India has time till November to respond to Cairn Energy’s demand for $5.6 billion compensation in the retrospective tax case, said CEO of the British oil firm, Simon Thomson.
Cairn has initiated an international arbitration seeking $5.6 billion in compensation from the Indian government in case the retrospective tax demand of Rs 29,047 crore is not quashed.
“It is important for the arbitration to continue quickly,” he said, after meeting Revenue Secretary Hashmukh Adhia here.
While Cairn has filed its Statement of Claims before a three-member international arbitration panel, the government of India has time till November to respond, he said.
“The important thing is to keep this arbitration moving,” he said, adding that globally, investors are watching how India settles the legacy retrospective tax issue.
A tax demand of Rs 10,247 crore was imposed on Cairn over an intra-group restructuring undertaken in 2006 prior to the IPO of its India unit. Together with back-dated interest, the total demand is over Rs 29,000 crore.
“We are confident of our position. We have complied with all regulations and paid all taxes that were due,” he said.
Cairn Energy sold majority stake in the India unit, Cairn India, to Vedanta Resources, but retains a 9.8 per cent stake which has been attached by the income tax department.
Thomson said the attachment of shares is “unfair” and it is in the interest of all that the issue is resolved quickly.
Earlier this month, Cairn in its half-yearly earnings statement said it has commenced the proceedings under the UK-India Bilateral Investment Treaty as India’s actions have breached the Treaty by “expropriating the company’s property without adequate and just compensation, denying fair and equitable treatment… and restricting its right to freely transfer funds in connection with its investment”.
The seat of arbitration has been agreed as the Hague in the Netherlands.
“Cairn has asked the arbitration panel either to order India to withdraw its unlawful tax demand and compensate Cairn for the harm suffered by the seizure of the Cairn India shares, being not less than $1 billion (plus costs) or, if the tax demand remains in place, compensate Cairn…,” the statement said.