Cairn Plc initiated arbitration proceedings to seek $5.6 billion in compensation from India on the grounds that India unfairly changed its capital gains tax.
Cairn's claim is that India retroactively changed the capital gains tax to levy taxes on "routine" transfers of shares. According to Cairn, had it known India would tax these share transfers, it never would have chosen London for its IPO.
As part of the retroactive tax levy, Indian authorities slapped Cairn with a retrospective tax bill of roughly $4.3 billion (rs 29,000 crore), with Cairn stating that the taxation law's retrospective nature was "an unfortunate coup of politics over the rule of law."
According to Forbes, Cairn is accusing India of decreasing the value of its business, essentially, and is seeking compensation for this. While India claims that it is within its rights to charge capital gains taxes on the transfer of companies owning assets in India, Cairn retorts that this does not apply to non-Indian companies owning assets in India.
In addition to the fact that this is a retrospective claim-having happened 10 years ago--and again, according to Forbes, "there is little evidence that Indian law was such that the transaction should have been taxed in India at the time", Cairn is also claiming that India failed to uphold its obligations under the UK-India Investment Treaty. It was not, Cairn says, "Fair and equitable treatment."
"International arbitration proceedings, under the United Kingdom-India Investment Treaty, have commenced to settle the retrospective tax which has been ongoing with the government of India since January 2014. Cairn has filed its Statement of Claim to the International arbitration panel," Indian media quoted a spokesperson of Cairn Energy as saying.
By James Burgess for Oilprice.com
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James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also… More