India asks US Court to reject Cairn’s plea on $1.2 bn Arbitration Award2 min read


Introduction: Claiming sovereign immunity under US law, the Indian Government has asked a federal court in Washington to dismiss the claim of a USD 1.26 billion arbitral awards granted to Britain’s Cairn Energy. The British company had pleaded to a US federal court to enforce the payment of a USD 1.26 billion arbitration award that the company had won in December. On August 13, the government filed a “Motion to Dismiss” in the US District Court for the District of Colombia, contending that it has protection granted under the US Foreign Sovereign Immunities Act of 1976 and also the court does not have the jurisdiction over the said subject matter. India also argued that it has never agreed to comply with the order of the arbitral tribunal on this matter.

Background: The said petition has been filed in response to Cairn’s enforcement petition in the US District Court. The Indian Government taxed Cairn ₹10,247 crores on account of its tax law by which the tax department was granted the authority to revert back to 50 years and charge retrospective capital gains from the companies where the proprietorship has changed hands overseas but the assets are located in India. This heavy levy of taxes was challenged by Cairn in December before an international arbitration tribunal which countermanded such tax demand and ordered the government to reimburse the tax extracted. This decision was initially non concurred with the following which Cairn pulled in Indian assets overseas. In July, the company was granted approval from a French court to capture the Indian government’s assets in Paris. Cairn had urged the US Court to enforce the December 2020 award decided by the Netherlands-based Permanent Court of Arbitration against India.

Policy Change Decision by India: The Indian government, last week ordained new legislation by which the current tax law demanding retrospective capital gain would be abrogated. Sitharaman, Finance Minister of India said that the said abrogation of the tax law by which companies like Cairn Energy Plc and Vodafone Plchave been charged would be framed soon.

Total Amount to be refunded: The Indian government has to refund about ₹8,100 crores that has been gathered by the current scrapped tax law. About ₹7,900 crore from the amount is to be reimbursed to Cairn alone. Vodafone company too succeeded in claiming the refund against the exaction of ₹22,100 crore tax by India.

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