8th Jul 2021 08:41
(Alliance News) - Cairn Energy PLC has effectively seized Indian state-owned properties in Paris on Thursday, as the oil producer attempts to collect damages owed by the Indian government.
The Financial Times reported that a French court has authorised the Edinburgh-based oil producer's application for an asset freeze that would transfer ownership of 20 Paris properties, valued at over EUR20 million, from the Indian government to the company.
Cairn took this step after failing to receive the USD1.7 billion in damages, plus interest and costs, it was awarded at Dutch arbitration tribunal last December over a tax dispute with the Indian government.
The firm said it has identified USD70 billion in worldwide assets that it may attempt to seize as long as the Indian government refuses to pay.
Cairn showed its willingness to do so when it sued Air India in May.
The company filled a petition with courts in the Southern District of New York to confirm India's national carrier, Air India, can be "classified as an alter ego of the Indian state and thereby jointly liable for the arbitral award."
"The strategy is similar to that of US hedge fund Elliott Capital Management, which in 2012 seized an Argentine naval vessel in Ghana over a debt dispute. Cairn has even hired lawyer Dennis Hranitz, who worked on the Elliott dispute," added the FT.
The conflict began in 2014 when the Indian Income Tax Department launched a retrospective tax investigation into Cairn as it prepared to sell its final stake in its Indian subsidiary Cairn India Ltd.
As a result, the oil firm was restricted from selling its 10% stake in Cairn India. The Indian Income Tax Department then sold the majority of Cairn's shareholding, collecting the proceeds and dividend payments.
Cairn said that this: "had a major detrimental impact on international shareholders, as well as the company" which "had to sell assets, postpone major investments and make a substantial reduction to its workforce."
The energy company currently has a market capitalisation of just GBP752 million and 180 employees.
Cairn raised proceedings in 2015, under the UK-India Bilateral Investment Treaty, and was awarded damages in December 2020.
In March, the Indian government petitioned the court to set aside the arbitration award.
According to the FT, analysts in New Delhi have identifies a pattern of refusal to acknowledge errors from the current Indian government under Narendra Modi, suggesting that the government will perceive any payout as a "tacit acknowledgement of wrongdoing".
On Thursday, a Cairn spokesperson said: "Our strong preference remains an agreed, amicable settlement with the Government of India to draw this matter to a close, and to that end we have submitted a detailed series of proposals to them since February this year. However, in the absence of such a settlement, Cairn Energy must take all necessary legal actions to protect the interests of its international shareholders."
Shares in Cairn were trading up 0.9% at 151.40 pence each in London on Thursday morning.
By Scarlett Butler; [email protected]
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