India has challenged a world arbitration tribunal asking it to return USD 1.2 billion to UK’s Cairn Energy Plc on grounds that it had by no means agreed to arbitrate over a ‘national tax dispute’, the finance ministry stated on Sunday.
In a press release, the ministry additionally refuted reviews that the Government of India has purportedly requested state-owned banks to withdraw funds from overseas foreign money accounts overseas in anticipation of the potential seizure of such accounts.
While the federal government appointed a choose on the three-member arbitration panel and absolutely participated within the proceedings in opposition to India looking for Rs 10,247 crore in again taxes from Cairn, the ministry stated the tribunal “improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and/or agreed to arbitrate.”
India had seized and offered shares of Cairn in its erstwhile India unit, confiscated dividend due and withheld tax refunds to get well the tax demand it had levied two years after passing a regulation in 2012 that gave it powers to levy tax retrospectively.
Cairn invoked arbitration beneath the India-UK bilateral funding treaty.
In December final yr, Cairn received an award that held the levy of taxes utilizing the 2012 regulation unfair on the corporate and the tribunal requested the Indian authorities to return USD 1.2 billion plus value and curiosity.
In a press release, the finance ministry known as the 2006 reorganisation of Cairn’s India enterprise for itemizing on the native bourses as “abusive tax avoidance scheme that were a gross violation of Indian tax laws, thereby depriving Cairn’s alleged investments of any protection under the India-UK bilateral investment treaty.”
“The award improperly ratifies Cairn’s scheme to achieve double non-taxation, which was designed to avoid paying taxes anywhere in the world, a significant public policy concern for governments worldwide,” it stated, including the federal government on March 22 challenged the arbitration award in a court docket in The Hague — the seat of the arbitration.
It will not be clear if a court docket in The Hague can go into deserves of levy of taxation by the Indian authorities over a company amalgamation scheme.
Precedence dictates that challenges to worldwide arbitration award are restricted to tribunal not following due course of.
The tribunal that went into Cairn’s problem consisted of three judges — one choose every being named by the corporate and the Indian authorities and a 3rd impartial presiding officer.
The three-member panel unanimously overturned the tax and requested India to return the worth of shares offered, dividend seized and tax refund withheld. This along with curiosity and price involves USD 1.72 billion.
With India refusing to pay, Cairn registered the award in 9 jurisdictions together with the US, the UK, Canada and Singapore and has began a course of to get well the cash from government-owned entities.
Earlier this month, it filed a plea in a court docket in New York for declaring Air India as India’s alter ego so it may be pressured to pay the award.
“The Government of India is vigorously defending its case in this legal dispute. It is a fact that the Government has filed an application on March 22, 2021 to set aside the highly flawed December 2020 international arbitral award in The Hague Court of Appeal,” the Department of Revenue within the Ministry of Finance stated within the assertion.
India’s attraction earlier than The Hague Court additionally says that the claims underlying the award are primarily based on an abusive tax avoidance scheme that was a gross violation of Indian tax legal guidelines, thereby depriving Cairn”s alleged investments of any safety beneath the India-UK bilateral funding treaty.
It additional stated the continuing earlier than The Hague court docket is pending and the federal government is dedicated to pursuing all authorized avenues to defend its case on this dispute.
It added that Cairn’s CEO and its representatives have approached the federal government for discussions to resolve the matter.
“Constructive discussions have been held and the Government remains open for an amicable solution to the dispute within the country’s legal framework,” the assertion added.
If the New York court docket had been to recognise Air India because the alter ego of the Indian authorities, Cairn can search attachment or seizure of its property within the US corresponding to airplanes, immovable property and financial institution accounts to get well the quantity it was awarded by the arbitration tribunal.
Even if Cairn succeeds in getting Air India recognised because the alter ego of the federal government, it will not imply that the airline’s property will fall into the arms of the British agency, sources stated.
All it means is that Cairn can search seizure of any asset Air India could have within the US. There will not be many such property.
The solely menace there might be is that when an Air India airplane lands at any US airport, Cairn would have the ability to transfer court docket and get that connected earlier than it flies out.