Last checked at 
(Adds government, lawyer comment)
By Aditi Shah and Aftab Ahmed
NEW DELHI, Dec 23 (Reuters) - Cairn Energy said on
Wednesday it had won an international arbitration case against
the Indian government over a tax dispute that had caused concern
among investors over retrospective tax claims on companies.
The tribunal ruled unanimously that India had breached its
obligations to Cairn under the U.K.-India Bilateral Investment
Treaty and awarded Cairn damages of $1.2 billion plus interest
and costs, the company said in its statement.
The amount is nearly equal to London-listed Cairn's market
value of $1.3 billion as of Tuesday's close.
For India, this is the second setback after losing another
international arbitration case in September against Vodafone Plc
over a $2 billion retrospective tax dispute.
The government said it will consider all options, including
legal remedies.
A government official told Reuters that the award in Cairn's
case is so big, "we don't think we can give that away without
challenging it", he said, adding that a final decision will be
taken by the Prime Minister's office.
"We will have to challenge both cases as we will otherwise
give a wrong signal to investors," said the official, who
declined to be named due to not being authorised to speak
publicly.
If the government decides to appeal, it will keep the
problem alive and create nervousness for investors, said
Anuradha Dutt, partner at Indian law firm DMD, which represented
Vodafone in its case against India.
"Tax certainty and rule of law are very critical for
investors to come to a destination and both have been violated
here which will have an impact, especially at a time when India
wants to attract investment," she said.
Dutt said the government must talk directly with Vodafone,
Cairn and Vedanta on how best to settle the matter.
Cairn took the case to arbitration in 2015 to fight against
a demand in 2014 from Indian authorities for 102 billion rupees
($1.4 billion) in taxes it said were owed on capital gains
related to the 2007 listing of its local unit.
In 2011, Cairn Energy sold its majority stake in Cairn India
to Vedanta Ltd, reducing its stake in the Indian
company to about 10%.
The Indian government seized the remaining shares in 2014
after the tax complaint was made, as well as dividends Vedanta
owed to Cairn Energy for its holdings in the Indian firm.
In 2018, Cairn Energy said it would write down the value of
its investment in Vedanta after Indian tax authorities sold $216
million worth of its shares in the Indian mining company.
Shares in Vedanta ended the day 8.2% higher on Wednesday.
(Reporting by Aditi Shah and Aftab Ahmed; additional reporting
by Sachin Ravikumar in Bengaluru; Editing by Tom Hogue,
Christian Schmollinger and Louise Heavens)
