Date set for Cairn Energy hearing as India sells down its Vedanta shares

The FTSE 250 firm said the hearings would involve testimony by expert and fact witnesses, and would address Cairn's claims under the Treaty, India's defences and issues of jurisdiction.

As it had previously announced, the Indian Income Tax Department (IITD) had continued to enforce its retrospective tax claim against Cairn while the Treaty arbitration has been ongoing.

“To date the IITD has seized dividends due to Cairn from its shareholding in Vedanta Limited (VL) totalling approximately $155m, and it has offset a tax rebate of $234m due to Cairn as a result of overpayment of capital gains tax on a separate matter,” Cairn’s board claimed in its statement.

“Cairn has now been notified by the IITD that it has sold part of Cairn's shareholding in VL, realising and seizing proceeds of $216m.”

Following the sale, Cairn's retained holding in VL was now approximately 3%, with the board saying it was possible that the IITD could make further sales.

Cairn said all of those enforcement measures by the IITD were addressed in Cairn's claim in the arbitration, with the reparation sought being the monetary value required to restore the company to the position it would have enjoyed in 2014 but for what it saw as the Government of India's actions in breach of the Treaty.

Accordingly, the board said the status of Cairn's assets seized in India did not affect the merits of its claims, the amount of relief sought, or the enforceability of the arbitral award.

“After the disposal of part of this shareholding in VL and seizure of proceeds by the IITD, Cairn will write down the carrying value of its investment in VL which will result in an impairment charge at the half year equal to the value of the total shares notified as having been sold by the IITD at that time.”

Following the hearing, the Arbitral Tribunal will issue a binding and internationally-enforceable award.

The drafting and issuance of such an award typically takes several months, Cairn noted.

In that case, taking into account the delays already suffered by Cairn, the Tribunal had stated that it would endeavour to issue its award as expeditiously as possible.

“Cairn continues to have a high level of confidence in the merits of its claims in the arbitration,” the board added.

“Cairn is seeking full restitution for losses totalling approximately $1.3bn resulting from India's expropriation of its investments in India in 2014, and India's unfair and inequitable treatment of those investments, due to the imposition of retrospective tax measures.”