Home Economy Bidding for 'global England' cannot ignore Cairn's Indian debt

Bidding for ‘global England’ cannot ignore Cairn’s Indian debt


Prime Minister is coming to India, looking for an agreement in favor of “Global Great Britain”.

Unfortunately the government does not want to protect the past agreements on behalf of the UK.

While the UK tries to lay the foundations for a stronger and further economic partnership strategy “leaning” towards the Indo-Pacific regionOil and gas explorer Cairn Energy is preparing to seize the assets of the Indian government in a protracted dispute.

An The international court ruled in December of last year that New Delhi has violated its obligations under the UK-India bilateral investment treaty.

This was the culmination of years of controversy, after the Indian tax department in 2014 opened a retroactive investigation into Cairn that resulted in the seizure and sale of the majority of Cairn India’s remaining shares.

Last year’s ruling required New Delhi to pay Cairn $ 1.2 billion in damages plus interest and costs. Instead, the Indian government – which sees it as a sovereign tax issue – last month petitioned a Dutch court to set aside the arbitration ruling, which just happened. in very limited cases.

Meanwhile, Cairn could move forward with execution if it chooses; it has identified $ 70 billion in sovereign assets and registered for an award in six jurisdictions including the UK, the US, France, the Netherlands and Singapore.

This was hardly ideal for Cairn, which turned into an international debt collection outfit with some oil and gas. The award is currently worth $ 1.7 billion, (and up about $ 4 million monthly). Compared to Cairn’s market value of about 1.1 billion dollars; it also has a net cash position.

It’s no surprise that some shareholders are lobbying for an award to be paid – or for the company to drive execution. The seizure of internationally sovereign assets is not unprecedented: both Venezuela and Argentina have suffered this fate in past disputes.

However, the UK government does not appear to want to participate. The International Trade Department wrote to Cairn last month saying it, according to two knowledgeable people, citing a “longstanding stance” of not engaging in these types of disputes.

Of course, all parties must be able to pursue all legal means available to them. But this is a “clear pact with a clear judicial ruling”, an unimpressed investor said, adding that they expect the government to support that. Others mumbled about the attractiveness of India as an investment destination.

It is difficult to understand that this “old” position of government does not extend back too far. Theresa May’s government has raised the issue with Indian Prime Minister Narendra Modi. Most recently in 2018, the UK government has made it clear that they will continue to cooperate with New Delhi to support arbitration results.

Perhaps Cairn is an awkward subject for a government trying to make progress Trade partnerships are highly valued with India as part of the post-Brexit agenda? Previous chats have entangled the problem of accessing UK visas for workers and students. And New Delhi is a tough partner, having failed to make a substantial trade deal since the 1990s.

But moves to begin to usurp the assets of the Indian government by a company in the UK will hardly be a useful backdrop for the warm and hot words (secured by Covid) during the visit of Prime Minister. Another route available to Cairn would also be trust: the company could sell its prize to a hedge fund or another institution that specializes in settling international debt.

Cairn was perhaps considered too small to derail larger commercial targets. But Other companies, such as Vodafone, has found himself in similar positions in India.

Without a doubt, a new partnership with India could be valuable for certain sectors: Scottish whiskey producers face a 150% tariff in a market where there are be a big bull market. (However, keep in mind that the Treasury Department’s Brexit analysis outlines the impact of a slew of new trade deals with a drastic 0.2% increase on long-term GDP.)

Finally, there is a principle at stake here. Governments need to be relied upon to make their own international treaties and transactions. Otherwise, Global Britain would not be worthy of the newspaper written on it.

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@helentbiz



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