Cairn Energy and Government of India dispute

The Cairn Energy and Government of India dispute is mainly an ongoing tax and investment dispute which has its origins in 2005–2006.[1][2] The case is closely linked to Cairn's partner in India, Vedanta, and to concepts such Ex post facto law in the form of retrospective taxation, bilateral investment treaties, and international arbitration between private and sovereign states.

Proceedings in the private investor-state arbitration (Cairn Energy PLC & Cairn UK Holdings Limited v. The Republic of India) at the Permanent Court of Arbitration in The Hague began on 22 September 2015 under United Nations Commission on International Trade Law (UNCITRAL) rules. The final arbitration award of US$1232 million was issued on 21 December 2020 in favour of Cairn; though compensation claimed by Cairn had been US$5584 million.[3][4] To enforce the arbitration award, Cairn has registered the award around the world including in countries such as United States, United Kingdom, Canada, France, Singapore, Mauritius, UAE, Cayman Islands and Netherlands.[1] In May 2021, Cairn sued Air India in New York.[5] In July 2021, Tribunal judiciaire de Paris accepts Cairn's claim to seize Indian properties in France.[6]

The case includes Vedanta Resources PLC v. Government of India in the Income Tax Appellate Tribunal of India,[7][8] as well as a case in the High Court of Delhi.[9]

India amended its income tax law in 2012, adding an amendment/clarification allowing for it to collect tax on old investments. While India applied the law on Cairn in 2015, it had done the same in 2014 to Vodafone. The case went to the Permanent Court of Arbitration and in September 2020, Vodafone got a ruling in its favour.[10][11] In August 2021 India scrapped its retrospective tax provision.[12]

## Timeline[edit]

### Before 2000[edit]

Year  | Cairn Energy  | Government of India  | Related events

|
|
|

1950 |  |

* 26 January: Government of India formed
* 29 July: India becomes party to and ratifies the Hague Conventions of 1899; therefore becoming party to the Permanent Court of Arbitration in The Hague.[13]

1959 |  |

* India becomes a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards[14][15]

1981 |

* Cairn Energy formed

|  |
1994 |

* Cairn invests in India's oil and gas sector.[16]

|  |
1996 |

* Cairn becomes an operator of Ravva oil field, Andhra Pradesh, India.[17]

|  |

### After 2000[edit]

Year  | Cairn Energy  | Government of India  | Related events

|
|
|

2004 |

* Cairn Energy completes its Mangala area appraisal drilling.[18]

|  |
2006 |

* Cairn undergoes internal restructuring in India, forms Cairn India, and transfers assets to it.[19][20] Cairn India Holdings Limited was a Jersey company.[21]

|  |
2007 |

* Cairn India listed on the Bombay Stock Exchange (BSE).[2]

|  |
2009 |

* Prime Minister of India Manmohan Singh inaugurates Cairn's oil fields in Mangala area.[22]

2011 |

* Cain Energy sells 58.5% stake in Cairn India to Vedanta Resources for $8.67 billion.

|  |
2012 |  |

* India under the UPA government and Finance Minister Pranab Mukherjee amends/clarifies its Income-tax Act, 1961.[1][20][23]

2014 |  |  |

* Vodafone serves arbitration notices under India-Netherlands Bilateral Investment Treaty.[24]

2015 |

* The Income Tax Department in India imposed on Cairn a tax demand of ₹20,495 crore (equivalent to ₹310 billion or US$3.9 billion in 2023), comprising tax of ₹10,248 crore and interest of ₹10,247 crore.[20]
* Cairn sues India at an investor-state dispute settlement tribunal, initiating international arbitration proceedings, citing violation of United Kingdom-India bilateral investment treaty (BIT).[4][25]
* 22 September: Permanent Court of Arbitration proceedings commence (Cairn Energy PLC & Cairn UK Holdings Limited v. The Republic of India).[3] The tribunal consisted of Presiding Arbitrator Laurént Levy and one arbitrator appointed by each side.[26][4] Representatives for Cairn included Quinn Emanuel Urquhart & Sullivan and Shepherd and Wedderburn, for the Indian state Gourab Banerji and Professor Chester Brown.[3]

2016 |

* 18 April: First procedural hearing.[7]

2017 |

* April: Cairn India merges with Vedanta.[27]

|  |
2018 |

* January-March: India's income tax department seizes a fraction of Cairns income;[28][29] that is Cairn Energy's 5% stake in Vedanta.[30]
* A majority of Cairn Energy's seized shares are sold by the Income Tax Department.[31]
* December: Following merits hearing and final hearing, Tribunal rules in favour of Cairn.[1][25]

2020 |

* 21 December: Final arbitration award.[32][25][3] Compensation claimed by investor was US$5584 million out of which US$1232 million was awarded.[4]

* 25 September: Vodafone get positive ruling from Permanent Court of Arbitration.[33]
* 24 December: India challenges Vodafone arbitration award in Singapore.[34]

2021 |

* February-March: Cairn registers award and moves courts in the United States, United Kingdom, Canada, France, Singapore, Mauritius, Netherlands, United Arab Emirates and the Cayman Islands.[14][1]

|  |

* Cairn and Government of India Revenue Secretary hold multiple meetings.[16]

* 17 May: Cairn sues Air India in New York.[5][35] Cairn is relying on judgments such as the US Supreme Court judgement in the case of First National City Bank NA versus Banco Para El Comercio Exterior de Cuba (Bancec).[21][36]
* 11 June: Tribunal judiciaire de Paris agrees to Cairns proposal to seize Indian assets in Paris.[6]

* 22 March: India files counter appeal at The Hauge following an announcement by the Finance Minister Nirmala Sitharaman on 5 March that it's her "duty" to do so.[2][1]

* Indian government denies reports of any properties being seized.[6]
* 5 August: Government of India introduces the Taxation Laws (Amendment) Bill, 2021, undoing the 2012 retrospective tax provision.[12]

* Devas Multimedia also files case against Air India.[37]
* 27 August: US District Court for the District of Columbia gives times till 10 September to Cairn to reply to a motion to dismiss petition.[38]

## See also[edit]

* Bifurcation (law)
* Ex post facto law
* State immunity

## References[edit]

1. ^ a b c d e f "Cairn Energy tax dispute India: All you need to know". The Times of India. 9 July 2021. Archived from the original on 2021-07-09. Retrieved 2021-07-09.
2. ^ a b c Seth, Dilasha (2021-04-12). "Arbitration case: Cairn Energy offers to invest $1.2 bn if India relents". Business Standard India. Retrieved 2021-07-09.
3. ^ a b c d "Cases | PCA-CPA — Cairn Energy PLC & Cairn UK Holdings Limited v. The Republic of India". pca-cpa.org. Permanent Court of Arbitration. Archived from the original on 3 February 2020. Retrieved 2021-07-22.
4. ^ a b c d "Cairn v. India | Investment Dispute Settlement Navigator | UNCTAD Investment Policy Hub". investmentpolicy.unctad.org. United Nations Conference on Trade and Development. Archived from the original on 20 June 2021. Retrieved 2021-07-09.
5. ^ a b Jonathan Stempel; Euan Rocha (2021-05-15). "Cairn Energy sues Air India to enforce $1.2 bln arbitration award - court filing". Reuters. Archived from the original on 2021-05-15. Retrieved 2021-07-22.
6. ^ a b c "Cairn gets ruling to freeze Indian assets in Paris". The Indian Express. 2021-07-09. Retrieved 2021-07-13.
7. ^ a b Torterola, Mistelis & Ponomarov 2020, p. 2.
8. ^ Bindra, Japnam (2020-09-16). "Tribunal award in favour of Vedanta upheld by SC". mint. Retrieved 2021-07-22.
9. ^ "$1.4 billion Cairn arbitration award: Nirmala Sitharaman says it's her duty to appeal". The Times of India. 5 March 2021. Archived from the original on 2021-03-05. Retrieved 2021-07-24.
10. ^ Aryan, Aashish (2020-09-27). "Retrospective taxation: the Vodafone case, and the Hague court ruling". The Indian Express. Archived from the original on 2020-09-26. Retrieved 2021-07-24.
11. ^ Kanekal, Nikhi; Ganz, Kian (2012-03-17). "Vodafone-Hutch deal | Retrospective change to I-T Act". mint. Archived from the original on 2012-11-07. Retrieved 2021-07-24.
12. ^ a b Chandorkar, Aashish (2021-08-09). "A pragmatic laying to rest of the retrospective tax ghost". Livemint. Archived from the original on 2021-08-09. Retrieved 2021-08-27.
13. ^ "Contracting Parties | PCA-CPA". pca-cpa.org. Permanent Court of Arbitration. Archived from the original on 20 July 2021. Retrieved 2021-07-22.
14. ^ a b "Cairn says it has identified Indian assets for seizing if it is not paid". The New Indian Express. 9 March 2021. Archived from the original on 2021-03-10. Retrieved 2021-07-24.
15. ^ Subramanian, Samanth (9 July 2021). "A Scottish energy company is using foreign courts to seize Indian assets". Quartz. Retrieved 2021-07-13.
16. ^ a b "FM Sitharaman says looking at how best to sort out Cairn arbitration". Business Standard India. PTI. 2021-04-22. Retrieved 2021-07-24.
17. ^ "Ravva Oil and Gas Field". Offshore Technology. Verdict Media (verdict.co.uk). Archived from the original on 2011-10-24. Retrieved 2021-07-13.
18. ^ "Cairn completes Mangala oil field appraisal drilling". Oil and Gas Journal. 12 July 2014. Archived from the original on 2021-07-09. Retrieved 2021-07-09.
19. ^ Singh, Sudheer Pal (2015-03-12). "Cairn Energy tax dispute: How the issue unfolded". Business Standard India. Retrieved 2021-07-09.
20. ^ a b c "I-T Dept slaps Rs 20,495 cr tax demand on Cairn India". Business Standard India. 2015-03-14. Retrieved 2021-07-09.
21. ^ a b Chandra, Naomi (21 June 2021). "Repercussions Of Retrospective Tax Amendments In India – In Light Of Cairn And Vodafone". www.mondaq.com. TMT Law Practice. Archived from the original on 2021-07-30. Retrieved 2021-07-30.
22. ^ Ammar Zaidi (2009-08-29). "PM launches Cairn India's oil fields in Barmer". Hindustan Times. Archived from the original on 2021-07-09. Retrieved 2021-07-09.
23. ^ Elizabeth Roche; Gireesh Chandra Prasad (2021-07-08). "Cairn versus India: What lies ahead". Mint. Archived from the original on 2021-07-08. Retrieved 2021-07-09.
24. ^ Mankotia, Anandita Singh (11 July 2014). "Budget 2014: Vodafone to continue international arbitration; 2012 retro-tax amendment stays". The Economic Times. Retrieved 2021-07-13.
25. ^ a b c Cairn Energy and Government of India - Retrospective tax arbitration proceedings. Cairn Energy. Accessed on 13 July 2021. Archived on 21 January 2021.
26. ^ Manoj, P. (23 December 2020). "Blow to India, Cairn wins $1.2-b award in retrospective tax dispute". The Hindu @businessline. Archived from the original on 2020-12-23. Retrieved 2021-07-13.
27. ^ "Cairn India merges with Vedanta". The Economic Times. 12 April 2017. Retrieved 2021-07-30.
28. ^ Sarkar, Shivaji (24 July 2021). "Cairn looking for arbitration money?". The Pioneer. Archived from the original on 2021-07-24. Retrieved 2021-07-24.
29. ^ "Income tax department seizes Rs 440 crore dividend income of Cairn Energy". Hindustan Times. 2018-04-15. Archived from the original on 2018-04-15. Retrieved 2021-07-24.
30. ^ Nair, Remya (2021-07-10). "Cairn targets Indian assets in Paris: What is its dispute with Modi govt & why it's escalated". ThePrint. Retrieved 2021-07-30.
31. ^ "I-T dept sells shares of Cairn Energy to recover retrospective tax". The Economic Times. PTI. 25 November 2018. Retrieved 2021-07-30.
32. ^ Shah, Aditi; Ahmed, Aftab (2020-12-23). "Cairn Energy wins over $1.2 billion from India in tax arbitration case". Reuters. Archived from the original on 2021-05-23. Retrieved 2021-07-13.
33. ^ "Vodafone retro tax case: All you need to know". The Economic Times. 25 December 2020. Retrieved 2021-07-13.
34. ^ Noronha, Peter, ed. (24 December 2020). "India Challenges Vodafone Arbitration Ruling In Singapore". NDTV. Archived from the original on 2020-12-24. Retrieved 2021-07-30.
35. ^ Vishwanath, Apurva (2021-05-20). "Explained: Why is Cairn Energy suing Air India?". The Indian Express. Archived from the original on 2021-05-18. Retrieved 2021-07-09.
36. ^ "Cairn Energy to file lawsuits in US, other nations to seize Indian PSU assets for recovery of $1.2 bn arbitration award". Firstpost. 2021-03-28. Archived from the original on 2021-03-28. Retrieved 2021-07-30.
37. ^ "Cairn Energy, Devas Multimedia Filed Lawsuits to Seize Air India's Overseas Assets: Govt". Moneylife. 23 July 2021. Archived from the original on 2021-07-23. Retrieved 2021-07-24.
38. ^ "US court sets timelines for Cairn India legal case". The Times of India. 27 August 2021. Archived from the original on 2021-08-27. Retrieved 2021-08-27.

### Bibliography[edit]

* Torterola, Ignacio; Mistelis, Loukas; Ponomarov, Volodymyr (2020), Massa, Diego Luis Alonso (ed.), TDM IACL Case Report Cairn Energy PLC, Cairn UK Holdings Limited v. The Republic of India. PCA Case No. 2016-7 - Procedural Order No. 4 - Decision on the Respondent's Application for Bifurcation - 19 April 2017 (PDF), School of International Arbitration, Queen Mary, University of London, International Arbitration Case Law, p. 6, archived from the original (PDF) on 1 May 2021