Cairn Energy PLC India tax dispute (3998I)
19 June 2017 - 4:00PM
UK Regulatory
TIDMCNE
RNS Number : 3998I
Cairn Energy PLC
19 June 2017
EMBARGOED FOR RELEASE AT 7AM 19 June 2017
CAIRN ENERGY PLC
("Cairn" or "the Company" or "the Group")
India tax dispute
Cairn is issuing an update on the India tax dispute. In March
2017 Cairn announced that it had received confirmation from the
Government of India (GoI) via the international arbitration
tribunal that dividends of US$53 million (m) due from Cairn India
Limited (CIL) were no longer restricted, and Cairn requested the
immediate release of that sum from CIL.
On 9 June 2017, the tribunal issued a formal order memorialising
the numerous confirmations from the GoI that the dividends were no
longer restricted and authorising that order to be provided to CIL
(now named Vedanta Limited (VIL) following the merger of CIL and
VIL).
However, on 16 June 2017 the Indian Income Tax Department (IITD)
issued an order to VIL directing it to pay over any sums due to
Cairn. Sums due to Cairn from VIL now total US$104m, including
historical dividends of US$53m and a further dividend of US$51m
after the merger of CIL and VIL.
Notwithstanding this action by the GoI, international
arbitration proceedings are progressing in respect of the Group's
claim under the UK-India Bilateral Investment Treaty (the Treaty).
Cairn is seeking full restitution for Treaty breaches resulting
from the expropriation of its investments in India in 2014, the
attempts to enforce retrospective tax measures and the failure to
treat the Company and its investments fairly and equitably.
Cairn has a high level of confidence in its case under the
Treaty and, in addition to resolution of the retrospective tax
dispute, its claim seeks damages equal to the value of the Group's
residual shareholding in CIL at the time it was attached
(approximately US$1 billion). The seat of the arbitration is The
Hague in the Netherlands and final hearings for the tribunal are
scheduled for January 2018.
Enquiries to:
Analysts / Investors
David Nisbet, Corporate Affairs Tel: 0131 475 3000
Media
Linda Bain, Christian Goodbody Tel: 0131 475 3000
Cairn Energy PLC
Patrick Handley, David Litterick
Brunswick Group LLP Tel: 0207 404 5959
NOTES TO EDITORS
Cairn UK Holdings Limited ("CUHL"), a direct subsidiary of Cairn
Energy PLC, is in receipt of an assessment order from the IITD
relating to the intra-group restructuring undertaken in 2006 prior
to the IPO of CIL in India, which cites a retrospective amendment
to Indian tax law introduced in 2012. Cairn strongly contests the
basis of this attempt to retrospectively tax the Group for an
internal restructuring.
The assessment order is in the amount of INR102billion (bn)
(approximately US$1.5bn) plus interest back dated to 2007 totalling
INR188bn (approximately US$2.8bn). The total assets of CUHL
comprise the Group's 9.8% shareholding in CIL, which has now been
converted to a shareholding in VIL and any recovery by the Indian
authorities would be limited to such assets.
Cairn commenced international arbitration proceedings in 2015
against the Republic of India under the UK-India Bilateral
Investment Treaty (the Treaty), on the basis that India's actions
have breached the Treaty by (1) expropriating Cairn's property
without adequate and just compensation, (2) denying fair and
equitable treatment to Cairn in respect of its investments and (3)
restricting Cairn's right to freely transfer funds in connection
with its investment. Based on detailed legal advice, Cairn is
confident that it will be successful in such arbitration.
The seat of arbitration has been agreed as The Hague in the
Netherlands and Cairn filed its Statement of Claim in June 2016
which clearly demonstrates that applying the retrospective
amendment to Cairn and seizing US$1bn worth of CIL shares was in
breach of the Treaty obligations of fair and equitable treatment
and its protections against expropriation. The Republic of India's
Statement of Defence was filed in February 2017 with evidential
hearings now expected to take place in January 2018.
Cairn has asked the arbitration panel either to order India to
withdraw its unlawful tax demand and compensate Cairn for the harm
suffered by the seizure of the CIL shares, being not less than
US$1.1bn (plus costs); or, if the tax demand remains in place,
compensate Cairn for the quantum of the tax assessment and the harm
suffered by the seizure of the CIL shares, being together not less
than US$5.6bn (plus costs).
About Cairn Energy PLC
Cairn is one of Europe's leading independent oil and gas
exploration and development companies and is listed on the London
Stock Exchange. Cairn has discovered and developed oil and gas
reserves in a variety of locations around the world.
Cairn's business operations are focused on frontier exploration
acreage in North West Europe, North West Africa and the North
Atlantic, underpinned by interests in development assets in the
North Sea. Cairn has its headquarters in Edinburgh, Scotland
supported by operational offices in London, Norway and Senegal.
Cairn and Corporate Responsibility
Ø Cairn is a signatory to the UN Global Compact and our core
values of respect, responsibility, relationships and our
commitments towards people, the environment and society are
enshrined in our Business Principles, which are available on the
Cairn website at
http://www.cairnenergy.com/index.asp?pageid=282
Ø Cairn became a participating company in the Extractive
Industry Transparency Initiative (EITI) in September 2013. The EITI
is a coalition of governments, companies and civil society, who
have adopted a multi-stakeholder approach to applying the EITI
global standard promoting transparency of payments in the oil, gas
and mining sectors http://eiti.org/
For further information on Cairn please see:
www.cairnenergy.com
This information is provided by RNS
The company news service from the London Stock Exchange
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