CAIRN Energy and Air India have jointly asked a New York federal court to stay further proceedings in the British firm's US lawsuit targeting the airline for the enforcement of a $1.2-billion (£870 million) arbitral award.
The move follows the Indian government enacting a law to scrap retrospective taxation in the country, which in effect will result in the withdrawal of the Rs 102.47 bn (£1bn) tax demand on Cairn, according to court documents.
The British company had won an international arbitration award against the levy of such taxes and sought to take over Air India assets when the government refused to honour the award and pay it $1.2 bn (£870m)-plus interest and penalty.
But, last month, the government enacted the Taxation Laws (Amendment) Act, 2021, that scraps all such retrospective tax demands and has agreed to refund Rs 79 billion (£780m) it had seized from Cairn to enforce such demand.
Cairn has indicated that the refund, without interest and penalty, was acceptable to it - opening an avenue to settle the seven-year-old dispute.
Cairn and Air India in a joint request to US District Judge Paul Gardephe on Monday (13) stated that a stay on proceedings would give them "additional time to evaluate the effects and implications" of legislation that repealed the retroactive tax.
In return for the Rs 79 bn (£780m), Cairn would drop lawsuits threatening court-ordered seizures of Indian government property abroad.
One of those suits was filed in May against the state-owned Air India Ltd, which Cairn has said should be considered the alter ego of the Indian government.
"The implementing regulations are in the rulemaking process and will take some time," the two said in the petition seeking extension of the October 21 deadline for the presentation of case papers and initial pre-trial conference on October 28.
They requested the court to "stay any further proceedings in this matter through October 31, 2021, and reschedule the initial pre-trial conference and, respectively, the deadline for the parties to submit their joint pre-trial letter and proposed case management plan, for new dates in November 2021."
"The parties have conferred and agreed that the stay will facilitate the efficient resolution of the dispute, conserve the court's and parties' resources, and is not intended to obstruct or delay," they added.
Cairn had on May 14 brought a lawsuit in the New York district court to hold Air India liable as the alter ego of the Republic of India for the obligations the government owes under a foreign arbitral award.
The firm separately filed a petition before the district court for the District of Columbia to recognise and enforce the arbitration award against India on February 12, 2021.
Seeking to repair India's damaged reputation as an investment destination, the government last month enacted new legislation to drop Rs 1.1 trillion (£10.8bn) in outstanding claims against multinationals such as telecom group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.
About Rs 81 bn (£800m) collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 79 bn (£780m) is due to Cairn alone.
An international arbitration tribunal in December overturned a levy of Rs 102.47 bn (£1.1bn) in taxes on a 2006 reorganisation of Cairn's India business prior to its listing.
It also asked the Indian government to return the value of shares seized and sold, dividend confiscated and tax refund withheld. This totalled $1.2 billion (£870m)-plus interest and penalty.
The government initially refused to honour the award, forcing Cairn to identify $70 bn (£50.6 bn) of Indian assets from the US to Singapore to enforce the ruling, including taking flag carrier Air India Ltd to a US court in May.
A French court in July paved the way for Cairn to seize real estate belonging to the Indian government in Paris.
All these litigations will be dropped once Rs 79 bn (£780m) is paid, Cairn CEO Simon Thomson had said earlier this month.
