Less than a week after it pledged to return $250 million of cash from the sale of its assets in Senegal, shareholders in mid-cap oil and gas exploration and development firm Cairn Energy (CNE) are celebrating an even bigger win after a tribunal ruled in its favour over a long-running dispute with the Indian government.
Cairn shares jumped more than 40% to 240p shortly after the open on Wednesday on news that a Dutch court, under the registry of the Permanent Court of Arbitration, ruled that India had ‘breached its obligations to Cairn under the UK-India Bilateral Investment Treaty’ and awarded the company damages of $1.2 billion plus interests and costs.
In its half-year trading update in September the firm had said it had a ‘high level of confidence in the merits of its claims in the arbitration’ regarding the expropriation of its Indian assets in 2014, the government’s continued attempts to enforce retrospective tax measures and its failure to treat the firm and its investments fairly.
The original court hearing took place in the Netherlands in mid-2018, with a final hearing in December 2018, and the firm was so confident it would get a positive result it booked no provisions for any of the tax or penalties assessed by the Indian authorities.
Although the ruling has taken slightly longer than expected due to the pandemic, and Cairn’s claim was for losses of more than $1.4 billion, investors aren't quibbling about the outcome. As of mid-morning, the shares were trading up 25.5% at 208.3p.
