PremiumBritish oil company Cairn Energy Plc has reportedly filed a lawsuit in a US court that aims to get Air India’s overseas assets seized and liquidated to fulfil an arbitration award it won in a tax dispute with the Indian government
British oil company Cairn Energy Plc has reportedly filed a lawsuit in a US court that aims to get Air India’s overseas assets seized and liquidated to fulfil an arbitration award it won in a tax dispute with the Indian government. As a state-owned company, Air India is “legally indistinct from the state", Cairn has argued, and so the airline’s assets should be used to make India cough up its dues.
That this tax case, revolving around a retrospective demand made by Indian authorities, has begun to entangle state-owned enterprises speaks of the muddled approach of our government. Its own seizure of Cairn’s assets in India to make good on a tax demand was ruled against by international courts, but the Centre has refused to make any reparations. This had hurt India’s global reputation for fair taxation. Yet, it’s by no means clear that a state-run firm can be held liable for what the state is globally deemed to owe a foreign business. Air India is an independent legal entity and is currently on the block for privatization. Clarity on the limits of liability are the bedrock of modern capital structures. Without this, little risk-taking would be undertaken for profit and little value generated.
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