Cairn Energy rose as much as 45% in early London trading, its biggest intraday gain in nearly 17 years.
India was ordered to return more than $ 1.2 billion to Cairn Energy Plc after Prime Minister Narendra Modi’s administration lost arbitration proceedings in a tax dispute, its second tax loss.
An international arbitration court ruled that the tax claim was not a valid claim and asked the government to refund the withheld funds along with interest to Cairn. India had seized dividends, tax refunds and shares to partially recoup the quotas. The judges unanimously ruled that India’s retrospective tax lawsuit violated the bilateral investment protection treaty between the UK and India, Cairn said in a statement Wednesday. India can appeal.
Cairn Energy rose as much as 45% in early London trading, its biggest intraday gain in nearly 17 years.
Cairn Energy’s victory will be India’s second loss in international arbitration after Vodafone Group Plc won a year-long tax dispute with the government in September over a controversial $ 3 billion tax claim. Unlike the Vodafone case, the government will have to reimburse Cairn. India in 2012 retrospectively amended the tax code, granting itself the power to pursue M&A deals from 1962 if the underlying asset was in India.
“The 2012 amendment muddied the waters for everyone,” said Chitranshul Sinha, a partner at India-based law firm Dua Associates. “The Vodafone and Cairn awards should be taken as a lesson that predatory retrospective tax policies are something to be eliminated.”
Cairn’s claim restitution compares to its $ 1.3 billion market capitalization, and “if successful and implemented, it could lead to unexpected mergers and acquisitions or a special dividend,” Bloomberg Intelligence analyst Will Hares wrote last year. past.
The UK oil explorer received the tax claim from the Indian authorities in March 2015 for a restructuring carried out in 2006 while preparing for an IPO of Cairn India. Tax authorities had seized 10% of Cairn India’s shares, later valued at around $ 1 billion, according to information on the Cairn Energy website.
In 2011, Cairn Energy sold the majority of its stake in the Indian unit to billionaire Anil Agarwal’s Vedanta Resources Plc for $ 8.7 billion. Cairn Energy had transferred ownership of its Rajasthan oil field, the country’s largest onshore discovery in two decades, to Cairn India.
The Edinburgh-based company filed a dispute under the UK-India Investment Treaty and requested international arbitration that began later in 2015 for losses arising from the expropriation of its investments in India to minority interest.
(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)
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