The government has rejected Cairn Energy UK’s plea for arbitration over an Rs 10,247-crore tax dispute saying taxation is not covered under the UK-India Investment Promotion and Protection Treaty.
The Edinburgh-based firm has, however, challenged saying it had invoked the bilateral investment protection treaty clause as it has not been allowed to carry out its natural course of business.
Using the treaty, Cairn had last month named former Bulgarian minister and lawyer Stanimir A Alexandrov as its arbitrator and asked the government appoint its own judge on a three-member arbitration panel to go into the Rs. 10,247-crore tax demand raised against it using retrospective taxation.
The Finance Ministry has replied to the notice saying it has been the consistent stand of Government of India that taxation is not covered under bilateral investment treaties, sources privy to the development said.
Cairn has retorted back saying it has not raised taxation under the treaty but it contending that by the government’s action it has not been able to conduct is business in India.