Cairn’s Rs 29,000-cr arbitration gets underway

British explorer Cairn Energy’s arbitration against a Rs 29,047-crore retrospective tax demand has begun

with the adjudicating panel fixing timelines so as to complete the arbitration in less than 12 months.

The three-member arbitration panel headed by Geneva-based arbitrator Laurent Levy held its first

procedural hearing in Paris a few weeks ago, sources privy to the development said.

The seat of the arbitration was agreed to be The Hague in the Netherlands, they said adding Cairn has

been asked to file a ‘Statement of Claim’ detailing its position on the issue and the relief it is seeking by

the end of this month.

The Indian government will fix its ‘Statement of Defence’ by fourth quarter of 2016 calendar year and

evidential hearing is expected to commence in early 2017. Sources said Levy intends to wind up the

arbitration process possibly by May/June 2017.

Cairn had in January 2014 received a notice from the Income Tax Department citing the 2012 legislation

that gave it powers to impose tax retrospectively. It made a draft assessment of Rs 10,247 crore as tax

due on a group reorganisation carried out in 2006.

The I-T Department provisionally attached the company’s remaining 10% shareholding in Cairn India,

then valued at about $1 billion. The value has since reduced by 30%. This year, a final assessment order

was slapped on it that included a Rs 18,800 crore of interest on top of Rs 10,247 crore principal tax

amount.

The company challenged the assessment by seeking an international arbitration under the UK-India

Investment Treaty.

NGS INDIA