Whatever It Takes
Do you guys remember the whole Cairn Energy retrospective tax case that our government was fighting?
The final decision of the International Court of Arbitration at The Hague was in favour of the UK-based energy company, and our government was ordered to pay it $1.2 billion. (You can read about the whole saga here.)
This was back in December 2020, but the amount still has not been paid. And so, Cairn Energy has decided to take more legal action to get what they owed.
Finding it hard to get money out of the government directly, they have now sued Air India in the United States.
Cairn Energy has moved a New York court, saying Air India is “the alter ego” of India. And since it is owned by the government, it should be held responsible for the government’s debts too.
But can Cairn really do that?
Well, India is a signatory to the ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards’ or what’s commonly known as the New York Convention.
The whole aim of this convention is to get foreign arbitration cases enforced by local courts, so yes, we do have a legal obligation to pay up.
And Cairn has the right to sue government agencies outside India.
Along with putting India on the (rather embarrassing) list of countries where global corporates are looking to seize assets, it will also probably hurt the chances of Air India being sold in a hurry.
If you’ve been a regular reader of The Gyst, you’d be familiar with the number of times the government has tried to sell loss-making national carrier Air India.
The Tata Group is/was the last known front runner in the race to take over the airline, but now with this extra demand of $1.2 billion or approx. Rs 10k crores, we’re not sure they’ll want to go through with the deal.
Air India already has ~Rs 60k crores of debt and in the previous financial year lost around Rs 20 crores per day!