NEW DELHI: New York court has suspended Cairn Energy’s lawsuit against US assets of Air India for recovery of $ 1.2 billion arbitration award, in order to allow UK firm to reach settlement with the Indian government over the long-standing dispute.
The New York District Court has postponed the tax lawsuit until Nov. 18, according to court documents reviewed by PTI. This follows Cairn Energy and Air India’s joint request to the court to suspend further proceedings due to the new government passing a new law aimed at removing retroactive taxation in the country.
The new law will result in the withdrawal of the tax demand of Rs 10,247 crore that the government requested from Cairn.
Sources with direct knowledge of the matter said the Finance Department is developing rules that will lead to the retrospective tax claim being withdrawn from Cairn and 16 other companies, including the UK’s Vodafone Group.
These rules require companies to withdraw all litigation against the government in exchange for refunding any money collected to force the retroactive tax claim. They said a format for the pledge that companies will need to provide committing to withdraw litigation is being finalized and is expected to be released in the coming days.
Companies will need to use this format to make a commitment, after which the money will be refunded. In total, the government is due to return around Rs 8,100 crore, of which Rs 7,900 crore is owed only to Cairn.
The British company had won an international arbitration award against the collection of these taxes and was seeking to take over the assets of Air India when the government refused to honor the award and repay more than $ 1.2 billion in interest and penalties.
Cairn said the repayment, without interest or penalty, was acceptable to him – paving a way to settle the seven-year-old dispute.
Cairn and Air India, in a joint September 13 request to US District Judge Paul Gardephe, said a stay of proceedings would give them “more time to assess the effects and implications” of legislation that repeals the tax. retroactive.
In exchange for Rs 7,900 crore, Cairn would drop lawsuits threatening court-ordered seizures of Indian government property abroad. One such lawsuit was filed in May against state-owned Air India Ltd, which Cairn said should be seen as the alter ego of the Indian government.
“The implementing regulations are in the process of being drafted and will take some time,” the two men had said in the petition calling for an extension of the Oct. 21 deadline for the presentation of case documents and the first conference. pre-trial on October 28.
They had asked the court to “stay all further proceedings in this case until October 31, 2021 and to postpone the initial pre-trial conference and, respectively, the deadline for the parties to submit their joint pre-trial letter and their draft. business management plan, for new dates. in November 2021 “.
“The parties have conferred and agreed that the suspension will facilitate the effective resolution of the dispute, preserve the resources of the Court and the parties and is not intended to hamper or delay,” they added. On May 14, Cairn filed a lawsuit in New York District Court to hold Air India liable as the Republic of India’s alter ego for the government’s obligations under a foreign arbitration award.
The firm separately filed a petition in the District of Columbia District Court to recognize and enforce the arbitral award against India on February 12, 2021.
Seeking to repair India’s damaged reputation as an investment destination, the government last month enacted new legislation to remove Rs 1.1 lakh crore in pending claims against multinationals such as the telecommunications group Vodafone, pharmaceutical company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.
About Rs 8,100 crore collected from businesses under the removed tax provision must be refunded if businesses agree to drop outstanding litigation, including interest and penalty claims. reorganization of Cairn’s activities in India before its IPO.
He also called on the Indian government to return the value of the shares seized and sold, the dividends confiscated and the tax refund withheld. This amount totaled over $ 1.2 billion in interest and penalties.
The government initially refused to honor the award, forcing Cairn to identify $ 70 billion in US Indian assets in Singapore to enforce the ruling, including bringing airline Air India Ltd to US court. in May.
In July, a French court cleared the way for Cairn to seize property owned by the Indian government in Paris. All such disputes will be dropped once Rs 7,900 crore is paid, Cairn CEO Simon Thomson told PTI earlier this month.