Cairn said the company has identified items/assets that belong to the Indian government Cairn Energy Plc on Tuesday said preparatory identification of assets belonging to the Indian government has begun in multiple countries. The company will go to court to seize the assets, if its arbitration award is not honoured. The company could also monetise the award, with the potential to transfer it to third-party funds.
It said the arbitration award, which stood at $1.7 billion ($1.2 billion plus interest currently totalling $490 million), was enforceable against India-owned assets in over 160 countries that have signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the company said in a presentation after announcing results on Tuesday.
“Cairn has already taken steps to have the award recognised in certain major jurisdictions in which Indian sovereign assets have been identified. We have to register the award in various countries before thinking of taking the next step, which would be to go to court with an application to seize the assets belonging to the Indian government,” said a person close to the development.
Cairn said the company has identified items/assets that belong to the Indian government, should it need to take action to protect the interests of its shareholders who have been waiting seven years for clarity on this issue.
The asset could be pledged against recourse or non-recourse financing. It said direct discussions on settlement mechanisms with the Indian government were underway, even through diplomatic channels. The award, it said, was enforceable in more than 160 jurisdictions under the 1958 New York Convention.
Cairn said it was ‘extremely confident’ that satisfaction of the award would be achieved — either by negotiated settlement or by enforcement against Indian assets (with potential financing and risk-sharing options available to accelerate access to cash recovered through enforcement).
“However, neither the route to recovery is sufficiently well defined in terms of the timing nor the amount of expected settlement to provide the virtual certainty required under the auditing norms. The receivable under the award therefore, remains classified as a contingent asset at this time,” said the company after its results.
Cairn, however, said it was engaged directly with the Indian government, following the unanimous arbitration decision under the UK-India Investment Treaty to award Cairn $1.2 billion plus interest. “We have engaged with the Government of India regarding adherence to the ruling and are pursuing all avenues to protect our shareholders’ rights to the value of the award,” said Simon Thomson, chief executive, Cairn Energy Plc, in a statement.
In the corporate outlook for 2021, it mentioned all necessary steps were being taken to ensure access to the value of the award. “The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and it awarded to Cairn damages of $1.2 billion plus interest and costs, which immediately became payable. The total due at the end of the year was $1.7 billion.”
Cairn’s engagement with the Government of India on its arbitration award will continue in parallel with pursuing options of enforcement and monetisation of the award. Among the risks to the company’s finances, it listed “the inability to promptly and fully secure or repatriate value from India”.
On December 23, Cairn announced the Geneva tribunal had ruled in its favour a claim against the Indian government. The company quoted the tribunal ruling, saying the application to Cairn of the retrospective tax amendment introduced by the Indian government was ‘grossly unfair’, discriminatory and in breach of the ‘fair and equitable treatment’ standard of the treaty.