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    Cairn India Arbitration Hearings Due Next Month

Summary

Final arbitration hearings are due to begin in six weeks in a dispute between UK firm Cairn and the Indian government.

by: Mark Smedley

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Natural Gas & LNG News, Asia/Oceania, Corporate, Litigation, News By Country, India, United Kingdom

Cairn India Arbitration Hearings Due Next Month

UK independent Cairn Energy said July 9 that it expects final arbitration hearings in The Hague, Netherlands, next month relating to its dispute with the Indian government.

All of the written submissions by Cairn and the Indian government have now been made, the company said, with final arbitration hearings scheduled for two weeks commencing August 20. It said the final arbitration ruling could follow several months later, but that the tribunal has stated that it will try to issue its award as swiftly as possible.

Cairn is seeking full restitution for losses totalling about $1.3bn resulting from what it terms as India's expropriation of its investments in India in 2014, and India's unfair and inequitable treatment of those investments, by the imposition of retrospective tax measures.

Cairn agreed to sell a majority stake in Cairn India to Indian firm Vedanta in 2011 but retained a 10% stake. But the latter was seized by the Indian tax department in a dispute dating back to 2006.

The merger of Cairn India with Vedanta completed in April 2017, whereby Cairn received ordinary shares and preference shares in Vedanta in exchange for the roughly 10% stake. As a result, Cairn now says by right it owned about 5% equity stake in Vedanta, plus an interest in preference shares. 

However the government has not only retained all dividends, but informed Cairn that it has sold part of the Cairn shareholding in Vedanta, realising and seizing proceeds of $216mn. Cairn says its retained stake in Vedanta is now only 3%, and that the government may sell more off more. The total claim of $1.3bn now sought by Cairn is understood to represent equity and dividends seized, plus equity sold.

Vedanta says that Cairn India produces oil and gas in Rajasthan, Andhra Pradesh and Gujarat (Cambay), accounting for about a quarter of India’s oil production; it also a 60% interest in South Africa's offshore block 1 that has an existing gas discovery, and other oil and gas prospects (see Vedanta map below).