French court allows Cairn to confiscate Indian government assets
French court has ruled in favor of Britain’s Cairn Energy in a tax dispute with India.
- A French tribunal has also ordered the freezing of about 20 Indian government-owned properties in central Paris over disputed tax claims.
- Also, the Arbitration Court had given Cairn the right to recover damages of US $ 1.7 billion.
What is the dispute?
- The Cairn dispute started 15 years ago in 2006-2007, when Cairn UK transferred shares of Cairn India Holdings to its Indian counterpart Cairn India.
- Thereafter, the tax authorities decided that since Cairn UK earned capital gains, it should pay capital gains tax.
- The retrospective tax was introduced by India in the year Under this, any capital gain arising from the year 1962 as a result of transfer of shares from a foreign entity (whose assets are situated in India) shall be taxable in India.
- Cairn initiated efforts for international arbitration. In December 2020, the Permanent Court of Arbitration in The Hague ruled that the Indian government should pay Cairn Energy $1.2 billion in damages because the retrospective tax was improperly applied to the company.
- Since India is a signatory to the New York Convention, this ruling can be enforced against Indian properties in many jurisdictions around the world.
- The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, also known as the New York Convention. It provides that foreign and non-domestic arbitration decisions shall not be discriminated against.
Source – The Hindu