Govt condemns 'incorrect reporting' on Cairn legal dispute

The Ministry of Finance said that recent reports claiming that the government was asking the state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of a potential seizure of such accounts with regard to Cairn legal dispute were ‘totally incorrect’ and ‘not based on facts'.

New Delhi: The Union government on Sunday condemned the ‘incorrect reporting’ by a section of the media regarding its legal dispute with UK-based energy giant Cairn Energy Plc.

In a statement, the Ministry of Finance said that recent reports claiming that the government was asking the state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of a potential seizure of such accounts with regard to Cairn legal dispute were ‘totally incorrect’ and ‘not based on facts'.

“Certain vested parties appear to have orchestrated such misleading reporting, which often relies upon unnamed sources and presents a lopsided picture of factual and legal developments in the case,” the finance ministry said.

The government said it was ‘vigorously defending’ its case in this legal dispute.

“It is a fact that the government has filed an application on March 22, 2021 to set aside the highly flawed December 2020 international arbitral award in The Hague Court of Appeal,” the ministry informed.

In December last year, the government lost its case against Cairn Energy Plc at an international tribunal at Hague that unanimously held that the country breached its obligations under the UK-India bilateral investment treaty. The tribunal awarded the firm $1.2 billion (Rs 10,247 crores) in damages, interest and cost of litigation. The total sum of the award includes an amount of $1.72 billion, which Cairn is trying to recover from the Government of India by identifying the government property abroad which can be seized in the event of non-compliance.

The dispute is linked to a retrospective tax demand of $1.4 billion raised by the income tax department in 2014, which was related to the listing of Cairn India’s shares in the stock market in 2007.

Though the government has challenged the awards announced by the tribunal in December 2020, the UK-based energy giant is pursuing the case and has identified Indian properties abroad that can be seized.

This is the second case after the Vodafone tax dispute that the government has lost at an international tribunal.

In order to enforce the award, Cairn Energy moved the Court of South District in New York against the public sector national carrier Air India, which has assets in different countries.

The finance ministry's strong rebuttal comes in the wake of some media reports that suggested the department of financial services, under the ministry of finance, has recently asked the public sector banks to appoint nodal officers, in case they receive some intimation or notice from foreign authorities with regard to recovery case pursued by the Cairn Energy Plc.

However, the government has rejected any such move, saying that it had raised several arguments to set aside the tribunal’s award.

The arbitral tribunal, the government said in the statement, improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and or agreed to for arbitration.

It said the claims underlying the award are based on 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.

“The award improperly ratifies Cairn’s scheme to achieve Double Non-Taxation, which was designed to avoid paying taxes anywhere in the world, a significant public policy concern for governments worldwide,” the government said, adding that the case was pending and it was committed to pursuing all legal avenues to defend its case in this dispute worldwide.

The government also said the representatives of the UK-based oil company have approached it for discussions to resolve the issue.

“Constructive discussions have been held and the Government remains open for an amicable solution to the dispute within the country’s legal framework,” it said.