Cairn's court victory in Paris against India is bad enough, but it could just be tip of the iceberg, considering the larger international arbitration mess India might be in. Besides loss of face, at stake could be a further global discrediting of the 'ease of doing business' mantra Prime Minister Narendra Modi has been trying hard to project.
The judgment at a Paris court this week entitles Cairn Energy, the British gas exploration major, to take control of properties belonging to India in the French capital worth about Rs 176 crore.
This is just the beginning. For the settlement India, India is supposed to pay Cairn Energy as per the verdict at an international tribunal nearly Rs 13,000 crore, adding in cost and interest.
Cairn has filed similar cases elsewhere against India's properties abroad, including a request to attach planes of Air India in a US court in New Jersey. The company says it has identified assets worth more than Rs 5 lakh crore belonging to India across the world, ranging from buildings to Air India aircraft.
Besides, loss in at least two other high profile international arbitration cases have besmirched India's image in recent months. The first one, of course, is the infamous Vodafone retrospective tax demand against the telecom multinational. The International Court of Arbitration in The Hague, Netherlands had set aside India's demand of a Rs 22,000 crore retrospective tax claim last year, saying it flouted the bilateral treaty between India and the Netherlands (the Vodafone entity in question is registered in The Netherlands). Another case involves Devas Multimedia, whose business deals with the commercial arm of ISRO, Antrix, was nixed by the government, following which it won a nearly Rs 9,000 crore arbitration case in international courts.
In both the cases, authorities in Delhi have decided to appeal and continue with the litigation, going directly against the prime minister's stated objective of projecting India as an investment-friendly nation. Even the latest official government response was diffident, claiming it has not received any notice. “Government of India will vigorously defend its case in set aside proceedings at The Hague,” finance ministry's statement said, even though it held out a not-too-camouflaged olive branch. "The government remains open to an amicable solution to the dispute within the country's legal framework," it added.
The retrospective tax ruling, on which the two other big arbitration cases are based on, is a legacy of late Pranab Mukherjee's stint as finance minister during the UPA years. It originally came as a means to circumvent a Supreme Court ruling which had gone in favour of Vodafone, and was generally considered a regressive measure that reeked of high-handedness by the state.
Despite talking about and having always maintained a pro-business pitch, Narendra Modi ironically did not do much to change the law, or work on the many cases the government was pursuing that created a bad impression amongst the international business community. In fact, the first notice to Cairn to pay up its dues was sent in 2015, after Modi's NDA came to power. And recently, by opting to appeal the orders and not settle (so far), the present dispensation continues down the same road.
"Our strong preference remains an agreed, amicable settlement with the government of India to draw this matter to a close, and to that end we have submitted a detailed series of proposals to them since February this year. However, in the absence of such a settlement, Cairn must take all necessary legal actions to protect interest of its international shareholders," Cairn said in a statement.
