Shares of Edinburgh-based international oil and gas company Cairn Energy rose about 20% on Wednesday after it said the tribunal established to rule on its claim against the Government of India has found in Cairn’s favour.
“Cairn’s claim was brought under the terms of the UK-India Bilateral Investment Treaty, the legal seat of the tribunal was the Netherlands and the proceedings were under the registry of the Permanent Court of Arbitration,” said Cairn.
“The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and has awarded to Cairn damages of US$1.2billion plus interest and costs, which now becomes payable.”
Cairn’s case had caused concern among big investors over retrospective tax claims on companies.
This is the second defeat for India after losing another international arbitration case in September against Vodafone Plc over a $2 billion retrospective tax dispute.
The government of India said it will consider all options.
A government official told Reuters that the award in Cairn’s case is so large that “we don’t think we can give that away without challenging it.”
A final decision will be taken by the Prime Minister’s office.
“We will have to challenge both cases as we will otherwise give a wrong signal to investors,” said the official.
Cairn took the case to arbitration in 2015 to fight against a demand in 2014 from India for 102 billion rupees ($1.4 billion) in taxes it said were owed on capital gains related to the 2007 listing of its local business.
Cairn Energy sold its majority stake in Cairn India to Vedanta Ltd in in 2011, reducing its stake in the Indian company to about 10%.
The Indian government seized the remaining shares in 2014 after the tax complaint was made, as well as dividends Vedanta owed to Cairn Energy for its holdings in the Indian firm.
In 2018, Cairn Energy said it would write down the value of its investment in Vedanta after Indian tax authorities sold $216 million worth of its shares in the Indian mining company.