The worldwide arbitration award of greater than $1.2 billion that British oil main Cairn Energy Plc. received in a dispute with India is very flawed and wrongly backed an alleged tax avoidance scheme of the company, the Union finance ministry mentioned on Sunday.
The arbitration panel improperly exercised jurisdiction in a nationwide tax matter and the Indian authorities will defend its case vigorously worldwide, the ministry mentioned.
The authorities, nevertheless, mentioned it stays dedicated to an amicable decision to the dispute inside Indian legal guidelines.
The ministry additionally termed as “totally incorrect” and “not based on true facts” information company experiences that state-owned banks have been requested to withdraw funds from overseas accounts in view of Cairn Energy’s transfer to implement the arbitration award.
“The government of India has strongly condemned the false reporting in certain media by some vested interests claiming that the Government of India has purportedly asked state-owned banks to withdraw funds from foreign currency accounts abroad in anticipation of the potential seizure of such accounts with regard to the Cairn legal dispute,” it mentioned.
The ministry mentioned India has filed an application on 22 March 2021 to put aside “the highly flawed December 2020 international arbitral award” in The Hague Court of Appeal. It is contesting the award of $1.2 billion in damages plus curiosity and value received by Cairn, saying the arbitral tribunal improperly exercised jurisdiction over a nationwide tax dispute that India by no means agreed to be topic of arbitration.
“The claims underlying the award are based on an abusive tax avoidance scheme that was a gross violation of Indian tax laws, thereby depriving Cairn’s alleged investments of any protection under the India-UK bilateral investment treaty,” the ministry mentioned.
Bilateral funding treaties present for compensation to overseas traders in sure circumstances comparable to nationalization of belongings, however India’s argument is that recovering taxes don’t fall in these classes.
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”, it mentioned.
Double non-taxation within the parlance of tax authorities is the company follow of abusing tax treaties meant to stop the identical earnings getting taxed in two international locations to get away with not paying taxes in both of the international locations.
An electronic mail despatched to Cairn Energy Plc. on Sunday in search of feedback remained unanswered until press time.