Air India sued by Cairn Energy

For Air India, the problems seem never-ending. The airline, which was up for divestment by the Government of India to a private entity, was today (May 15, 2021), sued by Cairn Energy UK, who is looking to Air India as a way to recover USD 1.2 billion + interest from the Government of India in an arbitration award between the two sides.

India Air Bubble Countries

Background

UK’s Cairn Energy has had a long-standing legal dispute with India, which was taken to arbitration. In December 2020, a Permanent Court of Arbitration at The Hague ruled that the Government of India should pay damages worth USD 1.2 Billion to Cairn Energy Plc. Adding up interest, India owes around USD 1.7 billion to Cairn Energy plc, it is estimated.

Cairn’s CEO had visited India in February 2021, hoping for an out of court settlement with the Government of India. Subsequently, Cairn Energy warned the Indian Government that it would pursue a global strategy to seize Indian assets abroad to recoup the money. The Government of India then instructed the state-owned Indian banks to withdraw cash in their Nostro accounts (a bank account held in other countries by these banks in local currency), trying to outmanoeuvre Cairn Energy.

As per Cairn Energy, the award is enforceable in over 160 jurisdictions that have signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Cairn Energy Sues Air India in US District Court for SDNY

On Friday, May 14, 2021, Cairn Energy sued Air India in the US District Court for the Southern District of New York as a part of their strategy to seize Indian assets. In its suit, Cairn Energy said that Air India, as a wholly-government of India owned enterprise is, “legally indistinct from the state itself”. It further said, “The nominal distinction between India and Air India is illusory and serves only to aid India in improperly shielding its assets from creditors.” Cairn Energy has asked for “joint control” of Air India.

The case could potentially mean funds held in Air India bank accounts in the USA could be seized, and not just that, their planes could be impounded. In 2019, a Jet Airways aircraft was impounded in Amsterdam at Schipol Airport after a local cargo handling company, WFS, moved the court on non-payment of their bills by 9W. So, this is a real possibility in the case of Air India as well, which is flying 50ish, and sometimes even six passengers from on US-India sectors due to the India travel ban of the US Administration at the moment.

Air India still does not have an official copy of the suit, so all they have said is that they will release a statement soon. The legal response to this move is still being discussed.

Considering Cairn is pursuing the Government of India in multiple jurisdictions, including the US, it could also mean that AI might be sued in other countries in the future as well. If this leads to any plane seizures,

Bottomline

Air India might become a pawn in the battle between Cairn Energy and the Government of India. The firm has sued Air India and has asked for Joint Control of the airline with the Government of India. It could also proceed in the direction of the firm’s assets being seized while on US soil.

What do you think of the move by Cairn Energy?


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Comments

    • Thanks for expressing your joy at the tax payer potentially losing some assets due to 2012 misadventures of Chidambaram and Manmohan.

      • @Praveen, what about Govt inability to properly address refund issues pending by Airline. SpiceJet has increased the CS validity to 31 March 2022. Why we have to bail out airlines ?

        • AI has always been like this. Nothing to do with the govt who inherited such an inefficient airline. Should have been taken care when these issues started over a decade ago.

          AI is super insular to govt intervention for improvement. You can’t fire the employees or make them work efficiently and they won’t change anyway. AI employees control the airline, earning fat salaries and pensions – they have your ticket money and also drive AI losses. Support the govt to transfer money from overpaid incompetent employees to tax payers such as you (assuming you pay all your dues).

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