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Tuesday, August 03, 2021

Cairn gets ruling to freeze Indian assets in Paris

The French court, Tribunal judiciaire de Paris, on June 11 agreed to Cairn's application to freeze (through judicial mortgages) residential real estate owned by the Government of India in central Paris, they said adding the legal formalities for the same was completed on Wednesday evening.

By: ENS Economic Bureau | Mumbai |
Updated: July 9, 2021 1:01:46 am
Cairn Energy, Cairn Energy vs Indian GovernmentAn arbitration panel had in December ordered the Indian government to return USD 1.2 billion plus interest and penalty to Cairn Energy after reversing a retrospective tax demand. (File photo)

Britain’s Cairn Energy Plc has secured an order from a French court authorising the freezing of 20 Indian government properties in Paris valued at over 20 million euros, the London-based Financial Times reported Thursday.

The newspaper said it has seen official documents confirming the freeze authorised by the French court, and that Cairn’s asset freeze application in Paris is the first to succeed.

In May, Cairn initiated a process to seize Indian assets and brought a lawsuit in the US against Air India to enforce the $1.2-billion arbitration award it won last year against the Indian government in a longstanding tax dispute.

Cairn, the FT report said, has identified $70bn of assets around the world ranging from buildings to Air India aircraft that it may try to seize if the Indian government refuses to pay.

According to FT, the company said the ruling by the Tribunal Judiciaire de Paris will effectively transfer the ownership of 20 properties in Paris, including in the 16th and 14th arrondissements.

In New Delhi, the Ministry of Finance, in a statement, said it has not received any order or notice and is trying to ascertain facts.

“There have been news reports that Cairn Energy has seized/frozen State owned property of Government of India in Paris. However, Govt. of India has not received any notice, order or communication, in this regard, from any French Court,” it said.

Explained

The ‘alter ego’ issue

Apart from the Cairn legal challenge, the government is facing a similar lawsuit from investors of Devas Multimedia seeking to recover dues by attempting to seize Air India’s overseas assets. The Centre has assembled a team to challenge the premise in the two cases that Air India is an “alter ego” of the Government of India.

“Government is trying to ascertain the facts, and whenever such an order is received, appropriate legal remedies will be taken, in consultation with its Counsel, to protect the interests of India,” it said.

In its statement, Cairn said that the company prefers “an agreed, amicable settlement with the Government of India to draw this matter to a close”.

“However, in the absence of such a settlement, Cairn must take all necessary legal actions to protect the interests of its international shareholders,” it said.

There is precedence of parties attempting to seize assets of government-owned entities to force the State into paying dues.

In 2019, American firm ConocoPhillips had moved US courts to seize assets of Venezuelan state-owned oil company PDVSA to recover $2 billion it had won in arbitration against Venezuela’s 2007 takeover of its assets. Thereafter, PDVSA paid its dues to the ConocoPhillips.

Similarly, a cargo-agent at Amsterdam’s Schiphol Airport had seized a Jet Airways aircraft in 2019 over unpaid dues. Earlier this year, a Malaysian court had allowed Dublin-based aircraft lessor AerCap to seize a Pakistan International Airlines-owned Boeing 777 plane in Kuala Lumpur over unpaid dues.

In December 2020, the Permanent Court of Arbitration (PCA) at The Hague had ruled that the Indian government’s retrospective tax demand on Cairn Energy was “in breach of the guarantee of fair and equitable treatment”, and against the India-UK bilateral treaty.

In its statement Thursday, the Ministry of Finance said the “Government has already filed an application on March 22, 2021 to set aside the December 2020 international arbitral award in The Hague Court of Appeal. Government of India will vigorously defend its case in Set Aside proceedings at The Hague.”

“It is also stated that the CEO and the representatives of Cairn have approached the Government of India for discussions to resolve the matter. Constructive discussions have been held and the Government remains open for an amicable solution to the dispute within the country’s legal framework,” it said.

India had seized and sold shares of Cairn in its erstwhile India unit, confiscated dividend due and withheld tax refunds to recover the tax demand it had levied two years after passing a law in 2012 that gave it powers to levy tax retrospectively. Cairn invoked arbitration under the India-UK bilateral investment treaty.

In May, Cairn filed a lawsuit in the US District Court for the Southern District of New York, pleading that Air India is controlled by the Indian government so much that it is its “alter ego” and the airline should be held liable for the arbitration award.

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