Why is Cairn going after Indian assets? – INSIGHTSIAS

Topics Covered: Important International institutions, agencies and fora, their structure, mandate.

Why is Cairn going after Indian assets?

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Context:

Britain’s Cairn Energy Plc has secured an order from a French court authorising the freezing of 20 Indian government properties in Paris valued at over 20 million euros.

• This is the first court order secured against India to enforce a $1.2-billion arbitration award that Cairn Energy had won against the Indian government in the retrospective tax dispute.

 

Why is Cairn going after Indian assets?

In December 2020, a three-member international arbitral tribunal at the Permanent Court of Arbitration in the Netherlands ruled unanimously that the Indian government was “in breach of the guarantee of fair and equitable treatment”, and against the India-UK Bilateral Investment Treaty, and that the breach caused a loss to the British energy company and ordered compensation of $1.2 billion.

• The Indian government is yet to accept the arbitration award. Cairn Energy is going after Indian assets overseas to recover the compensation.

 

What are India’s options going forward?

While it is the first one to succeed for Cairn, the French court order boosts its chances in other jurisdictions.

• The assets will be tangled in legal dispute and India will join a list of countries that includes Pakistan, Afghanistan whose assets were seized abroad.
• Unless it can be proved that the arbitration awards against India are mala fide in the appeals, the award can be enforced in foreign jurisdictions. However, a settlement between the two parties cannot be ruled out.

 

What’s the case?

• Cairn had challenged the Indian government seeking taxes over an internal business reorganisation using the 2012 retrospective tax law, under the UK-India Bilateral Investment Treaty.
• In 2014, the Indian tax department had demanded Rs 10,247 crore in taxes.
• In 2015, Cairn Energy Plc commenced international arbitration proceedings against the Indian government.

 

Permanent Court of Arbitration:

1. It was established in 1899 and is headquartered in The Hague, Netherlands.
2. It is an intergovernmental organization dedicated to serve the international community in the field of dispute resolution and to facilitate arbitration and other forms of dispute resolution between States.
3. All decisions, called “awards” are binding on all the parties in the dispute and have to be carried out without delay.

 

Insta Curious:

How arbitration, mediation and conciliation are different from each other? Reference:

 

InstaLinks:

Prelims Link:

1. What is Arbitration?
2. Recent Amendments.
3. About the International Court of Arbitration.
4. About the Arbitration Council of India.
5. Appointment of arbitrators under the 1996 Act.
6. Permanent Court of Arbitration- composition, functions and members.

Mains Link:

Discuss the significance of the Arbitration and Conciliation (Amendment) Act.

Sources: the Hindu.