Cairn Energy has filed a case in a U.S. district court to enforce a $1.2 billion arbitration award it won in a tax dispute against India. Cairn aims to enforce the award under international arbitration rules, commonly called the New York Convention.

New York Convention

• The Convention on the Recognition and Enforcement of Foreign Arbitral Awards is commonly known as the New York Convention.
• It was adopted by a UN diplomatic conference on 10 June 1958 and entered into force on 7 June 1959.
• It requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states.
• Widely considered the foundational instrument for international arbitration, it applies to arbitrations that are not considered domestic awards in the state where recognition and enforcement are sought.

What was the case?

• The Indian government has lost an international arbitration case to energy giant Cairn Plc over the retrospective levy of taxes and has been asked to pay damages worth $1.2 billion to the UK firm.
• The Permanent Court of Arbitration at The Hague has maintained that the Cairn tax issue is not a tax dispute but a tax-related investment dispute and, hence, it falls under its jurisdiction.
• India’s demand in past taxes, it said, was in breach of fair treatment under the UK-India Bilateral Investment Treaty.

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