Cairn tax dispute case: Govt refutes reports of PSU banks pulling out funds from foreign currency accounts 

The Government has strongly refuted media reports claiming that the government of India has purportedly asked state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of the potential seizure of such accounts with regard to the Cairn legal dispute.

The government said that these are totally incorrect reports which are not based on true facts. It has blamed ‘certain vested parties’ behind such misleading reporting. The government has said that these media reports rely on unnamed sources and present a misleading picture of factual and legal developments in the case.

In a statement issued today, the government has said that it is strongly defending its case in the Cairn retrospective tax case. The government has filed an application on March 22, 2021 to set aside, what it calls a highly flawed December 2020 international arbitral award in The Hague Court of Appeal.

The government maintains that the arbitral tribunal improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and/or agreed to arbitrate. The government further says that the claims underlying the award are based on an 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.

It further argues that the arbitral 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.

According to the government, the CEO and the representatives of Cairns have approached the 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.

An international arbitration court in December last year had ruled against India's decision to retrospectively tax the capital gains made when Cairn UK Holdings Ltd sold shares in Cairn India Holdings Ltd, a Jersey company, to Cairn India Ltd, an Indian company.

The arbitration court had ruled that India breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and awarded Cairn damages of $1.2 billion plus interest and costs. India is supposed to pay this amount to the UK energy giant. India has challenged the award in the case of Cairns in an appropriate court in Hague.