Business World

Cairn Energy threatens to seize Indian government assets over $1.2 billion tax award

British oil and gas firm, Cairn Energy has threatened to seize Indian government assets following a $1.2 billion award from a long-running corporate tax case.

The company was awarded damages by an international tribunal in the high-profile dispute with the Indian government last month.

Cairn has started identifying assets it could seize if the Indian government doesn’t comply with the order.

The case was filed after income tax officials seized Cairn’s 10% stake in its Indian subsidiary.

In December the tribunal ruled unanimously that India had violated the 2014 UK-India bilateral investment treaty.

It ordered India to pay $1.2 billion in damages, plus interest and costs, to compensate Cairn for the shares as well as confiscated dividends.

But since the 582-page judgment was issued, Indian prime minister Narendra Modi’s government has given no indication about whether it intends to honour the verdict, even though payment was due immediately.

Cairn has sent a letter to Indian government saying its shareholders “expect early resolution, failing which they will expect Cairn to pursue the award in conformity with its rights under the treaty”.

“The award can be enforced against Indian assets in numerous jurisdictions around the world for which the necessary preparations have been put in place,” the letter added.

Although the letter did not specify when assets might be seized, possible targets could include those owned by public sector enterprises such as state-owned Air India.

Cairn’s battle with Indian authorities stems from a 2012 law that changed the country’s tax regime retrospectively.

In 2014 tax authorities cited the new law to claim unpaid dues stemming from Cairn India’s 2006 corporate reorganisation.

If it does happen, India would not be the first country to face seizure of its international assets from an energy company.

In 2019, Venezuela was ordered by the World Bank to pay ConocoPhillips more than $8 billion to compensate for the 2007 expropriation of oil assets by the country’s late socialist leader Hugo Chavez.