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India about to join countries threatened by asset seizures across the world

Cairn Energy Plc will push authorities to impound Indian assets if the South Asian nation declines to honor an arbitration ruling in a $1.2 billion tax dispute, according to a letter the company sent

Topics
India | Cairn Energy | Venezuela

Siddharth Philip Elena Mazneva & Debjit Chakraborty | Bloomberg 

While US crude explorer ConocoPhillips has been seeking to recoup $10 billion from Venezuela for years, it’s the first time in recent memory a company has threatened to seize India’s overseas assets.
While US crude explorer ConocoPhillips has been seeking to recoup $10 billion from Venezuela for years, it’s the first time in recent memory a company has threatened to seize India’s overseas assets

is about to join countries including in being threatened by asset seizures across the world.

Plc will push authorities to impound Indian assets if the South Asian nation declines to honor an arbitration ruling in a $1.2 billion tax dispute, according to a letter the company sent to the Indian High Commission in the UK An international tribunal last month said India’s tax claim was not valid and asked Prime Minister Narendra Modi’s administration to return the money to Cairn.

While US crude explorer ConocoPhillips has been seeking to recoup $10 billion from for years, it’s the first time in recent memory a company has threatened to seize India’s overseas assets. The warning follows a series of events that can be traced back to a 2012 law change allowing the nation’s authorities to retrospectively tax capital gains.

The ruling is final and binding, and failure to comply would breach the UK-bilateral investment protection treaty and other international rules, Cairn Energy’s Chief Executive Officer, Simon Thomson wrote in the letter addressed to the Indian High Commissioner Gaitri Issar Kumar in London, and reviewed by Bloomberg News.

"As is a signatory to the New York Convention, the award can be enforced against Indian assets in numerous jurisdictions around the world for which the necessary preparations have been put in place," according to the letter, referring to the 1959 Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

India’s foreign ministry didn’t immediately respond to an email seeking comment on the letter and its contents. Cairn declined to comment.

Earlier this month, Malaysia’s government had impounded a plane owned by state carrier Pakistan International Airlines on a court order due to a UK court dispute with aircraft lessors. ConocoPhillips moved to seize shares of a unit of Venezuela’s state-owned oil company after the South American producer failed to make payments on a multibillion-dollar settlement agreement.

While Cairn didn’t mention any Indian asset in its letter, The Hindu newspaper earlier reported, citing people it didn’t identify, that assets could include bank accounts of its diplomatic missions, non-diplomatic premises, planes of state carrier Air India and state-owned ships in the UK, Netherlands, France, Canada and the US

has asked the Indian government for an early indication of implementing the arbitration award, well before the announcement of its full year earnings on March 9 for clarity of its shareholders, according to the letter.

The UK oil explorer received the tax claim from Indian authorities in March 2015 over a restructuring carried out in 2006 while preparing for an initial public offering of Cairn India. The tax authorities seized 10 per cent of Cairn India’s shares, then valued at about $1 billion, according to information on Cairn Energy’s website.

The Edinburgh-based company filed a dispute under the UK-India Investment Treaty and sought international arbitration that started later in 2015 for the losses over expropriation of its investments in India from the minority holding.

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First Published: Thu, January 28 2021. 10:26 IST
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