Cairn Arbitration Award
Indian govt to challenge Hague tribunal's award in favour of Cairn
The Hague/IBNS: India is believed to have challenged the decision of a three-member tribunal at the Permanent Court of Arbitration at The Hague dismissing its Rs 10, 247 crore tax claim on Cairn Energy Plc, said media reports.
The appeal was filed on Monday against the ruling that also asked the Indian government to return the share value it had sold, the dividends seized and tax refunds withheld.
This is the second time in three months that India has refused to accept the international award against retrospective ruling.
Media reports said British Prime Minister Boris Johnson is likely to press India to honour the ruling during his April 26 visit.
Earlier, Indian government had challenged a verdict by an international arbitration tribunal in Singapore that overturned its demand for Rs 22,100 crore in back taxes from Vodafone.
India has contended that Cairn had set up an abusive tax structure when it reorganised its business in India in 2006, and it did not pay taxes anywhere in the world on the gains made in India.
The finance ministry has made it clear that the issue of taxation is not a subject of bilateral investment treaties, such as the UK-India Bilateral Investment Treaty under which Cairn had sought reversing of the tax demand raised, and so the ruling should be challenged.
"The issue at stake is thus not a matter of domestic tax law, it is rather whether the fiscal measures taken by the state, valid or not under its own tax laws, violate international law," the Hague panel had said in a unanimous verdict, quoted media reports.
It noted that the 2012 law passed by the Indian government was a new law and not a clarification of a previous law that could be applied to earlier years.
Cairn has moved courts in nine countries to enforce the award and so far it has been recognised by the courts in US, the UK, Netherlands, Canada and France and is in the process in Singapore, Japan, the United Arab Emirates and the Cayman Islands.
With the recognition of the award, Cairn can take steps to seize assets owned by Indian government such as payments to state-owned entities, airplanes and ships in those jurisdictions,bank accounts, to recover the monies due to it, the media reports said, citing sources.
According to the Indian government, the international treaties are aimed at protecting investments while taxes are levied on the 'returns' earned by entities.
However, the Hague tribunal has rejected this claim.
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