On November 3, UK-based Cairn Energy announced that it is engaging with the Indian government, under the provisions of the recent Indian legislation withdrawing a controversial retroactive tax law, to resolve its more than USD 1 billion tax dispute with the country and obtain a refund from the government.
“Cairn is working collaboratively with the Government of India towards expediting the refund within the process of the Tax Amendment Act Rules,” Cairn said in a statement. “The previously announced special dividend is expected to be paid by early 2022.”
The taxes in dispute related to a 2012 law that introduced a retroactive tax on indirect transfers of assets located in India. Cairn challenged the tax through international arbitration provisions available in applicable investment treaties.
Cairn prevailed with a more than USD 1 billion arbitration award. While India contested the arbitration award, Cairn sought enforcement in multiple jurisdictions, including successfully garnering a court order in July to seize property owned by the Indian government in France.
In August, India introduced a legislative amendment and proposed rules to repeal the controversial retroactive tax and allow refunds in cases where taxpayers had already paid the tax. Refunds would be conditioned on withdrawing any related pending litigation and agreeing not to pursue further costs and damages.
Under the legal changes, and subject to the corresponding conditions, Cairn stated that it is entitled to a refund of INR 79 billion (approximately USD 1.06 billion) in taxes paid under the repealed provision. Accordingly, Cairn is undertaking the necessary procedures to withdraw its related enforcement actions against the Indian government.
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