Air India has time until mid-July to challenge Cairn lawsuit

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NEW DELHI: Air India has until mid-July to contest the lawsuit filed by Britain’s Cairn Energy PLC demanding that a US federal court obliges the airline to pay an arbitration award of $ 1.26 billion it had won against the Indian government in December of last year, sources mentioned.
Air India is so controlled by the Indian government that they are “alter egos,” Cairn said in the lawsuit filed with the US District Court for the Southern District of New York. The court should hold the airline responsible for the arbitration award, the company said.
A three-member international arbitration tribunal composed of a judge appointed by India unanimously quashed the Cairn tax levy in December and ordered the repayment of the shares sold, the confiscation of dividends and the repayments of ‘taxes withheld to collect this claim.
The Indian government, despite having participated in the arbitration process for four years, did not accept the award and filed a petition for “annulment” in a court in the Netherlands – the seat of the arbitration.
Cairn seeking to collect the reward from public entities such as Air India, the government said it would challenge any application.
Air India has time until mid-July to file a complaint against Cairn, three sources familiar with the matter said.
The airline, which is in the process of being privatized, is likely to argue that it is a separate entity and not the alter ego of the Indian government and that it cannot be forced to pay for any government responsibility, they said.
The Air India spokesman declined to comment on the story.
Cairn has identified $ 70 billion in Indian assets abroad for potential foreclosure in order to collect compensation, which now stands at $ 1.72 billion after including interest and penalties.
The identified assets range from Air India planes to ships owned by the Shipping Corporation of India, and properties owned by state-owned banks to PSU’s oil and gas cargoes, the sources said.
These assets are found in multiple jurisdictions, they said without giving further details.
Cairn plans to move courts from the United States to Singapore for the seizure of assets in the absence of the Indian government’s refusal to honor an international arbitration award.
Once a court recognizes Air India as the alter ego of the Indian government, Cairn can seek the seizure or seizure of its assets in the United States, such as planes, real estate and bank accounts, to recover the amount awarded to him by the arbitral tribunal.
The ruling is similar to a court in the British Virgin Islands that ordered in December last year that hotels in New York and Paris owned by Pakistan International Airlines be used to settle a claim against the Pakistani government by a Canadian-Chilean copper company.
Crystallex International Corp had filed a similar lawsuit to seize the property of Petroleos de Venezuela, SA (PDVSA), Venezuela’s state oil company, in Delaware a few years ago after the Latin American country did failed to pay the company $ 1.2 billion that an arbitral tribunal ordered to pay in lieu of the 2011 seizure of gold deposits held and developed by the company.
In 2012, Elliott Management, a US hedge fund that held distressed Argentine bonds, seized a beautiful tall ship owned by the Argentine Navy. Recently, French courts ruled that a strangled creditor could seize a Congo-Brazzaville government-owned business jet while on duty at a French airport, as well as $ 30 million in a bank account in the Congo. the country’s national oil company.
The Indian government is, however, considering challenging any enforcement proceedings brought by Cairn.
“The Indian government will naturally challenge such a foreclosure, but to save assets it may need to pledge the equivalent of the value of the assets in some form of financial collateral such as a bank guarantee. The tribunal will return such a guarantee to India if it does not find merit in the Cairn case. But the bond will be forwarded to Cairn if the court finds that India has not honored its obligation, ”a source said.
Last month, the finance ministry said the tribunal “has inappropriately exercised jurisdiction over a domestic tax dispute that the Republic of India has never offered and / or agreed to arbitrate.”
The ministry called the 2006 reorganization of Cairn’s Indian business for listing on local stock exchanges “an abusive tax evasion scheme constituting a flagrant violation of Indian tax laws, thereby depriving Cairn’s alleged investments of any protection under of the India-UK Bilateral Investment Treaty “.
The Scottish company invested in the oil and gas industry in India in 1994 and a decade later made a huge oil discovery in Rajasthan. In 2006, she listed her Indian assets for BSE. Five years later, the government passed retroactive tax law and charged Cairn Rs 10,247 crore plus interest and penalties for the reorganization related to the issue. The state then expropriated and liquidated Cairn’s remaining shares in the Indian entity, seized dividends, and withheld tax refunds to recover part of the claim.
Cairn challenged the decision in an arbitration tribunal in The Hague, which in December awarded him $ 1.2 billion (over Rs 8,800 crore) plus costs and interest, for a total of $ 1.725 million. of dollars (Rs 12,600 crore) in December 2020.
The company, which previously said the ruling was binding and enforceable under international treaty law, has since courted Indian government officials for the money. But the government did not agree to pay.
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