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Cairn Energy awaits result of “biggest well”

Weeks before a key arbitration hearing, Indian tax authorities have sold part of an asset Cairn claims was unfairly seized
July 11, 2018

After years of waiting, investors in Cairn Energy (CNE) will soon learn the outcome of the oil and gas company's multi-billion-dollar dispute with Indian tax authorities. In an update this week, Cairn confirmed that all submissions have been filed ahead of a two-week hearing that commences on 20 August.

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Cairn is confident an arbitration court will accept its claim for $1.3bn (£980m) of damages from what it alleges was the expropriation of its shareholding in Vedanta Limited by India’s revenue in 2014. Seeking to retrospectively apply legislation passed in 2012, the revenue argues Cairn failed to pay tax on certain intra-group share transfers ahead of Cairn India’s 2007 IPO.

The fly in the ointment – as if invocation of a bilateral trade treaty were not bad enough – has been the Indian treasury’s sale, for $216m, of part of the Vedanta stake Cairn says was unfairly seized. Cairn has cautioned that further sales are possible, but has been advised that the status of the seized assets does not affect the merits of its claims, the relief sought, “or the enforceability of the arbitral award”. However, the FTSE 250 group has flagged that the sale will likely force the impairment of the carrying value of the stake at its half-year results.