Britain's Cairn gets French court order to seize 20 Indian properties in Paris

The centrally located properties mostly comprise flats, valued at more than EUR 20 million, used by the Indian government establishment in France, three people with direct knowledge of the matter say

Britain's Cairn gets French court order to seize 20 Indian properties in Paris

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New Delhi, July 8

In a setback to India, Britain’s Cairn Energy Plc has secured a French court order to seize some 20 government properties in Paris to recover a part of the USD 1.7 billion due from New Delhi following an arbitration panel overturning levy of retrospective taxes.

The centrally located properties mostly comprise flats, valued at more than EUR 20 million, used by the Indian government establishment in France, three people with direct knowledge of the matter said.

The French court, Tribunal judiciaire de Paris, on June 11 agreed to Cairn's application to freeze (through judicial mortgages) the residential real estate owned by the Government of India in central Paris, they said, adding that the legal formalities for this were completed on Wednesday evening.

While Cairn is unlikely to evict the Indian officials residing in those properties, the government cannot sell them after the court order.

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A three-member international arbitration tribunal that consisted of one judge appointed by India, had in December last year unanimously overturned levy of taxes on Cairn retrospectively and ordered refund of shares sold, dividend confiscated, and tax refunds withheld to recover such demand.

With the Indian government refusing to honour the award, Cairn has moved in multiple overseas jurisdictions to enforce the award by seizing Indian assets.

Last month, Cairn brought a lawsuit in the US District Court for the Southern District of New York pleading that Air India is controlled by the Indian government so much that they are 'alter egos' and the airline should be held liable for the arbitration award.

Similar lawsuits are likely to be brought in other countries, primarily with high-value assets. The arbitration award has been registered in countries such as the US, the UK, Canada, Singapore, the Mauritius, France and the Netherlands.

Cairn has identified USD 70 billion of Indian assets overseas for the potential seizure to collect award, which now totals to USD 1.72 billion after including interest and penalty.

While the finance ministry did not immediately offer comments on the matter, a Cairn spokesperson said: "Our strong preference remains an agreed, amicable settlement with the Government of India to draw this matter to a close, and to that end we have submitted a detailed series of proposals to them since February this year."

"However, in the absence of such a settlement, Cairn must take all necessary legal actions to protect the interests of its international shareholders," the spokesperson said without elaborating.

Sources said the French court order affects some 20 centrally located properties, belonging to the Indian government, as part of a guaranttee of the debt owed to Cairn.

"This is the necessary preparatory step to taking ownership of the properties and ensures that the proceeds of any sales would be due to Cairn," one of the persons said.

Last month, Cairn filed a petition with the courts in the Southern District of New York, seeking judicial confirmation that Air India, the national carrier, can be classed as the alter ego of the Indian state and thereby jointly liable for the arbitral award.

Air India has time till mid-July to file a plea contesting the Cairn lawsuit, sources said.

The Government of India, which participated in the arbitration proceeding over four years, has not accepted the award and has filed a 'setting aside' petition in a court in the Netherlands - the seat of the arbitration.

In May, the finance ministry said that the tribunal "improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and/or agreed to arbitrate".

The ministry called the 2006 reorganisation of Cairn's India business for listing on the local bourses as "an abusive tax avoidance scheme that was a gross violation of Indian tax laws, thereby depriving Cairn's alleged investments of any protection under the India-UK bilateral investment treaty". PTI

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