Govt asks US court to dismiss Cairn’s suit
The Indian government has asked a federal court in Washington to dismiss Cairn Energy’s suit seeking enforcement of a $1.2-billion arbitral award, saying it had sovereign immunity under US law.
Cairn moved the court in May to force Air India to pay the award it had won in December.
The government on August 13 filed a ‘Motion to Dismiss’ petition in the US District Court for the District of Columbia, saying the court lacked subject-matter jurisdiction in the dispute between Cairn and the Indian tax authority, according to a filing seen by PTI.
This comes a week after the government enacted legislation to scrap a tax rule that gave the tax department power to go 50 years back and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India. That rule had been used to levy a cumulative of ~1.10 trillion of tax on 17 entities, including ~10,247 crore on Cairn.
Officials said rules for withdrawal of such tax demands were in the process of being framed. “One of the requirements for dropping the retrospective tax demands is that the parties concerned have to give an undertaking for withdrawing all cases against the government/tax department. So, while all this is in process, the government is obligated to respond in any legal matter where there is a time bar for doing so,” an official said.
Cairn had challenged the tax demand before an international arbitration tribunal, which in December last year overturned the same and ordered the government to refund the money collected.
In May, it took Air India to a US court and last month got a French court order to seize real estate belonging to the government in Paris. In response, the government filed a dismissal motion last week, citing protections afforded by the US Foreign Sovereign Immunities Act of 1976. India in the filing said the court “lacks subject-matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA) because India never waived its sovereign immunity and, likewise, never offered — let alone agreed — to arbitrate the present dispute with petitioners”. “India also never clearly and unmistakably excluded judicial review or delegated exclusive competence to decide these questions to an arbitral tribunal”, implying that Cairn couldn't satisfy any exception to sovereign immunity under the US law, the filing said.