The government is “vigorously defending” its case against an international arbitration order asking it to refund $1.2 billion to Cairn Energy over a retrospective tax dispute, the Finance Ministry said on Sunday, asserting that India had never “agreed to arbitrate” a national tax dispute.
The Ministry’s statement comes over a week after Cairn Energy filed a lawsuit in a U.S. court against Air India, seeking to make the national carrier liable to pay the damages awarded to it, but not yet honoured by the Indian government.
Sharing details of its application in The Hague Court of Appeal against the arbitration tribunal verdict for the first time since it was filed on March 22, the government termed the tribunal’s December 2020 decision “highly flawed”.
“The government has raised several arguments that warrant setting aside of the award including but not limited to the arbitral tribunal improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and/or agreed to arbitrate,” the Ministry pointed out.
The statement said the government remains open for an amicable solution within the country’s legal framework and is challenging the arbitration tribunal’s award as the claims underlying it “are based on an abusive tax avoidance scheme that were a gross violation” of Indian tax laws. Such a violation, it argued, “deprived Cairn’s alleged investments of any protection” under the India-UK bilateral investment treaty.
“The award improperly ratifies Cairn’s scheme to achieve Double Non-Taxation, which was designed to avoid paying taxes anywhere in the world, a significant public policy concern for governments worldwide. This proceeding is pending. The government is committed to pursuing all legal avenues to defend its case in this dispute worldwide,” the Ministry said.