In a setback to India, Britain's Cairn Energy has secured a French court order to seize some 20 government properties in Paris to recover a part of the USD 1.7 billion due from New Delhi following an arbitration panel overturning levy of retrospective taxes. The centrally located properties mostly comprise of flats, valued at more than EUR 20 million, were used by Indian government establishment in France, three people with direct knowledge of the matter said.
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 last week.
While Cairn is unlikely to evict the Indian officials residing in those properties, the government cannot sell them after the court order. A three-member international arbitration tribunal that consisted of one judge appointed by India, had in December last year unanimously overturned levy of taxes on Cairn retrospectively and ordered refund of shares sold, dividend confiscated and tax refunds withheld to recover such demand.
With the Indian government refusing to honour the award, Cairn has moved in multiple overseas jurisdictions to enforce the award by seizing Indian assets. Last month, Cairn brought 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 they are 'alter egos' and the airline should be held liable for the arbitration award.
Similar lawsuits are likely to be brought in other countries, primarily with high-value assets. The arbitration award has been registered in countries such as the US, UK, Canada, Singapore, Mauritius, France and the Netherlands. Cairn has identified USD 70 billion of Indian assets overseas for the potential seizure to collect award, which now totals to USD 1.72 billion after including interest and penalty.
While India's finance ministry did not immediately offer comments on the matter, 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 must take all necessary legal actions to protect the interests of its international shareholders," the spokesperson said without elaborating.
Sources said the French court order affects some 20 centrally located properties, belonging to the Indian government, as part of a guarantee of the debt owed to Cairn. In May, the finance ministry said that the tribunal "improperly exercised jurisdiction over a national tax dispute that the Republic of India never offered and/or agreed to arbitrate".
The ministry called the 2006 reorganisation of Cairn's India business for listing on the local bourses as "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".