Cairn to drop cases against India, accepts $1-bn offer

Vedanta is also likely to withdraw arbitration

Cairn Energy Plc on Tuesday said it was ready to withdraw all cases it had slapped against the Indian government for enforcing a $1.2-billion arbitration award the company had won in December 2020.

This is part of the settlement under a recent legislation by Parliament.

Also, Vedanta, which had bought Cairn Energy’s erstwhile subsidiary Cairn India in 2011, is likely to withdraw arbitration it had filed in Singapore seeking around ~5,000 crore as damages from the government. London Stock Exchange-listed

Cairn Energy will enter into “statutory undertakings” with the government. This will enable a refund of retrospective taxes collected from it by way of asset seizures since 2014. It will get a refund totalling ~7,900 crore (approximately $1.06 billion) once it withdraws litigation and enters into an agreement with the government.

According to Simon Thomson, chief executive, Cairn Energy Plc, the company would be required to withdraw its international arbitration award claim, interest, and costs, and end legal enforcement actions in order to be eligible for the refund under the terms of new legislation.

"WE ARE DELIGHTED THAT AN OPEN AND TRANSPARENT PROCESS HAS LED US TO THIS POINT. IT MEANS WE CAN MOVE ON FROM THIS" Simon Thomson chief executive, Cairn Energy PLC

The company had registered the arbitration award in many jurisdictions, including the US, the UK, Canada, Singapore, Mauritius, France, and the Netherlands.

It had even sought mortgaging government properties in Paris and sought claim on Air India as “the alter ego of the Indian state”.

According to draft rules of the Taxation Laws (Amendment) Act, 2021, released by the Central Board of Direct Taxes last week, companies have to file a declaration to “irrevocably withdraw, discontinue and not pursue” any legal proceedings.

These include proceedings before the appellate forum, proceedings for arbitration, conciliation or mediation, and enforcing or pursuing attachments in respect of any award, order, or judgment. The draft rules require a similar undertaking from “interested parties” and shareholders in support of withdrawing cases.

The legislation offers settling the retrospective cases pertaining to the 2012 legislation on the offshore indirect transfer of Indian assets.

London-based Vedanta Resources had served a notice of claim against the government of India under the Indiaunited Kingdom bilateral investment treaty, challenging the tax demand on March 27, 2015.