Lekha G
India has challenged Cairn Energy’s $1.2 billion arbitration award over a retrospective tax dispute saying it had never agreed to arbitrate a national tax dispute.
The Ministry contended that, “The award improperly ratifies Cairn’s scheme to achieve Double Non-Taxation, which was designed to avoid paying taxes anywhere in the world, a significant public policy concern for governments worldwide. This proceeding is pending. The Government is committed to pursuing all legal avenues to defend its case in this dispute worldwide.”
The Ministry also disapproved the reports that stated the government had asked state-owned banks to draw out funds from foreign currency accounts abroad in anticipation of the potential seizure of such accounts.
The Government challenged the arbitration tribunal’s award on the ground that the claims underlying it were based on an abusive tax avoidance scheme violating the Indian tax laws and further argued that such a violation “Deprived Cairn’s alleged investments of any protection” under the India- UK bilateral investment treaty.
The case dates back to December last year, when Cairn had won an award that levied taxes using the 2012 law unfair on the company and the tribunal had directed the Indian Government to return 1.2 billion including the cost and interest.