British Oil and Gas explorer Cairn Energy Plc has won an arbitration award of USD1.2 billion, plus interest and costs against the Government of India on a tax dispute. The dispute arose as a result of a change in Indian Tax law in 2012, enabling the government to retrospectively tax companies for mergers and acquisitions going as far back as 1962. In order to recover the dues from Cairns, Indian tax authorities had seized dividend and shares, and withheld tax refunds.
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Cairn initiated arbitration under the terms of UK-India Bilateral Investment Treaty,. The company sought $1.4 billion in damages from the Government of India to recoup the value of the Group’s residual shareholding in Cairn India Limited (CIL, since merged with Vedanta Limited).
Proceedings were done under UNCITRAL Rules, administrated by the Permanent Court of Arbitration (PCA), and the seat of arbitration was at Netherlands. The Arbitral Tribunal ruled that India’s tax claim was not valid and asked the government to repay the funds, along with interest, to Cairn. The Arbitral Tribunal declared that India’s retrospective tax demand breached the U.K.-India bilateral investment protection treaty.
In a Similar case, Vodafone had previously won an award against India, to the tune of USD 3 billion.
To read more kindly visit
https://pca-cpa.org/en/cases/221/
This Article is a Part of Our Arbitration: An Introduction with Special Reference to the United Arab Emirates Blogpost.
Part of ATB Legal’s Dispute Resolution practice.