UK upstream firm Cairn Energy has an option to seize India's overseas assets in case Delhi refuses to honour a $1.2bn international arbitration case won by Cairn.
The payment was due immediately after the arbitration award was made in December last year, but India's government has refused to acknowledge this nor has appealed against it.
Indian prime minister Narendra Modi yesterday encouraged international investors to invest in India at the Davos World Economic Forum promising an ease of doing business and reforms. But Modi's BJP government, which had criticised the previous Congress-led administration for "tax terrorism", has failed to reverse regressive tax laws and is instead contesting every arbitration award.
Cairn wrote to the Indian government seeking prompt payment, failing which the arbitration award carries provisions of enforcement against Indian assets in jurisdictions around the world for which the company is making preparations. India can still appeal the Cairn award and delay the judgement but then it must pay interest, penalties and more legal fees if it loses eventually.
Cairn's dispute with the Indian authorities revolves around a retrospective tax demand imposed after it initially sold its controlling stake in Cairn India to UK-listed Vedanta Resources in 2011. The Indian government alleged that the company failed to pay tax on 245bn rupees ($3.3bn) of capital gains when transferring its Indian assets to a new firm from subsidiaries incorporated in the European tax haven of Jersey in transactions made in 2006.
Delhi has also refused to honour another international arbitration award made in September in favour of UK telecommunications firm Vodafone over a tax demand that was first struck down by India's Supreme Court. India will appeal the decision in Singapore. It has also appealed international arbitration awards made made in favour of Shell and Indian private-sector conglomerate Reliance Industries in Indian courts, while it is embroiled in several arbitration cases in the energy and resources sectors.
It is also unclear if India has honored an international arbitration award in favour of the India-focused resources firm Vedanta subsequently upheld last year by the India's Supreme Court, regarding development of the Ravva oil and gas areas in the Krishna-Godavari basin off India's east coast.
Source: argusmedia.com
Read the latest issue of the OGV Energy magazine HERE.
Ithaca Energy acquires Eni’s UK business in £750m deal
Iraq awards Akkas gas field development contract to Ukrainian firm
Seal of approval for UK oil & gas firm to expand its stake in Angolan offshore blocks
NZTC and NSTA Unveil Roadmap for Emissions Measuring and Monitoring Technologies