India challenges $1.2-billion Cairn arbitration award

New Delhi, May 23

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India has challenged an international arbitration tribunal award asking it to return $1.2 billion to UK’s Cairn Energy Plc on the ground that it had never agreed to arbitrate over a “national tax dispute”, the Finance Ministry said here today.

In a statement, the ministry also refuted reports that the government had purportedly asked state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of the potential seizure of such accounts.

While the government appointed a judge on the three-member arbitration panel and fully participated in the proceedings against India seeking Rs 10,247 crore in back taxes from Cairn, the ministry said the tribunal “improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and/or agreed to arbitrate”.

India had seized and sold shares of Cairn in its erstwhile India unit, confiscated dividend due and withheld tax refunds to recover the tax demand it had levied two years after passing a law in 2012 that gave it powers to levy tax retrospectively.

Cairn invoked arbitration under the India-UK bilateral investment treaty.

In December last year, Cairn won an award that held the levy of taxes using the 2012 law unfair on the company and the tribunal asked the Indian Government to return $1.2 billion plus cost and interest. — PTI