Cairn accepts a $1 billion refund offer, to drop cases against India
UK-based Cairn Energy PLC on Tuesday said it will drop long pending litigations to seize Indian properties in countries ranging from France to the US, within a couple of days of getting a USD 1 billion refund. The multinational company that won the case against India in the international arbitration forum was responding to the government’s recent decision to the scrapping of a retrospective tax law. Cairn termed India’s decision to scrap the 2012 retrospective tax law as a bold policy.
The offer to return money seized to enforce retrospective tax demand in lieu of dropping all litigations against the government “is acceptable to us,” Cairn CEO Simon Thomson told the news agency PTI in an interview from London. The Carin CEO said that they will drop cases to seize diplomatic apartments in Paris and Air India airplanes in the US in “a matter of a couple of days” after the refund, he said adding Cairn’s shareholders are in agreement with accepting the offer and moving on.
Apart from Cairn and Vodafone, the new legislation enables the Indian government to drop
Rs.1.1 lakh crore in outstanding claims against multinationals such as pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.
“Some of our core shareholders like Black Rock and Franklin Templeton agree (to this). Our view is supported by our core shareholders (that) on balance it is better to accept and move on and be pragmatic. Rather than continue with something negative for all parties which could last for many years,” he said.
PGurus reported a series of articles on how the Narendra Modi Government agreed to international arbitration while these multinational companies are facing setbacks for tax evasion in Indian courts with the strong retrospective taxation law in 2012. In 2012, after losing the Vodafone case in Supreme Court, Government brought the retrospective tax law to stop the multinationals working in India from selling their shares through abroad registered countries, especially in tax havens. But due to hectic lobbying, the government in 2016 agreed to international arbitration and lost all cases.
PGurus in December 2020 published a detailed article on why India losing cases in International arbitrations.[1]
Apart from Cairn and Vodafone, the new legislation enables the Indian government to drop
Rs.1.1 lakh crore in outstanding claims against multinationals such as pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn. About Rs.8,100 crore collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs.7,900 crore is due only to Cairn.
“Once we get to final resolution, part of that resolution is us dropping everything in terms of litigation. We can do that within a very short period of time, just a matter of a couple of days or something,” Thomson said. “So we are preparing on the basis of getting this resolution quickly, all these cases being dropped, and putting all this behind.” He said all enforcement proceedings brought because of the Government of India’s refusal to honour an international arbitration award asking it to return the value of money seized to enforce the retrospective tax demand, will be dropped. “Everything will be dropped. There will be no more litigation, that will be it. It will clear the matter up,” he said.
Cairn in its half-yearly report on Tuesday said it will return up to USD 700 million out of the Rs.7,900 crore (USD 1.06 billion)it is supposed to get from the Indian government, to “shareholders via special dividend and buyback.” Asked if the company would make a comeback to India, Thomson said India will become another potential investment destination once the issue is closed.
[with PTI inputs]
References:
[1] Why does India lose in International Arbitration Forums? After Vodafone, Cairn Energy wins 1.4 billion dollars (around Rs.10,400 crores) in tax case – Dec 25, 2020, PGurus.com
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