Cairn hopeful of ‘swift solution’

Cairn Energy said on Sunday that it had discussed multiple proposals with Indian government officials in recent days in an attempt to find a ‘swift solution’ to a long drawn-out tax dispute with the South Asian nation, Reuters reported.

In December, an arbitration body awarded the British firm damages of $1.2 billion plus interest and costs, after ruling India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty. FE Bureau adds: As reported by FE earlier, the Indian government wants Cairn to settle the dispute using the Vivad se Vishwas scheme.

Under the scheme, the company will have to pay around half the amount due sans interest and penalties in cases where the tax department has lost a case in a forum and filed an appeal, as the instant one.”

Simultaneously, the government will also challenge the arbitration award.

While Cairn has filed a case in a US court to enforce the $1.4 billion arbitration award ($1.2 billion plus interest and penalties) that it has just won and this can, eventually, even lead to Indian assets – properties of Indian embassies, even possibly Air India’s planes – being attached, finance ministry sources feel that this is not going to be easy either and can be a long-drawn process. In which case, their hope is that Cairn recognises that the value of its money will keep declining and so its best bet is pay part of the taxes and then move on”.

In a release on Sunday, Cairn said it had held ‘cordial and constructive discussions’ with officials from the Indian finance ministry. “We remain hopeful that an acceptable solution can be found, in order to avoid further prolonging and exacerbating this negative issue for all parties,” the company said, adding it is also ready to take all necessary steps to protect the interests of its shareholders.

Cairn took the case to arbitration in 2015 to fight a demand from Indian authorities in 2014 for Rs 102 billion ($1.4 billion) in taxes that India said it was owed on capital gains related to the 2007 listing of its local unit.

India lost another major international arbitration case last September against telecommunications giant Vodafone over a $2 billion retrospective tax dispute.