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Dispute proposal

Cairn Energy offers to invest in India to settle tax battle


The Edinburgh company is locked in a legal dispute

Cairn Energy has offered to settle its dispute with the Indian government over a $1.2 billion tax payment by investing in the country if the government agrees to comply with the decision of a tribunal.

The Edinburgh-based oil and gas explorer, which won a long-running legal battle in December, is said to be offering to invest the $500 million interest payments due. One local report said it would be prepared to invest the entire award payment.

However, sources in India say the government is unlikely to accede to the proposal, arguing that it would mean accepting the verdict, against which it has appealed.

A government official told the Business Standard newspaper: “There is no way that the government is going to accept the proposal. We have filed an appeal. Any solution will be within the legal framework.

“For that, we have asked them to come under the Vivad Se Vishwas (VsV) scheme and settle the dispute by paying 50% of the disputed principal tax amount and get a waiver of interest and penalty. That would have resulted in an immediate refund of $300 million.”


Another official said that with international arbitration, it was difficult for Cairn to invest in India.

“Slowly, foreign direct investment conditions for the energy sector are being relaxed. But in the arbitration scenario and threats of asset seizure, it will be difficult for Cairn to invest here,” he said.

The case relates to a tax demand (including interest and penalty) on capital gains made by the oil major in reorganising its India business in 2006-07.

India is expecting a stay on the award from a lower Dutch court anytime now. Based on that, it will seek a stay on the implementation of the award in other jurisdictions such as the UK, Canada, the US, and France, which will protect India from its commercial assets like aircraft and ships getting seized.

Cairn Energy invested in the oil and gas sector in India in 1994 made a large discovery in Rajasthan around 2004. It subsequently listed its Indian assets on the BSE.

The government then passed a tax law and later seized dividends and withheld tax refunds to recover a part of demands made on the company.

Cairn challenged the move before an arbitration tribunal in The Hague, which in December awarded it $1.2bn plus costs and interest (totalling $1.725 million.

Chief executive Simon Thomson met finance ministry officials in February, seeking the award’s implementation.

India has appealed the verdict on grounds of sovereignty and tax avoidance by the company.

One Comment to Cairn Energy offers to invest in India to settle tax battle

  1. India said would abide by decision, they haven’t. The appeal is pathetic. No grounds whatsoever and when they lose they still won’t pay. Their own appointed judge agreed with two other judges’ unanimous decision.

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