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Air India asks US court to reject Cairn’s plea, says it is premature

By Ruchi Upadhyay 
Updated Date

New Delhi: Air India has asked a New York court to dismiss a petition filed by UK’s Cairn Energy against the Indian government for confiscation of its assets to enforce USD 1.2 billion arbitral awards, saying that The litigation was premature as the appeal against the arbitration award was still pending.

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The petition by the airline, which is separate to Indian government’s plea in a Washington court seeking dismissal of Cairn’s lawsuit to seek confirmation of the arbitral award, said the New York district court lacks jurisdiction to adjudicate a “mere hypothetical question” or one that depends upon contingent future events that may or may not occur.

Cairn first moved a court in the US District Court for the District of Columbia seeking confirmation of the arbitration award and then filed a petition in the New York court to seek declaration of Air India as “alter ego” of the Indian government and so it should be made liable to pay the USD 1.26 billion arbitral award.

An international arbitration tribunal in December last year set aside the levy of capital gains tax, using a 2012 retrospective legislation, on a 2006 reorganization of India business that Cairn carried before listing it on local stock exchanges. It ordered India to return the value of shares seized and sold, dividend confiscated and tax refund withheld to enforce levy.

With India refusing to pay, Cairn moved courts in the US.

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“Cairn’s petition to confirm the Award is pending in the District Court for the District of Columbia,” Air India said in the August 23 petition seen by PTI.

It went on to state that the Indian government has filed before a court in The Hague — the seat of the international arbitration tribunal — a Motion to Stay and a Motion to Dismiss the arbitral award.

Air India said,”In effect, the Complaint (by Cairn Energy) is a premature enforcement action dressed up as a declaratory judgment action, invoking this Court’s federal jurisdiction to get a head start on executing the Award before the D.D.C. has had the opportunity to address the Republic of India’s immunity defenses and its claims that the Award is not subject to enforcement under the New York Convention”.

“One of the requirements for the dropping of the retrospective tax demands is that the parties concerned have to give an undertaking for withdrawal of all cases against the government/tax department. So, while all this is in process, the government is obligated to respond in any legal matter where there is a time bar for doing so,” an official explained.

The government in the dismissal motion filed on August 13 before DCC, cited protections afforded by the US Foreign Sovereign Immunities Act of 1976.

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India in the filing said the court “lacks subject-matter jurisdiction under the FSIA because India never waived its sovereign immunity and, likewise, never offered – let alone agreed – to arbitrate the present dispute with Petitioners”.

“India also never “clearly and unmistakably” excluded judicial review or delegated exclusive competence to decide these questions to an arbitral tribunal”, implying that Cairn couldn’t satisfy any exception to sovereign immunity under the US law, the filing said.

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