A tax tribunal established to rule on a claim against the Government of India has found in Cairn’s favour.
It ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and awarded the oil and gas giant damages of $1.2bn, plus interest and costs.
Shares in the Edinburgh-based business surged as much as 40% in early trading this morning.
Cairn brought the case against the Indian Income Tax Department over tax charges related to its former subsidiary Cairn India.
Final hearings in The Hague took place in 2018 and the arbitration panel originally said it expected to issue an award “expeditiously”, but the decision was still weighing on the firm’s finances late last year.
The long-running dispute centres on restructuring undertaken by Cairn ahead of the flotation of its Indian subsidiary in 2007.
Cairn said India was trying to retrospectively apply tax legislation introduced in 2012 to transactions made by the firm six years earlier.
The Indian tax department had seized dividends owed to the company from its shareholding in Indian company Vedanta, in which it held a stake. The tax department also withheld cash from the sale of part of Cairn’s shareholding in Vedanta.
