India ready to appeal Cairn's $1.2 billion arbitration award this week

Courts in five countries, including the US and UK, have given recognition to the $1.4 billion arbitration award

A day after British oil firm Cairn Energy pressed for honouring the over $1.4-billion international award on a tax dispute, finance ministry officials said New Delhi was preparing to appeal at The Hague this week. The Union government has finalised the grounds for appeal against the award and is in the final leg of discussions with the Dutch counsels, according to officials.

Based on the appeal, India will apply for a stay on the enforcement of the award at a lower Dutch court. It will also contest the enforcement in eight other jurisdictions including the US, UK, Canada and France. Getting a stay may take another three to four months after the appeal.

The energy major has been building pressure on India to honour the December 21 arbitration award and has filed a case in the US, the UK, Netherlands, Canada, France, Singapore, Japan, the United Arab Emirates and Cayman Islands. While courts in five countries, including the US, Canada and the UK, have given recognition to the arbitration, the oil major has also started the process to register the award in Singapore, Japan, the UAE and Cayman Islands. This will allow the company to petition for seizing of Indian government assets such as aircraft, ships, bank accounts, etc, in those jurisdictions, to recover the award dues.

“We are ready to file an appeal, based on which we will try to get a stay on the enforcement of the award and contest the case in other jurisdictions,”   said a government official.

“It is not going to be easy to get sovereign assets seized as India is not a signatory to the International Centre for Settlement of Investment Disputes convention,” said the official. In the appeal at The Hague, India is expected to take a stand that the government has the sovereign right of taxation and private individuals cannot decide on that. Besides, it falls outside the domain of a bilateral investment treaty and beyond the jurisdiction of international arbitration. Also, the government may invoke international public policy, arguing that Cairn did not pay tax in any jurisdiction across the globe.