Update, October 2026: This post reports the award of December 2020. After Parliament passed the Taxation Laws (Amendment) Act 2021, Cairn agreed to withdraw its arbitration and enforcement actions and India refunded INR 7,900 crore to Cairn in 2022; for the current position on investment-treaty protection in India, see India bilateral investment treaty protection: how to secure your investment before a dispute.
British Oil and Gas explorer Cairn Energy Plc has won an arbitration award of USD1.2 billion, plus interest and costs against the Government of India on a tax dispute. The dispute arose as a result of a change in Indian Tax law in 2012, enabling the government to retrospectively tax companies for mergers and acquisitions going as far back as 1962. In order to recover the dues from Cairns, Indian tax authorities had seized dividend and shares, and withheld tax refunds.
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Cairn initiated arbitration under the terms of UK-India Bilateral Investment Treaty,. The company sought $1.4 billion in damages from the Government of India to recoup the value of the Group’s residual shareholding in Cairn India Limited (CIL, since merged with Vedanta Limited).
Proceedings were done under UNCITRAL Rules, administrated by the Permanent Court of Arbitration (PCA), and the seat of arbitration was at Netherlands. The Arbitral Tribunal ruled that India’s tax claim was not valid and asked the government to repay the funds, along with interest, to Cairn. The Arbitral Tribunal declared that India’s retrospective tax demand breached the U.K.-India bilateral investment protection treaty.
In a similar case, a tribunal under the India–Netherlands bilateral investment treaty had held on 25 September 2020 that India’s retrospective tax demand against Vodafone breached the treaty, and ordered India not to enforce the demand, to refund tax collected and to pay costs.
To read more kindly visit
https://pca-cpa.org/en/cases/221/
This Article is a Part of Our Arbitration: An Introduction with Special Reference to the United Arab Emirates Blogpost.
About ATB Legal
ATB Legal is a law firm practising in India and the UAE. Its disputes and investment work covers investment protection under India’s treaties, international arbitration, the enforcement of awards and judgments in India, and foreign direct investment.
This article is general information, not legal advice, and is not a solicitation of work. Under the Bar Council of India rules, Indian advocates may not advertise or solicit work.
Part of ATB Legal’s Dispute Resolution practice.