CAIRN energy sues Air India in US court

MUMBAI/NEW YORK: Cairn Energy has sued India’s flagship carrier Air India to enforce a $1.2 billion arbitration award that it won in a tax dispute against India, according to a U.S. District Court filing. The move ratchets up pressure on the Indian government to pay the sum of $1.2 billion plus interest and costs that the British firm Cairn was awarded by an arbitration tribunal in December.

Cairn Energy has sued India’s flagship carrier Air India to enforce a $1.2 billion arbitration award that it won in a tax dispute against India, according to a US District Court filing reviewed by Reuters.

The move ratchets up pressure on Indian government to pay the sum of $1.2 billion plus interest and costs that the British firm Cairn was awarded by an arbitration tribunal in December. The body ruled India breached an investment treaty with Britain and said New Delhi was liable to pay.

Cairn filed the lawsuit on Friday in the US District Court for the Southern District of New York, seeking to make Air India liable for the judgment that was awarded to Cairn. The lawsuit argued that the carrier as a stateowned company, is “legally indistinct from the state itself”.

“The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors like (Cairn),” the filing said.

Air India did not immediately respond to comment requests.

However, a senior government official aware of the development, on the condition of anonymity, said, “There are some news reports in the media that Cairn has initiated some action against a PSU to enforce the award. Government/ PSU have not received any such notice. As and when any such notice is received, Government/concerned organization shall take all necessary steps to defend against any such illegal enforcement action. It may be mentioned that Government has challenged the award in the case of Cairns in the appropriate court in the Hague and the Government is confident that the award will be set aside. The Government has also engaged a counsel team which is ready to defend against any enforcement action if and when initiated by Cairn anywhere in the world.”

Cairn’s move could potentially jeopardise India’s attempts to divest the state-owned carrier this year. New Delhi said in December that it had received multiple expressions of interest after it moved to privatise the loss-making entity. New Delhi has filed an appeal against the arbitration award, and added “the government is confident that the award will be set aside”.

Cairn had since January, however, begun taking steps to identify Indian assets overseas against which it could enforce the award including bank accounts, aircraft and even ships. It had also started registering its claim against India in courts in the US, Britain, Netherlands and Canada.

Reuters last week reported that India had asked state-run banks to withdraw funds from their foreign currency accounts abroad, fearing Cairn might sue to seize the funds. Cairn had said previously it was pursuing a settlement with India, but in the interim it has also been laying the grounds to seize Indian assets should talks fail.

A company spokesman on Saturday said that Cairn was taking the necessary legal steps to protect shareholder interests in the absence of a resolution.

He said that “Cairn remains open to continuing constructive dialogue with the Government of India” to reach a settlement.

An Indian official told Reuters last week, talks between New Delhi and the company were making “little progress” and noted that India’s directive to state-run banks to withdraw foreign currency funds sitting overseas showed the government is worried that Cairn may move quickly to seize assets.

THE LAWSUIT ARGUED THAT AIR INDIA, AS A STATE-OWNED COMPANY, IS ‘LEGALLY INDISTINCT FROM THE STATE ITSELF’