India is scrapping its controversial 2012 tax amendment that allowed it to impose retrospective taxes on foreign companies' investments. It has also offered a $1 billion tax refund to the British company Cairn Energy that had successfully begun to seize Indian-state assets internationally.

The swift volte face of the BJP government followed the successful seizure of Indian-owned properties in Paris and an application to seize Air India assets in New York. Some $70 billion worth of assets had been identified.

In 2012 after losing several tax cases against Vodaphone, the Indian government introduced a retrospective tax law only penalising foreign companies with operations in India. At the time the opposition party, the Bharatiya Janata Party (BJP) described the move as 'economic terrorism'.

The most high-profile case was the seizure in 2014 of Cairn Energy's 10% holding in its India venture, worth $1.2 billion. Following a series of wins in the Indian court system, Cairn took the case to an international arbitration tribunal.

In December 2020, the Dutch tribunal order the Indian government to pay Cairn $1.7bn as compensation having violated its obligations under the 2014 UK-India bilateral investment treaty.

The New Delhi government refused to honour the award reiterating sovereignty on domestic tax issues and prompting  Cairn to successfully set about seizing Indian state assets abroad starting in Paris.

The new draft law will cancel the 2012 legislation meaning over $13.5bn in similar claims against companies such as  Vodafone, Sanofi and brewer SABMiller will be dropped.


  • Given the BJP's criticism over 'economic terrorism' in 2014, it has taken the ruling party a long time to rescind legislation, widely seen as damaging India's reputation as a place to invest.
  • The move continues to defy international tax rulings and reiterates that domestic tax law trumps international treaties.
  • The change in the law does not compensate for litigation fees or interest. In Cairn's case, the Dutch award of $1.7bn is one and a half times the company's total equity value.

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