UK’S Cairn Energy Plc has sued India’s national carrier Air India to enforce a 1.2 billion dollars arbitration award which it had won in a tax dispute against India. The casewas filed in US District Court on May 15. This action by Cairn has ratcheted up pressure on the Indian government to pay a total of 1.2 billion dollars with interest, which means that at this point India owes $1.7 billionto the British firm.
According to the arbitration tribunal, India breached an investment treaty with Britain. The body had ruled that the Indian government should pay damages worth $1.2 billion to Cairn Energysince a case of retrospective tax was wrongly applied to the company.
The lawsuit filed argued that the carrier as a state-owned company is legally indistinct from the state itself. The filing said, “The nominal distinction between India and Air Indiais illusory and serves only to aid India in improperly shielding its assets from creditors.”
On this Air India has not responded but a senior government official said that the government and Air India had not received any formal notice of any suit. The official said, “As andwhen any such notice is received. The government or concerned organization shall take all necessary steps to defend against any such legal action.”
The official also added that New Delhi has engaged a team ready to defend against any enforcement action initiated by Cairn anywhere in the world.