Cairn Energy said Wednesday it had won an international arbitration case against the center.
Cairn Energy said Wednesday it had won an international arbitration case against the center over a tax dispute that had caused concern among investors over the companies’ retrospective tax claims.
The court unanimously ruled that the center had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and awarded Cairn damages of $ 1.2 billion plus interest and costs, the company said in its statement.
The amount is roughly equal to Cairn’s market value, which is listed in London, of $ 1.3 billion as of Tuesday’s close.
For the center, this is the second setback after losing another international arbitration case in September against Vodafone Plc over a retrospective $ 2 billion tax dispute.
The government said it will consider all options, including legal recourse. A government official told Reuters that the award in the Cairn case is so big, “we don’t think we can hand it over without question,” he said, adding that the prime minister’s office will make a final decision. “We will have to contest both cases, otherwise we will give the wrong signal to investors,” said the official, who declined to be named because he is not authorized to speak publicly.
If the government decides to appeal, it will keep the problem alive and create nervousness among investors, said Anuradha Dutt, a partner at the Indian law firm DMD, which represented Vodafone in its case against India. “Tax certainty and the rule of law are very critical for investors to reach a destination and both have been violated here, which will have an impact, especially at a time when India wants to attract investment,” he said.
Ms Dutt said the government should speak directly to Vodafone, Cairn and Vedanta about the best way to resolve the matter. Cairn took the case to arbitration in 2015 to fight a 2014 lawsuit by Indian authorities for 102 billion rupees ($ 1.4 billion) in taxes that he said were owed on listing-related capital gains in 2007. from your local unit. In 2011, Cairn Energy sold its majority stake in Cairn India to Vedanta Ltd, reducing its stake in the Indian company to approximately 10%. The government seized the remaining shares in 2014 after the tax lawsuit was filed, as well as the dividends Vedanta owed Cairn Energy for its stakes in the Indian company.
In 2018, Cairn Energy said it would downgrade the value of its investment in Vedanta after tax authorities sold $ 216 million worth of shares in the Indian mining company, which closed the day 8.2% higher on Wednesday.
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