the award to be put aside.

In 2011, Cairn Power offered majority of its then India enterprise, Cairn India, to Vedanta. The Indian taxman, nonetheless, didn’t permit Cairn UK to promote 10% and connected Cairn India shares in addition to dividends that the corporate paid to its mother or father. The Hague court docket additionally ordered the federal government to return the worth of shares it had offered, dividends seized and tax refunds withheld. In reality, the federal government was requested to compensate the Edinburgh-headquartered agency “for the whole hurt suffered” along with curiosity and price of arbitration.

The Cairn tax dispute arose as in 2006-07, as part of inner rearrangement by means of a agency in European tax haven of Jersey, Cairn UK transferred shares of Cairn India Holdings to Cairn India. Later, India retrospectively raised a requirement of capital positive factors tax on Cairn UK amounting to $2.74 billion.