Cairn Energy is moving closer to receiving $1.7billion in compensation as part of a long-running tax dispute with the Indian government.
Delhi is planning to settle lengthy tax disputes by introducing proposals for an amendment to its tax law. The move sent Cairn’s shares up by more than a quarter yesterday.
The oil and gas company was awarded $1.2 billion by an international tribunal in December. The parties were arguing over a $1.4 billion tax grab by India under rules introduced during 2012 on the reorganisation of Cairn’s assets in the country in 2006.
The Scottish company is also due about $500 million in costs and interest after the ruling. It has received nothing, in spite of executives travelling to meet Indian ministers on more than one occasion to reach an agreement.
The lack of progress has forced Cairn to take other actions. In recent weeks it has tried legally to take control of Indian-owned upmarket properties in Paris as well as aircraft in the United States.
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Yesterday India softened its stance as it introduced legislation promising to nullify taxes on asset transfers before May 2012, subject to conditions. These would include companies withdrawing from litigation and agreeing to file no further damages claims.
The case was first raised in 2014.
Tarun Bajaj, India’s revenue secretary, said the proposed change in the law should help to solve cases with Cairn and Vodafone, the telecoms group. Analysts suggested it could lead to settlements in 17 disputes over tax payments totalling $6.7 billion.
An international arbitration panel decided last year that India’s imposition of a $2 billion tax on Vodafone breached an investment treaty between India and the Netherlands. The tax demand related to Vodafone’s purchase of Indian mobile assets from Hutchison Whampoa in 2007.
Bajaj indicated that India’s government did not agree with retrospective taxation, adding: “This decision helps to clarify our position.” Cairn said: “We are monitoring the situation.”
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Cairn’s shares rose by 26.2 per cent, or 32¾p, to close at 158½p last night.
