London-listed oil and gas company Cairn Energy has revealed that a long-standing tax dispute with India is coming to an end.
The bosses said they expected the country’s government to hand over US $ 1.06 billion (£ 770 million) after officials seized a stake in its Indian operations as part of a tax payment that they believed was due.
Since then, the two sides have been embroiled in legal disputes in international courts, but recent changes to Indian tax laws have resulted in Cairn being offered a refund in exchange for ending his litigation.
As a result, the company has announced that it will remit up to $ 700million (£ 506million) to shareholders.
Cairn said: “The group plans to enter into statutory commitments with the Indian government regarding new legislation, which would allow for the reimbursement of retrospective taxes collected from Cairn in India through asset foreclosures since 2014.”
He added: “By accepting the terms of the new legislation in India, Cairn would be required to withdraw its claim for an international arbitration award, its interest and costs, and to end all legal actions to be eligible for reimbursement.”
The money will be returned to shareholders via a special dividend of $ 500 million (£ 361 million) and a share buyback program, where the company buys shares on the open market, for $ 200 million (145 million pounds sterling).
The rest of the money will be used to grow the company, which has also announced plans to buy Shell’s assets in the Western Desert in Egypt to reduce reliance on offshore development.
The dispute between Cairn and India dates back to 2006, when the company restructured its Indian operations and transferred ownership of its oil fields from Rajasthan to Cairn India.
In 2012, the country’s government passed laws that could retrospectively require mergers and acquisitions, including the restructuring of Cairn, for the payment of capital gains tax.
Authorities subsequently seized 10% of Cairn India’s shares, which led to a dispute that was heard by global arbitration tribunals, with Cairn seeking damages for loss of earnings resulting from its inability to invest. .
A hearing in The Hague ruled in Cairn’s favor but the arbitration award was not enforced.