A leading investor in Cairn Energy has called on the Indian Government to drop a $1.6bn claim at the centre of a long-running tax dispute that is hampering the company.
US fund management giant Hotchkis and Wiley Capital Management said the claim was unfair and typical of the kind of action that put investors off India.
"Cairn clearly followed the law, to the point that its reorganisation nine years ago was approved by the government of India,” portfolio manager Stan Majcher told the Press Trust of India news agency. “When the government changes the rules after the fact, it violates the most basic rules that support investment and growth."
Led by chief executive Simon Thomson, Cairn Energy has been prevented from selling the remaining $526 million stake the group holds in its former subsidiary, Cairn India, while the dispute drags on. Cairn India owns acreage on which Cairn made massive finds under founder Sir Bill Gammell.
The value of Cairn Energy’s stake in the business fell from about $1bn when the dispute started in January last year, to $526m at June 30.
The Indian Government slapped a retrospective tax demand on the company concerning events leading up to the flotation of Cairn India in 2007. Cairn insists it has paid all taxes due.
Mr Majcher said: "Repudiating retrospective laws and adopting international norms on taxation would allow the international investment community to see that the Modi government is delivering on its pre-election promise to eradicate so called tax terrorism."
Cairn Energy sold a majority stake in Cairn India to Vedanta Resources for $5.5bn in 2011, and paid $3.5bn of the proceeds to shareholders
The company has shifted its focus from India since Mr Thomson succeeded Sir Bill in 2011. It has developed a portfolio that combines hunting for oil and gas in under-explored areas such as parts of West Africa with lower risk activity in the North. It made two big finds off Senegal last year.
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