In the latest twist in a long-running corporate tax case between the Indian government and Cairn Energy over a USD1.2 billion arbitration award, the Edinburgh-based energy company has sued Air India (AI, Delhi International) in an attempt to enforce it. The suit would allow it to seize the flag carrier’s aircraft.
Reports emerged in January that Cairn had started identifying assets it could seize if India did not comply with the award for damages in a December 2020 ruling at the Permanent Court of Arbitration in The Hague, with possible targets including state-owned ships and aircraft.
As previously reported, Cairn Energy initially filed the case after income tax officials seized its 10% stake in Cairn India in 2014 following a corporate reorganisation. The court ruled that India had breached an investment treaty with the United Kingdom.
The lawsuit, filed in the United States District Court for the Southern District of New York on May 14, aims to legally establish that Air India is “the alter ego of the Republic of India and therefore jointly and severally liable for the debts and obligations of India itself,” the Financial Times and Reuters reported citing court papers.
“The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors,” it added.
It is unclear whether opening a lawsuit on the issue in the United States could serve as a means for Cairn Energy to seize Air India aircraft that land in the US.
Some countries have restricted flights from India due to the intensity of the second coronavirus wave there, but Air India operates routes from Delhi International to Chicago O'Hare, New York Newark, San Francisco, New York JFK, and Washington Dulles, the ch-aviation capacities module shows. As for the UK, it flies to London Heathrow from Delhi International, Mumbai International, Bengaluru International, and Goa Dabolim.
An unnamed “senior government official” told the Indian business news site Moneycontrol that Air India would release a statement soon “with all the facts” and stressed that the government was pressing ahead with the loss-making airline’s privatisation process.
Another official told Reuters that New Delhi would “take all necessary steps to defend against any such illegal enforcement action” and that it had engaged a team to defend against any enforcement actions that Cairn may initiate. India has, meanwhile, filed an appeal against the arbitration award.
A Cairn Energy spokesman told the news agency that while it “remains open to continuing constructive dialogue with the government of India” it was taking the necessary legal steps to protect shareholders’ interests if a resolution could not be found.
Air India did not immediately respond to ch-aviation’s request for comment.
