India Asked To Pay $5.6 Billion By Oil Explorer Cairn In Retroactive Tax Case

India has been asked to pay nearly $6 billion by oil energy explorer Cairn as compensation for hurting its business through a tax dispute. 

Last year, Cairn was asked by India to pay $1.6 billion retroactively for the 2007 listing of its India operation. Cairn then took its case to the international arbitration court in The Hague.

Cairn, based in Scotland, said the taxes sought were related to transactions carried out to reorganise the company's structure to prepare for Cairn India Limited's stock market flotation in 2007.

Cairn sold its majority stake in Cairn India to Vedanta Resources Plc in 2011. Cairn said the tax department's investigation, which started in January 2014, had stalled the sale of its outstanding holding in the Indian venture, worth about $700 million.

Cairn said it would seek "restitution of losses" stemming from that delay. 

Cairn challenged India under the terms of a UK-India investment treaty, which means arbitration was involved.

India has now moved to renegotiate dozens of these treaties with other countries. Delhi wants to protect itself from foreign litigation and the new template asks for all Indian legal avenues to be exhausted before turning to international arbitration.

Investment treaties lay out the rules for how business disputes should be handled. 

The idea for renegotiating investment treaties comes as India has been hit by a series of lawsuits over issues such as retroactive taxation or cancelled licenses. Britain-based Vodafone has a case pending with the International Court of Justice for arbitration over a bill for $2.5 billion that India's tax authorities say the company owes for a 2007 asset purchase, based on legislation passed only in 2012.