The battle of a Scottish company to seize the planes of the Indian national airline

It may seem unlikely that a Scottish company with 180 employees would snatch a plane from an Indian state-owned airline.

But Cairn Energy is exactly that in the latest legal story testing Britain’s willingness to stand up for British companies as British Prime Minister Boris Johnson tries to strike a post-Brexit trade deal. I ask permission to do so.

Cairn, which has annual revenues of less than $ 400 million but has investors such as BlackRock and Vanguard, Sue Air India In New York, he will apply a decision of $ 1.7 billion against New Delhi, or $ 1.2 billion plus interest.

The oil and gas company is trying to prove that Air India is the Indian government’s “deputy” and “therefore co-responsible for India’s debts and obligations,” the United States said. Marshall could pave the way for the seizure of an aircraft carrier jet. In 2012, he hired a lawyer, Dennis Flanitsky. Capture an Argentinian ship and In Ghana as part of a long battle between the American hedge fund Elliott Capital Management and Buenos Aires.

Cairn’s price is Made by an international tribunal In the Netherlands in December. Once in force, it could bring significant benefits to Cairn shareholders, revitalizing companies held back for years by the struggle that has forced them to reduce their assets, lay off employees and limit their investments. There is a possibility of becoming.

But now, five months later, the government of Indian Prime Minister Narendra Modi has shown no sign of planning payments.

This case is one of many cases between a Western company and New Delhi. Vodafone too Get involved in a quarrel The Indian tax authorities demanded a reimbursement of 3 billion euros.

This comes at a sensitive time in relations between Britain and India. Last month’s country Formulated “Roadmap 2030” Strengthen relationships in areas such as trade and defense. London hopes to start negotiations on a full trade deal this fall.

The battle was based on the 2012 law, allowing New Delhi to retroactively tax cross-border transactions whose underlying assets are in India.

In 2014, authorities began a tax audit, forcing Cairn to sell its remaining 10% stake in its former subsidiary, Cairn India. The following year is $ 1.6 billion tax bill..

Under a bilateral investment treaty between the UK and India, Cairn filed proceedings to force the withdrawal of tax claims and seek compensation for financial losses. Most of the remaining shares of Cairn India, which later merged with Vedanta, were sold by Indian tax authorities.

Johnson did not mention the dispute during a phone conversation with Prime Minister Modi last month. The former administration raised Mr Cairn’s case, people familiar with the matter say, but Britain’s policy is not to get involved in investor-state legal proceedings to which it is not a party. .

“We cannot put Boris Johnson in a position to defend the interests of British business … I hope this will pave the way for future trade deals,” said the shadow of Labor. Said Emily Thornberry, UK Commerce Secretary.

The Scottish government has said it will ensure that “the Scottish economy and other interests are clear to the UK government before and during future discussions with the Indian government on free trade agreements”.

“We are ready to continue a constructive dialogue with the Indian government,” said Cairn, who identified the potential to pursue $ 70 billion in Indian assets around the world.

International arbitration experts say other assets held by India, such as stocks and bank accounts, could be easily targeted, and the Modi administration’s privatization deals against Air India are having the greatest impact. He suggests he’s designed to have.

“They are trying to reconcile,” said an international arbitration lawyer, calling Cairn’s actions “aggressive”.

Satvik Varma, a New Delhi-based lawyer, said Cairn had few options as Indian courts did not allow international arbitral awards granted under the bilateral investment treaty. “Cairn is also responsible to the shareholders, and after receiving the award, he must do everything to seek execution,” he said.

“It costs a lot of money, and after all, it can be aggressive,” Cairn’s top 15 shareholders said.

Rasmi Ranjan Das, co-secretary of the Treasury, told the Financial Times that New Delhi was continuing the dialogue with Cairn. “The government is moving towards an amicable solution,” he said, but this had to be “within India’s legal framework”. “The government’s position is that taxes are… a function of sovereignty. “

He said Cairn was still involved in legal proceedings regarding tax disputes in India. He also said that Air India is a legally independent organization and “is not responsible for payment of any amount under the Cairn arbitration award or any other debt or obligation claimed from India.”

Cairn said he had “complete confidence” in this position.

Senegalese Cairn Rig

Enforcement of Dutch court order could bring significant benefits to Cairn shareholders and revitalize the company

Lawyers suggest the next logical step is for India to ask to “hold” Air India’s proceedings in New York until a challenge to the court proceedings in The Hague is filed. ing.

It was worth over £ 8 in 2012, when India’s retroactive law was introduced, but is now trading at around 165 pence. 2014 and 2020.

In addition to downsizing and selling off assets at the start of the conflict, observers say the uncertainty over the decision limits Cairn’s competitiveness on assets. Scale is becoming increasingly important for independent oil and gas companies that are no longer up to date on the stock market.

“Everybody knows that [London-listed] Harbor Energy and Energean and these [larger independent oil and gas companies] It will be a winner because it will be big enough that investors care, ”said Investec analyst Nathan Pyper.

“Since 2015, Cairn has been trying to move the business forward… but due to the uncertainty of whether you have $ 1 billion, they are not really in a position to do so. “

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