Companies

Cairn Energy sues Air India in US to enforce $1.2 billion arbitration award

Shishir Sinha New Delhi | Updated on May 15, 2021

Govt says no notice yet; will defend strongly such a move

Scotland-based Cairn Energy has filed a lawsuit in US Court against Air India to enforce a $1.2 billion tax arbitration award which it won against India. Meanwhile, Government sources said that the Government or the Company is yet to receive any notice, but once received, it will fight strongly.

“Cairn is taking the necessary legal steps to protect shareholders’ interests in the absence of a resolution to the arbitral award,” a company spokesperson said. Further he added that the company remains open to continuing constructive dialogue with the Indian Government to arrive at a satisfactory outcome to this long-running issue.

Cairn’s move is being seen as a pressure tactic on Government after Hague based International Arbitrational Tribunal, in December, ruled in the company’s favour. As talks between company and the Government did not produce any results, the former begun identifying overseas Indian assets in case the Indian government fails to honour the arbitration award. Latest lawsuit against Air India is important legal move in this direction.

Meanwhile, government sources said that there are some news reports in the media that Cairn has initiated some action against a PSU to enforce the award. “Government/ PSU has not received any such notice. As and when any such notice is received, Government/concerned organization shall take all necessary steps to defend against any such illegal enforcement action,” a source said.

Another source reminded that government has challenged the award in the case of Cairns in the appropriate court in the Hague and the Government is confident that the award will be set aside. “The Government has also engaged a counsel team which is ready to defend against any enforcement action if and when initiated by Cairn anywhere in the world,” he said.

According to reports, Cairn filed the lawsuit on Friday in the U.S. District Court for the Southern District of New York, seeking to make Air India liable for the judgement that was awarded to Cairn. The lawsuit argued that the carrier as a state-owned company, is legally indistinct from the state itself. "The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors like (Cairn)," the filing said.

Earlier this year, cairn has already moved courts in the US, the UK, the Netherlands, Canada, France, Singapore, Japan, the UAE and Cayman Islands to get the December 21 international arbitration tribunal award registered and recognised. This is the first step before it can seek seizure of the Indian government assets such as bank accounts, payments to state-owned entities, aircraft and ships in those jurisdictions in case India does not return the value of the shares seized and sold, dividend confiscated, and tax refund stopped to adjust a ₹10,247-crore tax demand raised using a retrospective legislation.

 

Published on May 15, 2021

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