India tax dispute - clarification

Cairn is issuing an update on the India tax dispute. In March 2017 Cairn announced that it had received confirmation from the Government of India (GoI) via the international arbitration tribunal that dividends of US$53 million (m) due from Cairn India Limited (CIL) were no longer restricted, and Cairn requested the immediate release of that sum from CIL.

On 9 June 2017, the tribunal issued a formal order memorialising the numerous confirmations from the GoI that the dividends were no longer restricted and authorising that order to be provided to CIL (now named Vedanta Limited (VIL) following the merger of CIL and VIL).

However, on 16 June 2017 the Indian Income Tax Department (IITD) issued an order to VIL directing it to pay over any sums due to Cairn. Sums due to Cairn from VIL now total US$104m, including historical dividends of US$53m and a further dividend of US$51m after the merger of CIL and VIL.

Notwithstanding this action by the GoI, international arbitration proceedings are progressing in respect of the Group’s claim under the UK-India Bilateral Investment Treaty (the Treaty). Cairn is seeking full restitution for Treaty breaches resulting from the expropriation of its investments in India in 2014, the attempts to enforce retrospective tax measures and the failure to treat the Company and its investments fairly and equitably.

Cairn has a high level of confidence in its case under the Treaty and, in addition to resolution of the retrospective tax dispute, its claim seeks damages equal to the value of the Group’s residual shareholding in CIL at the time it was attached (approximately US$1 billion). The seat of the arbitration is The Hague in the Netherlands and final hearings for the tribunal are scheduled for January 2018.

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