A high level inter-ministerial group (IMG), meanwhile, met in New Delhi on Wednesday to chalk out procedural details of the government’s appeal against the award. It was part of a series of meetings to chart out India’s strategy to contest the award given by the Permanent Court of Arbitration at The Hague in December. The IMG comprises senior officials from the department of revenue, ministry of law, department of economic affairs and ministry of external affairs.
India is likely to file an appeal at The Hague by around March 10 and is in talks with senior Dutch lawyers. New Delhi has time till March 21 to file an appeal in accordance with a 90-day window.
The award will likely be contested on two key grounds – jurisdiction and international public policy. Thomson had, however, in a video message last week, expressed willingness to meet Sitharaman.
Cairn Energy has filed a case in a US district court to implement the arbitration award. Earlier, the Edinburgh-based company had filed a similar case in a Dutch court.
In the appeal, India is expected to take a stand that the government has the sovereign right of taxation and private individuals cannot decide on that.
According to the Centre, the award falls outside the domain of a bilateral investment treaty and beyond the jurisdiction of international arbitration.
Also, the government is likely to invoke international public policy, arguing that Cairn did not pay tax in any jurisdiction across the globe.
The government had lost an international arbitration case to energy giant Cairn Plc under the retrospective tax legislation amendment in a verdict on December 21.
Thomson had, in a video address, said last week, “The arbitration is now finalised and the award has been given and we would request, along with others, that the Indian government moves swiftly to adhere to the award that has been given.”
The company had, in a letter to the Centre last month, threatened seizure of Indian government’s assets if New Delhi failed to pay the award. Cairn had got an order from a Dutch lower court on implementation of the award, which will enable the UK firm to identify commercial Indian assets that can be seized, such as aircraft and ships, among others. The case pertains to the Rs 24,500-crore tax demand on capital gains made by the oil major in reorganising its India business in 2006-07.
The Rs 8,800-crore arbitration award includes legal fees paid by Cairn for the case. It also includes reversing the dividend as well as tax refund the government had seized and shares the I-T department sold to recover part of the demand.
India had argued, during the Cairn arbitration, that non-compliance to tax was not covered under international treaties. Also, the amendment in the Finance Act, 2012 (retrospective amendment), was only clarificatory in nature. The verdict was given by a three-member panel chaired by Laurent Levy. The final hearing in the case was held in Paris in December 2018. Meanwhile, in 2017, the Iincome Tax Appellate Tribunal had upheld the I-T department’s capital gains tax demand of Rs 10,240 crore. The matter – pertaining to computation of capital gains and abuse of tax – is being heard by the Delhi High Court, with the next hearing on March 10.
The principal tax demand in case of Cairn stands at Rs 10,247 crore, besides a penalty at 100 per cent on the tax. There is also interest at 12 per cent per year from February 2017, taking the total to Rs 24,500 crore.
India had, in December, appealed against Vodafone’s verdict of over Rs 22,100-crore tax demand at the Singapore court of appeals on grounds of sovereignty.
India had lost the arbitration to the British telecom major over a 2012 legislation that gave the government powers to retrospectively tax deals like Vodafone’s acquisition of 67 per cent stake in Hutchison Whampoa in 2007.
Dossier on website
In an interesting show of its contribution to India’s energy landscape, Cairn Energy Plc recently posted a link on its website’s home page titled Discover More About Cairn Energy in India. For a company, which currently has no business in India, it is surprising that there is also a Hindi translation of the dossier on its contribution to India titled ‘Bharat Mein Cairn Energy Ke Bare Mein Adhik Jankari.’ The company has highlighted its Rajasthan oil discovery on its home page.