‘Not a question of domestic tax law, but whether India violated international law’
Courts in five countries including the U.S. and the U.K. have given recognition to an arbitration award that asked India to return $1.4 billion to Cairn Energy plc — a step that now opens the possibility of the British firm seizing Indian assets in those countries if New Delhi does not pay, sources said.
Cairn Energy had moved courts in nine countries to enforce its $1.4 billion arbitral award against India, which the company won after a dispute with the country’s revenue authority over a retroactively applied capital gains tax.
Of these, the December 21 award from a three-member tribunal at the Permanent Court of Arbitration in the Netherlands has been recognised and confirmed by courts in the U.S., the U.K., the Netherlands, Canada and France, three people with knowledge of the matter said. Cairn has begun the process to register the award in Singapore, Japan, the United Arab Emirates and Cayman Islands, they said.
The registration of the award is the first step towards its enforcement in the event of the government not paying the firm. Once the court recognises an arbitration award, the company can then petition it for seizing any Indian government asset such as bank accounts, payments to state-owned entities, airplanes and ships in those jurisdictions, to recover the monies due to it, they said. The tribunal had on December 21 ruled that the Indian government had breached an investment treaty with the U.K.
Finance Minister Nirmala Sitharaman had on March 5 indicated the Centre’s intent to appeal against the award when she said it was her ‘duty’ to appeal in cases where the nation’s sovereign authority to tax is questioned.
“The issue at stake is… not a matter of domestic tax law; it is rather whether the fiscal measures taken by the State… violate international law,” the tribunal had said.
Source: Read Full Article