Govt of India to Contest Cairn’s $1.2 billion Arbitration Award By

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By Aditya Raghunath — The Cairn Energy vs Government of India dispute doesn’t look like it’s likely to get resolved. The Government has decided to file an appeal against Cairn Energy’s $1.2 billion arbitration award.

The Government is also going to contest other suits that Cairn has filed at various international courts, according to multiple media reports.

Cairn Energy CEO Simon Thomson had met Finance Secretary Ajay Bhushan Pandey on Thursday, February 18 to take talks ahead on the $1.2 billion award as ruled on by the Permanent Court of Arbitration (PCA) at The Hague in December 2020.

The court passed a judgment saying that India’s retrospective tax demand on Cairn Energy was “in breach of the guarantee of fair and equitable treatment.”

The issue dates back to 2006-07 when Cairn UK had transferred shares of Cairn India (NS:) Holdings to Cairn India. The IT (income tax) department decided that Cairn UK had made capital gains and it should pay a capital gains tax of Rs 24,500 crore.

The PCA said that the issue was not just a taxation issue, it was also related to investments, and hence under international jurisdiction.

“Tax demand against the claimants (Cairn Energy Plc and Cairn UK Holdings Limited) in respect of AY (assessment year) 2007-08 is inconsistent with the treaty and the claimants are relieved from any obligation to pay it and orders the respondent (Indian government) to neutralise the continuing effect of the demand by permanently withdrawing the demand,” said the three-member PCA arbitration panel.

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