“There is no way that the government is going to accept the proposal. We have filed an appeal. Any solution will be within the legal framework. For that, we have asked them to come under the Vivad Se Vishwas (VsV) scheme and settle the dispute by paying 50 per cent of the disputed principal tax amount and get a waiver of interest and penalty. That would have resulted in an immediate refund of $300 million,” said a government official.
In fact, the government is still open to settling the dispute by accommodating the oil major under VsV direct tax dispute resolution scheme, the declaration window for which officially closed on March 31. The payment window closes on April 30.
Another official pointed out with international arbitration, it was difficult for Cairn to invest in India.
“India is an attractive investment destination. Slowly, foreign direct investment conditions for the energy sector are being relaxed. But in the arbitration
scenario and threats of asset seizure, it will be difficult for Cairn to invest here,” he added.
India is expecting a stay on the award from a lower Dutch court anytime now. Based on that, it will seek a stay on the implementation of the award in other jurisdictions such as the UK, Canada, the US, and France, which will protect India from its commercial assets like aircraft and ships getting seized.
The Edinburgh-based company had invested in the oil and gas sector in India and made a large discovery in Rajasthan around 2004. While it currently has no business in India, Cairn Energy
Plc recently posted a link on its website’s home page titled ‘Discover More About Cairn Energy
There was also a Hindi translation of the dossier on its contribution to India titled ‘Bharat Mein Cairn Energy Ke Bare Mein Adhik Jankari’.
Cairn Energy Chief Executive Officer Simon Thomson had met finance ministry officials in February, seeking the award’s implementation.
India has appealed the verdict on grounds of sovereignty and tax avoidance by the UK oil major. India is learnt to have taken the stand that the government has the sovereign right to tax, and private individuals cannot decide on that. Besides, it falls outside the domain of a bilateral investment treaty and beyond the jurisdiction of international arbitration.
Also, the government is learnt to have invoked international public policy, arguing that Cairn did not pay tax in any jurisdiction across the globe.
India has contested the stand taken by the Permanent Court of Arbitration
at The Hague that this is not a tax dispute but a tax-related investment one, and hence, it falls under the court’s jurisdiction. India has contested this claim in the appeal filed last month.
“There is either an investment dispute or a tax dispute, but there is no precedent for something called an investment related-tax dispute,” said another official.
The government lost the international arbitration case to Cairn Energy Plc over the retrospective tax legislation amendment in a December 21, 2020, verdict.
The case pertains to the Rs 24,500-crore tax demand (including interest and penalty) on capital gains made by the oil major in reorganising its India business in 2006-07.
: Cairn discovers the Mangala oilfield in Rajasthan
December 8, 2011
: Vedanta completes acquisition of 58.5% in Cairn India
from Cairn Plc for $8.67 billion
January 2012: Supreme Court rules in favour of Vodafone
March 16, 2012: Ministry of Finance introduces retrospective tax amendment in the Finance Bill
January 2014: Income-tax department launches retrospective tax investigation transactions undertaken prior to the IPO
March 2015: Cairn Plc commences international arbitration proceedings against the Government of India under the UK-India bilateral investment treaty
December 2018: Hearing concludes in arbitration case
December 22, 2020: Arbitral tribunal issues award, asking India to pay $1.2 billion in damages
March 22, 2021: India files appeal against the verdict at The Hague
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