Cairn Energy sues Air India for $ 1.2 billion arbitration award

A Scottish energy company has launched legal action to allow it to seize planes from state-owned Air India, amid a growing tax dispute with Narendra Modi’s government.

Cairn Energy is suing Air India in the United States to impose compensation of $ 1.2 billion plus interest – now worth more than $ 1.7 billion – in one of many disputes between Western companies and New Delhi .

The lawsuit, filed Friday in the southern district of New York, aims to establish that Air India is “the alter ego of the Republic of India and therefore jointly responsible for the debts and obligations of India itself”.

It’s a legal process that could lead Cairn Energy to attempt to seize planes and other assets in a long-standing tax dispute, though talks to settle the case continue.

The Edinburgh-based company has identified $ 70 billion in Indian-owned assets around the world that could potentially be mined, including in London.

If the New York case proves Air India’s assets are at risk in the litigation, Cairn Energy believes it should set a precedent for other state-owned assets. The New York legal system is at the center of the company’s efforts because of its experience in handling international disputes of this type.

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British Prime Minister Boris Johnson is under pressure from the opposition Labor Party to defend Cairn Energy and other companies in conflict with India.

Labor claims Johnson remains silent because he is desperate to secure a trade deal with Modi. A Tory official said he did not believe Johnson raised the Cairn Energy case during a video conference with Modi this month.

Johnson agreed in his video call with Modi to an “enhanced trade partnership” – both sides say they are seeking a comprehensive free trade deal that would remove barriers to trade and investment.

But some Western companies say Modi’s government is not respecting existing trade agreements. Vodafone, one of Britain’s largest companies, is embroiled in a complex dispute with Indian tax authorities, which demanded € 3 billion in arrears. An international arbitration tribunal ruled in favor of Vodafone, but New Delhi appealed the decision.

Devas, a satellite company based in India and the United States, has also been embroiled in a legal dispute with Indian authorities.

“We cannot be in a position where Boris Johnson fails to defend the interests of UK business in the hope that this will ease the path to a future trade deal with India,” said Emily Thornberry, spokesperson of Labor.

The UK government has said it hopes “that a resolution will be found soon” between Cairn Energy and the Indian government, but has “not commented on legal proceedings to which it is not a party.” He is committed to helping UK companies wishing to invest in India.

An international tribunal in December ordered India to pay $ 1.2 billion to Cairn in a retrospective tax dispute, New Delhi sought to collect the company. Modi’s government challenged the process.

India’s finance ministry did not respond to a request for comment, although local media quoted an anonymous official as saying the government would take all measures to defend itself.

Under a law passed in 2012, India retroactively demanded $ 1.4 billion in tax payments from Cairn Energy related to the British group’s listing of its Indian subsidiary on the Bombay Stock Exchange in 2007. .

An arbitration tribunal found that India had violated its obligations under the UK-India BIT in 2014 when tax authorities seized Cairn Energy’s residual 10% stake in the branch, which she sold to Vedanta.

Nirmala Sitharaman, India’s finance minister, pushed back the court ruling last month.

Talk to Event moderated by the Financial Times and Indian Express, she said: “International arbitrations involving India’s sovereign right to tax are a matter of concern, and to this limited extent we fear that it creates a false previous.”

Cairn Energy said it was “taking the necessary legal steps to protect the interests of shareholders in the absence of a resolution of the arbitration award.”

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