Cairn Energy Behaving Like East India Company Needs Proper Treatment
Sources in the govt said India will take all necessary steps to defend itself against any such ‘illegal enforcement action’
UK’s Cairn Energy Plc has started behaving like erstwhile East India Company. It needs to be taught a sound lesson by Government of India.
It should be made known to Cairn Energy, Govt of UK and Govt of USA that no Court elsewhere has any jurisdiction over Sovereign decisions of Govt of India, except courts in India.
It has been learnt that Cairn Energy has brought a lawsuit in the US to pierce the corporate veil between the Indian government and its owned flag carrier Air India so as to seize its overseas assets to recover USD 1.7 billion it has been awarded by an international arbitration tribunal for being taxed retroactively. Cairn thinks that USA is the Chief Police Constable of the World and can dictate to India.
The firm first moved courts in the US, UK, Canada, France, Singapore, the Netherlands and three other countries to register the December 2020 arbitration tribunal ruling that overturned the Indian government’s Rs 10,247 crore demand in back taxes and ordered New Delhi to return the value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand.
Now, the firm has begin bringing lawsuits in the US and other countries to pierce the corporate veil between the Indian government and its owned companies such as in oil and gas, shipping, airline and banking sectors, to seize their overseas assets to recover the money awarded, three sources with direct knowledge of the development said.
In the first instance, it filed a lawsuit on May 14 in the US District court for the Southern District of New York, seeking to make Air India liable for the judgment. The lawsuit argued that Air India as a state-owned company is “legally indistinct from the state itself”.
On March 28, 2021 it had been reported that Cairn will bring lawsuits to pierce the corporate veil to establish that certain state-owned entities are India’s alter ego under Bancec for enforcing the arbitration award.
The Bancec guidelines deal with determining when a judgment against a foreign state is enforceable against its agencies. However any country which tries to back Cairn Energy without refering back the case to an Indian Court is sure to attract retaliatory reciprocal action from the Indian side.
The lawsuit is similar to the one brought by Crystallex International Corp to attach property of Petroleos de Venezuela, S.A (PDVSA), the state-owned oil company of Venezuela, in Delaware couple of years back after the Latin American country failed to pay the firm USD 1.2 billion that an arbitration tribunal had ordered to pay in lieu of the 2011 seizing gold deposits held and developed by the firm.
Even Uncle Sam and its courts should not make the mistake of equating India with any of the South American Countries.
Sources in the government said India will take all necessary steps to defend against any such “illegal enforcement action”.
It will contest the move on grounds that the government has challenged the arbitration award in the appropriate court in The Hague and it is confident that the award will be set aside. The government has also engaged a counsel team which is ready to defend against any enforcement action.
Indian assets across several jurisdictions have been identified that Cairn says it will be seeking to seize to enforce the award, sources said. As a retaliation, all assets of Cairn Energy in India will surely be seized and elsewhere too as feasible. Cairn is pulling out all the stops to recover the damages, including hiring a team of asset recovery experts.
The assets that can be attached could range from airplanes to ships, to oil and gas cargoes and bank accounts of state-owned entities. The country so doing should then be ready to face reciprocal actions by India.
Cairn had previously said the money ultimately belongs to its shareholders — which include large investors such as BlackRock, Fidelity and Franklin Templeton, and the ramifications of India not honouring the award will “run across the international investment community more widely”. Well India does not require such investments controlled by Shylocks.
Its management team has held three rounds of face-to-face and one video conferencing discussions with top officials in the finance ministry.
India has appealed against the arbitration award on the grounds that taxation-related matters are not covered in its bilateral investment treaty with the United Kingdom under which the case was filed, and therefore the arbitration tribunal does not have the jurisdiction to rule on the matter, sources said.
However, the appeal in the Dutch court does not bar Cairn from taking action in other jurisdictions to recover the full amount of the arbitral award which totals USD 1.7 billion after including interest and cost as of December 2020.
The company will seek to establish that state-owned entities/firms are India’s alter ego under Bancec regulations, that is, to pierce the veil between the Indian government and them.
‘Piercing the corporate veil’ is a means of imposing liability on an underlying cause of action against a third-party which would not otherwise be liable.
By this, Cairn will seek to pierce the veil in order to shift liability for payment of an existing judgment against the Republic of India to a third-party that is not otherwise liable, that is state-owned firms or banks.
“Government/ PSU has not received any such notice. As and when any such notice is received, the government/concerned organisation shall take all necessary steps to defend against any such illegal enforcement action,” a government source said.
