$6billion compensation for hurting its business through a tax dispute: Oil energy explorer Cairn ask India to pay up

New Delhi july 12:Cairn, based in Scotland, said the taxes sought were related to transactions carried out to reorganise the company’s structure to prepare for Cairn India Limited’s stock market flotation in 2007.

Cairn sold its majority stake in Cairn India to Vedanta Resources Plc in 2011. Cairn said the tax department’s investigation, which started in January 2014, had stalled the sale of its outstanding holding in the Indian venture, worth about $700 million.

Cairn said it would seek “restitution of losses” stemming from that delay.

British explorer Cairn Energy has sought USD 5.6 billion in compensation from the Indian government for raising a retrospective tax demand of Rs 29,047 crore on 10-year old internal reorganisation of its India unit.

Cairn challenged India under the terms of a UK-India investment treaty, which means arbitration was involved.

The company is claiming full compensation for the USD 1 billion value lost following the tax notice and freezing of its 9.8 percent shares in Cairn India.

India has now moved to renegotiate dozens of these treaties with other countries.

Delhi wants to protect itself from foreign litigation and the new template asks for all Indian legal avenues to be exhausted before turning to international arbitration.

Investment treaties lay out the rules for how business disputes should be handled.
The idea for renegotiating investment treaties comes as India has been hit by a series of lawsuits over issues such as retroactive taxation or cancelled licenses.

Britain-based Vodafone has a case pending with the International Court of Justice for arbitration over a bill for $2.5 billion that India’s tax authorities say the company owes for a 2007 asset purchase, based on legislation passed only in 2012.

Cairn Energy still holds 9.8 percent in Cairn India which the I-T Department has barred it from selling.