© Reuters. FILE PHOTO: The Air India logo is seen on the facade of its office building in Mumbai, India July 7, 2017. REUTERS / Danish Siddiqui
By Euan Rocha and Jonathan Stempel
MUMBAI / NEW YORK (Reuters) – Cairn Energy (OTC 🙂 has sued Indian flagship carrier Air India over a $ 1.2 billion arbitration award it won in a tax dispute against India, according to a US District Court file reviewed by Reuters.
The move increases pressure on the Indian government to pay the sum of $ 1.2 billion plus interest and fees that UK-based Cairn obtained from an arbitration tribunal in December. The body ruled that India had violated an investment treaty with Britain and said New Delhi was beholden.
Cairn filed the lawsuit on Friday in U.S. District Court for the Southern District of New York, seeking to hold Air India accountable for the Cairn judgment. The lawsuit argued that the carrier, as a crown corporation, is “legally indistinguishable from the state itself”.
“The nominal distinction between India and Air India is illusory and only serves to help India unduly protect its assets against creditors like (Cairn),” the file said.
Air India did not immediately respond to requests for comment.
However, a senior government official, who asked not to be named, said the government and Air India had received no formal notice of such a lawsuit.
“As and when such notification is received. The government or organization concerned must take all necessary measures to defend itself against such unlawful enforcement measures,” the official said, adding that New Delhi had engaged a team ready to defend itself against any execution measure initiated by Cairn anywhere in the world.
Cairn’s decision could potentially undermine India’s attempts to divest the common carrier this year. New Delhi said in December that it had received multiple expressions of interest after deciding to privatize the loss-making entity.
The senior government official noted that New Delhi had filed an appeal against the arbitration award, and added that “the government is confident that the award will be overturned.”
Cairn had, however, started in January to take steps to identify Indian assets abroad against which he could enforce the sentence, including bank accounts, planes and even ships. He has also started registering his claim against India in the courts of the United States, Great Britain, the Netherlands and Canada.
Last week, Reuters reported that India had asked state-owned banks to withdraw funds from their overseas currency accounts, fearing Cairn could sue to seize the funds.
Cairn had previously said he was still pursuing a settlement with New Delhi, but in the meantime he also laid the groundwork for the seizure of Indian assets should negotiations fail.
“Cairn continues to have constructive engagement with the Indian government,” a company spokesperson told Reuters last week.
The company was not immediately available for comment on Saturday.
However, an Indian official told Reuters last week that talks between New Delhi and Cairn were making “little progress” and noted that India’s directive to state-owned banks to withdraw foreign currency funds sitting abroad showed that the government feared Cairn would move quickly to seize assets.
It is not known whether the pursuit against Air India could serve Cairn to seize Air India planes landing on US soil.
Earlier this year, a Malaysian court cleared the seizure of a Pakistan International Airlines Boeing (NYSE 🙂 777 plane that landed in Kuala Lumpur, after Dublin-based AerCap filed a lawsuit in court UK for unpaid bills. The plane was released almost two weeks later, after the two sides reached an out-of-court settlement.
Air India is the only Indian carrier to offer long-haul flights to destinations such as the United States and Canada. The frequency of its overseas flights has recently been affected as the second wave of the pandemic that hit India prompted countries to restrict or ban travel from the South Asian nation.