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Lawyers, other representatives, expert(s), tribunal’s secretary

Final Award

List of Abbreviations

9 Subsidiaries The nine UK incorporated subsidiaries through which Cairn Energy held operations and assets in India
27 Subsidiaries The further 18 subsidiaries held by the 9 Subsidiaries, together with the 9 Subsidiaries
2002 Task Force 2002 Task Force on Direct Taxes
2006 Transactions The transactions undertaken in 2006 by the Claimants in and around the time of their corporate reorganisation and the listing of CIL on the BSE, specifically, Cairn's pre-IPO corporate reorganisation and post-IPO transactions
2012 Amendment or 2012 Clarification Amendment made in 2012 to Section 9(1)(i) of the Income Tax Act 1961
AAR Authority for Advanced Rulings
ACIT Assistant Commissioner of Income Tax Circle 1(2)(1), International Taxation, New Delhi
Actual Scenario What happened in reality
Addendum Addendum to the Second Terms of Appointment of the Confidentiality Expert
Additional Document Request Respondent's application for document production of 29 November 2017
Amarchand Amarchand & Mangaldas & Suresh A Shroff & Co.
Application for Bifurcation Application for bifurcation filed by the Respondent on 6 October 2016
AT-XX The Tribunal's communications to the Parties
Authorised Persons List of persons to whom the Restricted Documents may be disclosed
BIT or Treaty or UK- India BIT Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Promotion and Protection of Investments, entered into force 6 January 1995
BJP Bharatiya Janata Party
[Person 1] Documents Evidence related to Ms [Person 1] filed in the Delhi High Court Proceedings
BSE Bombay Stock Exchange
But For Scenario Situation which would, in all probability, have existed if the act had not been committed
Buy-Back Programme CIL's plan to buy back its shares, formally announced 14 January 2014
Cairn The Cairn group of companies
Cairn Energy Holdings Cairn Energy Holdings Ltd
Cairn Energy India Cairn Energy India Pty Limited
Cairn Energy or CEP Cairn Energy PLC
Cairn's corporate reorganisation Cairn's 2006 pre-IPO corporate reorganisation
CBDT Central Board of Direct Taxes
CCom-XX Claimants' communications to the Tribunal
CEA Cairn Energy Australia Pty Limited
CEA Loan Loan account from Cairn Energy used by CEA to acquire 100% of Command Petroleum
CEGHBV Cairn Energy Group Holdings BV
CEHL Cairn Energy Hydrocarbons Ltd
CEHL Debt Debt of £29,780,710 assigned by Cairn Energy to CUHL, owed to Cairn Energy by CEHL
CGP CGP Investments
CIHL Cairn India Holdings Limited
CIHL Acquisition The transaction taxed by the Respondent (i.e., the transfer of the shares in CIHL from CUHL to CIL)
CIL Cairn India Limited
CIL/VIL or VIL Vedanta Limited
Claimants Cairn Energy PLC and Cairn UK Holdings Limited, collectively
Claimants’ Document Request No. 1 Claimants’ request for documents concerning the FIPB’s review and approval of CUHL’s application of 10 August 2006
Claimants’ Document Request No. 2 Claimants’ request for documents relating to the proceedings conducted by the Standing Committee on the preparation of the Standing Committee Report
Claimants’ Original Request on Dividends Claimants’ request of 12 May 2017 that the Tribunal order the Respondent to confirm that all dividends can be paid to CUHL without further delay
Claimants’ Publication Application Claimants’ request that the Tribunal issue a ruling finding that PO2 and PO16 are fit for publication
Claimants’ Updated Request for Relief Final request for relief submitted by the Claimants on 14 December 2018
Closing Hearing Hearing on closing submissions held in Paris on 19 and 20 December 2018
CNHBV Cairn Energy Netherlands Holdings BV
Command Petroleum Command Petroleum Limited
Confidentiality Expert Dr Dirk Pulkowski, PCA Senior Legal Counsel designated to act as confidentiality expert
Cost Basis Theory Respondent’s theory that the 2006 Transactions had been abusively structured so as to inflate the cost basis of CIL’s shares so that less tax would be payable on future sales of CIL shares
CRL Cairn Resources Limited
CUHL Cairn UK Holdings Limited
[Person 2] Committee Committee for Reforming the Regulatory Environment for Doing Business in India, chaired by Mr [Person 2]
DAO 9 March 2015 draft assessment order issued by ITD against CUHL
Daylight Loan The "daylight overdraft" (i.e., a loan repayable in one day) obtained by Cairn Energy from Citibank
Demand Tax demand against the Claimants in respect of AY 2007-2008, as set forth in the FAO
DIP Disclosure and Investor Protection
Direct Transfer Theory Respondent’s argument that the 2006 Transactions were, in substance, a transfer / divestment of Cairn’s underlying oil and gas assets in India
Dividend Migration Scenario Respondent’s argument that had CUHL provided an alternative security to the tax authorities, such as a bank guarantee, CIL could have remitted the dividends to CUHL before receipt of the notice under Section 226(3) of the ITA dated 16 June 2017
DRP The Dispute Resolution Panel
DRP Ruling 31 December 2015 ruling of the Dispute Resolution Panel
DTAA Double Taxation Avoidance Agreement
DTC 2009 Direct Tax Code Bill of 2009
DTC 2010 Direct Tax Code Bill of 2010
DTC 2013 Direct Tax Code Bill of 2013
Dutch Arbitration Act Code of Civil Procedure of The Netherlands
ECHR European Convention on Human Rights
ECtHR European Court of Human Rights
FAO Final Assessment Order issued 25 January 2016
FET Fair and equitable treatment
FIPB Foreign Investment Promotion Board
FIPB Application Application submitted by CUHL (together with CIL) to the FIPB on 10 August 2006
First CIHL Acquisition CIL’s acquisition of the first tranche of CIHL shares (16.5 per cent) from CUHL
First Report of the Confidentiality Expert Report of the Confidentiality Expert issued 20 December 2017
First ToA of the Confidentiality Expert Terms of Appointment of the Confidentiality Expert issued 28 November 2017
Fourth CIHL Acquisition CIL’s acquisition of the remaining 24.3 per cent of CIHL from CUHL
Frozen Shares CUHL’s 184,175,764 equity shares in CIL provisionally frozen by the Section 281B Order
GAAR General Anti-Avoidance Rule
HEL Hutchison Essar Ltd
Hutchison Hutchison Telecommunications International Ltd.
IBA Rules IBA Rules on the Taking of Evidence
ICIJ International Consortium of Investigative Journalists
India Hold Co. Single UK holding company in which all of Cairn’s Indian shareholdings and underlying assets were consolidated
Indian Sub Indian subsidiary company
IPO Initial public offering
ITA 1961 or ITA Income Tax Act 1961
ITAT The Income Tax Appellate Tribunal
ITAT Order 9 March 2017 order issued by the Income Tax Appellate Tribunal
ITD Income Tax Department
JOAs Joint operating agreements
Joint Statement Joint statement produced by the Claimants’ and Respondent’s valuation experts of 28 November 2018
Law Commission Law Commission of India
Legal Costs Costs of legal representation and assistance referred to in Article 38(e) of the UNCITRAL Rules
Lock-In Requirement Requirement that the promoter retain the 20 per cent shareholding for three years before it could sell it
MFN Most-favoured nation
Minimum Promoter Contribution or MPC The 20 per cent of the post-IPO share capital of the Indian entity in which Cairn Energy was required to acquire in cash
MoF Ministry of Finance of India
MST or Minimum Standard of Treatment Customary international law minimum standard of treatment
NELP New Exploration Licensing Policy
Notice of Demand Notice of demand issued by ITD and received by CUHL on 4 February 2016
ONGC India's Oil and Natural Gas Commission
Parliament Parliament of India
Penalty Order Penalty order issued by the Respondent against CUHL on 29 September 2017
Petronas Petronas International Corporation Ltd.
PO1 Procedural Order No. 1
PO2 Procedural Order No. 2
PO3 Procedural Order No. 3
PO4 Procedural Order No. 4
PO5 Procedural Order No. 5
PO6 Procedural Order No. 6
PO7 Procedural Order No. 7
PO8 Procedural Order No. 8
PO9 Procedural Order No. 9
PO10 Procedural Order No. 10
PO11 Procedural Order No. 11
PO12 Procedural Order No. 12
PO13 Procedural Order No. 13
PO14 Procedural Order No. 14
PO15 Procedural Order No. 15
PO16 Procedural Order No. 16
PO17 Procedural Order No. 17
PO18 Procedural Order No. 18
PO19 Procedural Order No. 19
President of the Tribunal or President Mr Laurent Lévy, the Presiding Arbitrator
Project Sapphire Presentation Document containing the slides of a presentation made by ABN Amro Rothschild at a board meeting of Cairn Energy PLC on 4 April 2005
PSCs Production sharing contracts
RBI Reserve Bank of India
RCom-XX Respondent's communications to the Tribunal
Renewed RIM Claimants' renewed request for interim measures of 6 May 2017
Request for Vedanta documents The Respondent’s document production request of 17 December 2016
Respondent Republic of India
Respondent's Confidentiality Application Application of the Respondent that PO2 and PO16 remain confidential and not be disclosed to the Delhi High Court
Respondent's Updated Request for Relief Updated request for relief submitted by the Respondent on 14 December 2018
Restricted Documents The documents produced in response to the Claimants’ Document Request No. 2 that are subject to confidentiality protections
RIM Request for interim measures issued by the Claimants on 13 April 2016
RIM Hearing Hearing in London on 12 June 2017 on the Renewed RIM
Rothschild NM Rothschild & Co
SEBI Securities and Exchange Board of India
Second CIHL Acquisition CIL’s purchase of an additional 5.3% of shares in CIHL from CUHL
Section 131 Notice 22 January 2014 summoning of CUHL by ITD to provide information on the CIHL Acquisition
Section 148 Notice 21 January 2014 notification by ITD to CUHL regarding the escapement of assessment for income chargeable to tax
Section 274 Notice Section 274 Notice received by CUHL on 4 February 2016
Section 281B Order 22 January 2014 order issued by the Deputy Director of Income Tax
Share Purchase Deed Share Purchase Deed dated 12 October 2006
Share Sale Migration Scenario Respondent’s argument that had CUHL provided an alternative security to the tax authorities, such as a bank guarantee, it would have been able to obtain an authorisation to sell its shares in CIL despite the Section 281B Order
Shares The Claimants’ equity shares in CIL
Shell Shell India Production Development BV
[Person 3] Committee Committee led by Dr [Person 3] to examine the implications of the 2012 Amendment
SOCO BVI SOCO Australia Limited
SSE Substantial Shareholding Exemption
SSPA Subscription and Share Purchase Agreement dated 15 September 2006 (and amended on 5 October 2006)
Standing Committee Standing Committee on Finance
Standing Committee Report Official report of the Standing Committee on the DTC 2010
Statutory Rate The statutory rate applied to tax refunds in India (0.5% per month, in INR terms, without compounding)
Stay Application Application for a stay of the proceeding filed by the Respondent on 6 June 2016
Supreme Court Supreme Court of India
TARC Tax Administration Reform Commission
TARC Report First Report of the Tax Administration Reform Commission
Tata Tata Cellular Industries
Tax Leakage Theory Respondent's theory that by planning to collapse all of the holding structure between CIL and the oil and gas assets into CIL, the Claimants avoided paying the full amount of Indian tax on dividends that would have been otherwise applicable
Tax Planning Theory Respondent's argument that the Claimants chose an unnecessarily complex and artificial structure to consolidate the oil and gas assets under CIL with the dominant purpose of avoiding taxes
Third CIHL Acquisition CIL's acquisition of 135,267,264 shares in CIHL from CUHL
[Person 4] WS Witness statement of Mr [Person 4]
ToA Terms of Appointment
TPO Transfer Pricing Officer
UK-India DTAA Double Taxation Avoidance Agreement between the UK and India
UNCITRAL Rules United Nations Commission on International Trade Law Arbitration Rules 1976
VCLT Vienna Convention on the Law of Treaties
Vedanta Vedanta Resources Plc
Vedanta arbitration Arbitration initiated by Vedanta against the Respondent
VEL Vodafone Essar Ltd
Venice Commission European Commission for Democracy through Law
Vodafone Vodafone International Holdings BV
VWAP Volume weighted average price
Withheld Appendices Appendices V and VI not filed with the Claimants' new version of the Project Sapphire Presentation

I. Introduction

1.
The present dispute arises out of tax measures applied by the Government of India to certain transactions undertaken in 2006 by the Claimants (the "2006 Transactions") in and around the time of their corporate reorganisation and the listing of a newly incorporated subsidiary, Cairn India Limited ("CIL"), on the Bombay Stock Exchange (the "BSE").
2.
The tax measures were applied to certain share transfers following an amendment made in 2012 to Section 9(1)(i) of the Income Tax Act 1961 (the "ITA 1961" or "ITA") (the "2012 Amendment"). The Claimants maintain that the corporate reorganisation and the initial public offering (the "IPO") were at all times conducted with due adherence to the then-applicable Indian tax laws, and that by applying retroactively the 2012 Amendment to the 2006 Transactions, and subsequently taking enforcement measures against Cairn's investments, the Respondent breached its obligations under the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Promotion and Protection of Investments (the "UK-India BIT", the "Treaty", or the "BIT"). Cairn claims that the Respondent's actions have caused them significant damage.
3.
The Respondent denies that the 2012 Amendment and the tax measures applied to the 2006 share transfers breaches the UK-India BIT. To the contrary, the Respondent argues that these transactions were taxable under Indian law even without the 2012 Amendment. In particular, the Respondent contends that the Supreme Court of India took an unduly formalistic approach to the "source" rule embodied in Section 9(1)(i) of the ITA (when it should have taken a purposive approach consistent with long-standing authority dating back at least to the 1940 decision of the Judicial Committee of the Privy Council in the Rhodesia Metals case) and, moreover, that the Claimants' corporate reorganisation and IPO were merely an elaborate guise to avoid paying tax in the first instance, and were in any event taxable in India in accordance with other provisions of Indian law. Accordingly, the Respondent alleges that Cairn owes approximately US$ 1.6 billion in capital gains tax and additional amounts accrued in interest and penalties following the Claimants' corporate restructuring. Consequently, the Government of India has taken certain enforcement measures against the Claimants and has proceeded with the forced sale of the Claimants' remaining assets in India.

A. The Claimants

4.

The claimants in this arbitration are Cairn Energy PLC ("Cairn Energy" or "CEP") and Cairn UK Holdings Limited ("CUHL", collectively, the "Claimants").1

5.
Cairn Energy is an oil and gas exploration and production company that is incorporated in Scotland, United Kingdom, and is listed on the London Stock Exchange. Its registered office is:

Cairn Energy PLC
50 Lothian Road
Edinburgh, EH3 9BY
Scotland, United Kingdom

6.
CUHL is a wholly-owned subsidiary of Cairn Energy and is incorporated in Scotland, United Kingdom. Its registered office is:

Cairn UK Holdings Limited
50 Lothian Road
Edinburgh, EH3 9BY
Scotland, United Kingdom

7.

The Claimants are represented in this arbitration by:

Mr Mark S. McNeill
Partner
Quinn Emanuel Urquhart & Sullivan, LLP
51 Madison Avenue, 22nd Floor
New York, NY 10010
United States of America
Email: [Redacted]

Mr Arvind P. Datar
No. E-61 Anna Nagar East
Chennai 600 102
Tamil Nadu
India
Email: [Redacted]

Ms Niti Dixit
Partner
S&R Associates
Advocates
64 Okhla Industrial Estate, Phase III
New Delhi 110 020
India
Email: [Redacted]

Mr Uday Walia
Partner
Platinum Partners
Plot 1 & 2, Block E, The Mira
Mathura Road, Ishwar Nagar,
New Delhi 110 065
India
Email: [Redacted]

Mr Paul Hally
Partner
Shepherd and Wedderburn LLP
1 Exchange Crescent
Conference Square
Edinburgh, EH3 8UL
Scotland, United Kingdom
Email: [Redacted]

Mr Maarten Drop
Advocaat | Partner
Cleber N.V.
Herengracht 450
1017 CA Amsterdam
The Netherlands
Email: [Redacted]

B. The Respondent

8.

The respondent in this arbitration is the Republic of India (the "Respondent"). For the purposes of this arbitration, the Respondent’s contact details are:

Mr [Person 7]
Joint Secretary (FT&TR-I)
Central Board of Direct Taxes
Department of Revenue
Ministry of Finance
Government of India
Room No. 803, 8th Floor,
C Wing, Hudco Vishala Building,
Bhikaji Cama Place,
New Delhi 110066
Tel: [Redacted]
Email: [Redacted]

Mr [Person 8]
Additional Commissioner of Income-tax (OSD) (FT&TR-I)
Room No. 903, C Wing
Hudco Vishala Building
Bhikaji Cama Place
New Delhi 110066, India
Email: [Redacted]

Mr [Person 9]
Deputy Commissioner of Income-tax (OSD) (FT&TR-I)
C Wing
Hudco Vishala Building
Bhikaji Cama Place
New Delhi 110066, India
Email: [Redacted]

9.

The Respondent is represented in this arbitration by:

Mr Salim Moollan, QC
Essex Court Chambers
19 Duxton Hill
Singapore 089602
Email: [Redacted]
Professor Chester Brown
7 Wentworth Selborne Chambers,
7 /180 Phillip Street,
Sydney NSW 2000, Australia Email: [Redacted]

Mr Shreyas Jayasimha
Mr Mysore Prasanna
Mr Krishnan Shakkottai
Ms Bhavya Chengappa
Aarna Law LLP
No. 5, Second Main Road, Vyalikaval,
Bangalore 560003, India
Emails: [Redacted]

C. The Tribunal

10.

In accordance with Article 9 of the UK-India BIT, on 2 April 2015, the Claimants informed the Respondent that they had appointed Mr Stanimir Alexandrov, a national of Bulgaria, as arbitrator. Mr Alexandrov accepted his appointment on 1 April 2015. Mr Alexandrov’s contact details are as follows:

Stanimir Alexandrov
Stanimir A Alexandrov PLLC
1501 K Street N.W.
Suite C-072
Washington D.C. 20005
Tel: [Redacted]
Email: [Redacted]

11.

As the Respondent did not appoint an arbitrator within the time limit set out in Article 9 of the UK-India BIT, on 12 August 2015 and in accordance with Article 9(3)(c)(ii) of the UK India-BIT, the Claimants requested the President of the International Court of Justice, H.E. Judge Ronny Abraham, to act as appointing authority. Ultimately, on 9 November 2015, the Respondent informed the Claimants that it had appointed Mr J. Christopher Thomas, QC, a national of Canada, as arbitrator. Mr Thomas accepted his appointment on 20 November 2015. Mr Thomas’s contact details are as follows:

Mr J. Christopher Thomas, QC
Suite 1200, Waterfront Centre
200 Burrard Street
P.O. Box 46800
Vancouver
British Columbia
Canada V7X-1T2
Email: [Redacted]

12.

On 13 January 2016, in accordance with Article 9 of the UK-India BIT, the co-arbitrators notified the Parties that they had appointed Mr Laurent Lévy, a national of Switzerland and Brazil, as the Presiding Arbitrator in this matter. Mr Lévy confirmed that he accepted his appointment that same day. Mr Lévy's contact details are:

Mr Laurent Lévy
3-5 Rue du Conseil-Général
Case Postale 552
CH-1211 Genève 4
Switzerland
Tel.: [Redacted]
Fax: [Redacted]
Email: [Redacted]

13.

With the consent of the Parties, the Tribunal appointed Ms Sabina Sacco, a national of Chile, Italy, and El Salvador, as Secretary of the Tribunal. Her contact details are:

Ms Sabina Sacco
3-5 Rue du Conseil-Général
Case Postale 552
CH-1211 Genève 4
Switzerland
Tel.: [Redacted]
Fax: [Redacted]
Email: [Redacted]

II. The Facts

A. The petroleum industry in India

14.
Prior to the 1990s, the hydrocarbon industry in India was under state control. Despite efforts by India's Oil and Natural Gas Commission ("ONGC"), there was limited investment and technical expertise committed to developing India's domestic petroleum industry. As a result, India was predominantly dependent on imported petroleum.2
15.
The 1990 Persian Gulf crisis increased the cost of oil significantly. Combined with high levels of public spending and debt, this created a major financial crisis in India in 1991. The International Monetary Fund granted loan assistance to India on the condition that the Government of India instigate major reforms. Assisted by the World Bank, India undertook structural changes to prepare it to become a free market economy open to foreign investment. As a part of this liberalisation programme, in the 1990s India implemented a series of reforms to deregulate and de-license the petroleum sector.3
16.
A major element of these reforms included the development of a legal structure designed to attract foreign investment and expertise into the oil and gas sector. This was achieved predominantly by increasing the ONGC's ability to enter into ventures with foreign investors to increase production from the existing fields and fund further exploration.4
17.
Throughout the 1990s, India continued with its attempts to attract foreign investment in the oil and gas sector. In 1997, the Indian Government instituted the New Exploration Licensing Policy ("NELP"), which opened up additional blocks for exploration by multinational companies and put private companies on a more competitive footing with the two national oil companies, ONGC and Oil India Limited. The NELP fostered greater foreign participation by instituting a process for competitive bidding and allowing greater foreign investment in production sharing contracts ("PSCs").5

B. The Claimants’ investments in India

1. Cairn’s acquisition of Command Petroleum

18.

Cairn began oil and gas exploration and development activities in India in 1996, with the acquisition of Command Petroleum Limited ("Command Petroleum"), an Australian company that held interests in a 1994 PSC for the Ravva oil and gas field. Command Petroleum was also involved in a venture with ONGC and other foreign investors.6

19.

To purchase Command Petroleum, Cairn Energy incorporated Cairn Energy Australia Pty Limited ("CEA") in Australia. CEA acquired 100% of Command Petroleum using a loan account from CEP (the "CEA Loan"). CEA also acquired SOCO Australia Limited ("SOCO BVI") (incorporated in the British Virgin Islands), which held approximately 31 per cent of Command Petroleum.7

20.

Once it had acquired Command Petroleum, between 1996 and 1997 CEP restructured its holdings through a series of intra-group share transfers, as follows:

a. CEP incorporated two wholly owned subsidiaries, Cairn Energy Holdings Limited ("Cairn Energy Holdings") in the UK and Cairn Energy Group Holdings BV ("CEGHBV") in the Netherlands.

b. CEP then transferred to Cairn Energy Holdings its interest in the CEA Loan, its shares in CEA, and its shares in CEGHBV in consideration for the issue of shares in Cairn Energy Holdings.

c. Cairn Energy Holdings then transferred its interest in the CEA Loan and the shares in CEA to CEGHBV in exchange for the issue of shares in CEGHBV.

d. CEGHBV then cancelled the CEA Loan in consideration for the issue of further shares in CEA. As a result, by September 1997, CEGHBV owned the entirety of the Command Petroleum assets through its shareholding of CEA.

e. In January 2001, a new parent company entity, Cairn Energy Netherlands Holdings BV ("CNHBV"), was inserted within the Cairn corporate group above CEGHBV. This required Cairn Energy Holdings to transfer the entire share capital of CEGHBV to CNHBV in consideration for an issue of shares by CNHBV.8

21.

The Claimants note that, "[i]n total, the transaction involved five transfers of share capital in non-Indian companies - entities incorporated in Australia, the UK, the Netherlands, and the British Virgin Islands - all of which derived substantial value, directly or indirectly, from their underlying assets in India."9 They further note (and the Respondent does not dispute) that the Indian Government was "fully aware of this change in foreign control in connection with one of the most important PSCs in the Indian oil and gas sector, the Ravva concession."10 The Under-Secretary of India’s Ministry of Petroleum and Natural Gas signed an amendment to the Ravva PSC to reflect Command Petroleum’s acquisition by CEP and its resulting name change, and the Government accepted a new parent company guarantee by a company of the Cairn group in relation to liabilities under the Ravva PSC.11 However, the Claimants allege that "India did not indicate that any tax liabilities had accrued to any member of the Cairn corporate group as a result of the transfers of shares of the non-Indian corporations involved which derived substantial value from Indian interests."12 In particular, Ms [Person 1] testifies that "[t]he Indian Income Tax Department [...] never once sought to assess capital gains tax on any of these transactions."13

2. Cairn’s expansion in India

22.

From their acquisition of Command Petroleum in India in 1996 up until their 2006 corporate reorganisation, Cairn developed numerous other interests in India. Beginning in 1998, through a series of transactions with Shell India Production Development BV ("Shell"), a Dutch company, Cairn acquired a 100 per cent interest in, and became the operator of, a PSC in Rajasthan.14 This interest was ultimately held by two Cairn subsidiaries, Cairn Energy India Pty Limited, an entity incorporated in Australia ("Cairn Energy India") and Cairn Energy Hydrocarbons Limited, an entity incorporated in Scotland ("CEHL"). These transactions required three assignments of the relevant PSC, which in turn required the prior consent of the Government of India.15 The Claimants allege that, in connection with securing India's consent to its acquisition of the Raj asthan PSC, it disclosed its India-related corporate structure to the Indian Government, but the Government "never once suggested that Cairn owed or was in default for not having paid capital gains tax on transfers of shares in non-Indian corporations with underlying Indian assets."16

23.

Through its exploration activities, in 2004 Cairn discovered the Mangala oil field in Rajasthan, "the largest onshore discovery in India [in] over two decades,"17 followed by the Aishwariya and Bhagyan fields, also in Rajasthan. The Claimants affirm, and the Respondent does not dispute, that "these Rajasthan fields currently account for roughly one quarter of India's entire domestic oil production."18

24.
In December 2004, Cairn sold interests in two PSCs to the ONGC for approximately US$ 135 million. Cairn entities also acquired interests in certain minor exploration assets from ONGC. According to the Claimants, these transactions also required detailed disclosures to the Government of India to secure the Government's consent to the assignment of the relevant PSCs.19 According to the Claimants, "[o]nce again, the disclosures about the Cairn group structure that were scrutinised by the Government of India reflected that Cairn then indirectly held its significant underlying Indian assets", but "[a]t no time did India ever suggest that the Cairn corporate group had failed to settle any capital gains tax liabilities in connection with the Command Acquisition and Reorganisation."20
25.

By 2006, CEP held operations and assets in India through nine UK incorporated subsidiaries (the "9 Subsidiaries"), which subsequently held between them a further 18 subsidiaries (together, the "27 Subsidiaries") incorporated in different jurisdictions around the world.21 These interests included 12 PSCs, (three entered into before the NELP regime, and seven under that regime),22 interests in various joint operating agreements ("JOAs") with ONGC and other parties in respect of PSCs in the Cambay Basin, Rajasthan, and the Krishna-Godavari Basin,23 three processing plants, 12 platforms, 250 kilometres of pipelines, several active drilling programmes, and considerable reserves of oil and gas.24

26.

According to the Claimants, "[i]n the course of its decades of oil and natural gas exploration and production in India, Cairn contributed more than US$ 3 billion in tax and other revenue to India."25

3. Cairn’s 2006 corporate restructuring

27.

According to the Claimants’ witness, Ms [Person 1], "[b]y 2006, the Cairn Energy group’s remarkable success in India raised the possibility of gathering all Indian operations and assets under a single entity and offering shares to the public. The resulting capital increase would allow further investment in Rajasthan and other locations in India. CEP’s Board considered two primary options for accomplishing this goal: gathering its Indian assets and operations under a UK company and listing on the London Stock Exchange, or incorporating a holding company in India and offering shares for public sale on the Bombay Stock Exchange (the 'BSE’)."26

28.

On 8 March 2006, a committee of CEP's Board of Directors decided to proceed with the India option.27 The reasons for this decision, and the process that Cairn underwent to arrive to determine the form that this reorganisation would take, are discussed below in Section II.B.3.b. For present purposes, the Tribunal will record the steps that Cairn took to reorganise its Indian assets.

29.

On 20 April 2006, at its annual general meeting, CEP announced to its shareholders its plan to reorganise its Indian assets and operations under an Indian holding company that would be publicly listed in India after launching an IPO.28

30.

Cairn's India reorganisation was composed of three main elements: (i) the incorporation of an Indian subsidiary, (ii) the consolidation of Cairn's Indian assets under that Indian subsidiary, and (iii) listing that subsidiary in the Indian stock exchanges and launching the IPO. As discussed further below, the Claimants allege that they structured this reorganisation under the guidance of experienced advisors, and that the specific structure that was ultimately adopted was dictated by the following Indian legal requirements:29

a. The corporate entity under which all 27 Subsidiaries would be consolidated needed to be incorporated in India, since only Indian companies could list on Indian stock exchanges.

b. As promoter of the IPO, CEP was required to acquire in cash 20 per cent of the post-IPO share capital of the Indian entity (the "Minimum Promoter Contribution" or "MPC"). This requirement could only be fulfilled in cash because a share exchange would have substantially delayed the IPO.

c. Cairn was required to retain its Minimum Promoter Contribution for three years before being able to sell it, and to retain any additional shareholding for at least one year.

31.
The Claimants allege that, on this basis, Cairn structured its Indian reorganisation as summarised below.

a. Initial steps of the restructuring

32.

In April 2006, CEP initiated the separation of its Indian and non-Indian assets and operations with the incorporation of Cairn Resources Limited ("CRL"), a Scottish entity wholly owned by CEP. CEP subsequently transferred to CRL the various subsidiaries holding its non-Indian assets and operations in exchange for issues of its shares.30

33.

In May and June 2006, CEP gradually consolidated all of the 27 Subsidiaries (nine of which were held directly by CEP and 18 of which were held indirectly). All 27 Subsidiaries were incorporated outside of India, and collectively held virtually all of the group's assets and operations in India. This consolidation process involved the transfer of shares in non-Indian companies with underlying assets in India.31

34.

On 26 June 2006, CEP incorporated CUHL (the second Claimant in this arbitration) in Scotland as a wholly-owned subsidiary.32

35.

On 30 June 2006, CEP transferred the entire issued share capital of the 9 Subsidiaries it held directly to CUHL in exchange for an issuance of 221,444,034 ordinary shares (at £1 each) in CUHL.33 As a result, CUHL became the direct and indirect owner of the 27 Subsidiaries.34 According to Ms [Person 1], the value of the 27 Subsidiaries was reflected in CUHL's accounts at the nominal value of the share certificates tendered by CUHL in consideration, pursuant to the international accounting principles prevailing at the time.35 (This assumes importance in the later taxation of the transaction.) The Claimants note that this transaction involved nine separate transfers of interests in non-Indian companies with underlying assets in India.36 This transaction is illustrated in the diagram below:37

*CEP UK = Cairn Energy Plc

36.

On 2 August 2006, CUHL incorporated Cairn India Holdings Limited ("CIHL") in Jersey,38 as a wholly-owned subsidiary.39

37.

On 7 August 2006, CUHL transferred the 9 Subsidiaries (and as a result, its holdings in all 27 Subsidiaries) to CIHL in exchange for shares in CIHL.40 In exchange for the 27 Subsidiaries, CIHL issued 221,444,032 shares (one again at a value of £1 each) to CUHL, and Juris Limited and Lively Limited (each holders of one share in CIHL), transferred their CIHL shares to CUHL.41 The Claimants again note that this involved transfers by non-residents in non-Indian companies with underlying assets in India.42 This transaction is illustrated in the following diagram:43

38.

On 21 August 2006, CIL was incorporated in India as a wholly-owned subsidiary of CUHL.44 At that point in time, CUHL held 50,000 shares in the Indian company, which were valued at INR 500,000 (approximately US$ 10,752 at that time).45

39.

The corporate structure of Cairn's holdings in India at that point can be illustrated as follows:46

Corporate Structure as of 21 August 2006

40.

On 1 September 2006, pursuant to a debt conversion agreement between CEP, CUHL, CIHL, and CEHL, CEP assigned to CUHL a debt of £29,780,71047 owed to it by CEHL (the "CEHL Debt"). In consideration for that debt, CUHL issued 29,780,710 shares (at £1 each) to CEP. In other words, CEP obtained shares in CUHL paid for in kind (through the assignment of the CEHL Debt), and now CUHL had an account payable of £29,780,710 against CEHL. (This is noted because the Respondent (and its witness, Mr [Person 6]), have placed much emphasis on it for the calculation of the alleged capital gain.48 The debt conversion agreement was later cited in the Final Assessment Order ("FAO").)49 This transaction is illustrated in the following diagram:50

41.
Immediately after this, CUHL assigned the CEHL Debt to CIHL in return for the issuance of 29,780,710 ordinary £1 shares in CIHL.51 In other words, CUHL obtained shares in CIHL which it paid for in kind (through the assignment of the CEHL Debt), and now CIHL now had an account payable of £29,780,710 against CEHL. This transaction is illustrated in the following diagram:52
42.
As a result, by 1 September 2006, CIHL had acquired the 9 Subsidiaries and the CEHL Debt, and CUHL was the owner of 251,224,744 shares of £1 shares each in CIHL,53 as illustrated in the following diagram:54

b. The transfer of Cairn’s Indian assets to CIL

43.

The final step in the reorganisation was the transfer of all Cairn’s Indian assets to CIL, the Indian subsidiary. This was to be implemented by transferring CIHL from CUHL to CIL in a series of incremental steps. Specifically, the plan was that CIL would acquire 20% of CIHL in cash prior to the IPO, and after the IPO it would acquire the remainder of CIHL’s shares, partly with cash (obtained through the IPO) and partly through a share exchange.55

44.

In parallel, Cairn and/or its advisors liaised with the various governmental offices in India to obtain the necessary regulatory approvals for the IPO.56 These approvals included:

a. Approvals by the Foreign Investment Promotion Board ("FIPB"), an inter-ministerial group led by the Ministry of Finance ("MoF"). Ms [Person 1] explains that "[a]t that time, foreign investment in oil and natural gas exploration enjoyed automatic approval under the Foreign Exchange Management Act ("FEMA"). However, [...] because the Cairn corporate group’s reorganisation involved a share allotment for consideration other than cash, [Cairn] submitted the full details of the proposed transaction to FIPB for the necessary approval".57

b. Approvals by the Reserve Bank of India ("RBI"). According to Ms [Person 1], "[a]t the time of the transaction, RBI regulations allowed an Indian company to invest in foreign joint ventures or subsidiaries as long as its total financial commitment outside of India did not exceed 200 per cent of its net worth."58 As the reorganisation involved an investment by an Indian company in a foreign company by way of a share swap, CEP’s advisers recommended that it obtain RBI approval. This approval could only be granted after receiving FIPB approval.

c. Approvals by the Securities and Exchange Board of India ("SEBI") (which regulates the Indian securities market, including the BSE.

45.

In particular, in June 2006, Cairn met with SEBI to provide it with a description of the planned transaction. According to the Claimants, the presentation to SEBI explained that CIL would acquire CIHL through an exchange of its shares and cash from the IPO proceeds.59 This point is addressed in Section II.B.3.b(ii) below.

46.

Also around this time, Cairn’s tax advisors, the accounting firm RSM, and underwriters met separately with the FIPB and the RBI to explain the proposed restructuring and IPO.60 The Claimants allege that, in doing so, they explained that a part of the transaction would take place through a share swap between CUHL and CIL for the remaining shares in CIHL.61 According to Ms [Person 1], "[b]y the end of June, [Cairn] had secured indications from both regulatory bodies that the planned reorganisation and IPO as proposed would be compliant with their regulations."62

47.

On 10 August 2006, CUHL (together with CIL, the IPO promoters) submitted its application to the FIPB (the "FIPB Application").63 According to the Claimants, "[t]his application provided all relevant details regarding the planned reorganisation and the listing of CIL on the Indian stock exchanges (which now included the National Stock Exchange ('NSE’) in addition to the BSE)."64 The cover letter to that application specified that:

The investment in CIL, an oil and gas exploration and production company will be partly in cash and partly in shares. The cash element will be approved under the automatic route. This application is therefore to obtain the FIPB’s permission for the investment by way of share exchange, full details of which are in the accompanying proposal.65

48.

By letter of 29 August 2006, the FIPB requested more information from CUHL on the planned transactions (in particular, the precise number of shares involved in the proposed share exchange between CUHL and CIL).66

49.

On 5 September 2006, CUHL submitted its application to the RBI. According to the Claimants, this application also included a detailed description of the restructuring and the IPO, and annexed the FIPB Application.67

50.

In parallel and to comply with RBI regulations for overseas direct investments by Indian companies, CUHL also obtained an independent valuation of CIHL carried out by NM Rothschild & Co. ("Rothschild"). The purpose of such a valuation was to demonstrate that the consideration that CIL would pay for CIHL would not be disproportionate to CIL's ultimate value. On 18 September 2006, Rothschild issued a certificate valuing CIHL at between US$ 6 billion and US$ 7.2 billion.68

51.
The FIPB considered CUHL's application at its meeting of 8 September 2006.69 The minutes of that meeting note that "approval has been sought" for the following:

Approval for Cairn India Limited for issuing and allotting equity shares aggregating to up to 70% of its post IPO equity capital, to Cairn UK Holdings Limited, in exchange for shares (up to 70%) of Cairn India Holdings Limited held by Cairn UK Holdings Limited.

Subsequent to the completion of the IPO, CIL would require the balance equity shares (at least 10%) of CIHL from CUHL, for a cash consideration under automatic route.70

52.

CEP was not invited to send a representative to the meeting, but received a copy of the agenda, which the Claimants claim listed Cairn's application for review and noted that the Secretary for the Department of Revenue was scheduled to attend.71 The Respondent denies that the Secretary for the Department of Revenue attended the meeting.72 In any case, the record suggests that the Department of Revenue did receive the minutes of the meeting.73

53.

After this meeting, the FIPB recommended the application for consideration and approval by the Minister of Finance.74 On 21 September 2006, FIPB approved the final steps of Cairn's corporate reorganisation.75

54.

Also in September 2006, Cairn sent two letters to the RBI to enquire on the status of its application.76 The RBI responded on 18 September 2006 saying that "[a]s the proposals envisage[d] investments in the oil exploration sector, [it was] examining the matter in consultation with the Government of India."77 Ms [Person 1] testifies that she met with the RBI in early October 2006 "to explain the assets that CIL was intended to hold following the IPO as well as the projected timeframes of the transaction."78 She also sent, on behalf of CIL, a letter dated 6 October 2006 providing this information in writing.79 In that letter, Ms [Person 1] indicated to the RBI that Cairn understood that the RBI had "received a clarification from the Ministry of Finance of their having considered our transaction structure in its entirety while giving the FIPB approval."80 The RBI approved the transaction on 10 October 2006, noting that "the Foreign Investment Promotion Board (FIPB) ha[d] considered the entire proposal and approved the share swap transaction between Cairn UK Holdings Ltd (CUHL), Cairn India Holdings Ltd (CIHL) and Cairn India Ltd. (CIL) which follows the first two legs of the proposed transaction, vide its approval letter dated September 21, 2006."81

55.

On 12 October 2006, Cairn filed a draft red herring prospectus with SEBI in accordance with its regulations. According to the Claimants, this document (which was made available to the public), set out the full details of Cairn’s corporate reorganisation in India and the IPO.82

56.

Having obtained the necessary approvals, the last stage in Cairn’s reorganisation proceeded in two steps:

a. Step 1 : Pursuant to a Subscription and Share Purchase Agreement dated 15 September 2006 (the "SSPA"),83 CIL acquired 21.8 per cent of CIHL from CUHL, for cash consideration.84

b. Step 2 : After the IPO bidding period closed, and once the IPO price range had been set, CIL acquired the remaining 78.2 per cent of CIHL from CUHL, partly through a share exchange and partly for cash consideration. This step took place pursuant to the Share Purchase Deed dated 12 October 2006 (the "Share Purchase Deed").85

(i) Step 1 : CIL acquires 21.8 per cent of CIHL

57.

The Claimants allege that the sequence of transactions required for Step 1 (and in particular, the flow of funds involved) was dictated by the need to comply with SEBI regulations.86 CUHL, (together with CEP, the promoter of the IPO), was required to invest a MPC of 20 per cent of the estimated post-IPO share capital in CIL,87 which amounted to over US$ 1 billion.88 The MPC needed to be fulfilled in cash, because a share swap was only permitted if the IPO was to occur three years after the acquisition of the MPC,89 a timing that was not suitable to Cairn.90 The promoter was also required to retain the 20 per cent shareholding for three years before it could sell it (the "Lock-In Requirement"), and retain any additional shareholding for at least one year.91

58.

To meet the MPC requirement, CEP obtained a "daylight overdraft" (i.e., a loan repayable in one day) from Citibank (the "Daylight Loan").92 Because CEP’s articles of association imposed a maximum borrowing limit, this loan had to be taken in two tranches.93 CEP then loaned these funds to CUHL via intercompany loan.94

59.

On 12 October 2006, CUHL in turn used the funds from the Daylight Loan to subscribe for shares in CIL.95 The Tribunal understands that this involved payment of the shares subscribed under the SSPA of 15 September 2006. Indeed, according to the SSPA, CUHL had agreed to subscribe in cash for 365,028,898 CIL shares.96 The Share Purchase Deed confirmed that, as on that date, CUHL had subscribed and paid for 365,078,892 shares in CIL (the remaining six shares being held at that date by six different individuals, including Ms [Person 1]).97 The Tribunal understands that these six shares were thereafter transferred to CUHL.98

60.

On that same day, CIL used the proceeds it received from CUHL's share subscription (specifically, INR 50,373,987,924) to acquire the first tranche of CIHL shares (16.5 per cent) from CUHL (the "First CIHL Acquisition").99 This allowed CUHL to repay this tranche of the Daylight Loan.100 The First CIHL Acquisition is one of the transactions subject to the taxation measures at issue in this arbitration.

61.
As a result of these two transactions (CUHL's subscription of shares issued by CIL, and CIL's purchase of CIHL shares from CUHL), the cash provided by the Daylight Loan (INR 50,373,987,924) entered and exited India on the same day. The Claimants note in this respect that "the first transfer that the Indian Income Tax Department has alleged to be a taxable event involves taxation of the return of these borrowed funds (infused solely as a result of Indian securities law requirements)."101 As shall be seen, the Parties dispute whether this transaction meets the MPC requirement and SEBI regulations more generally.102
62.

On 22 November 2006, CUHL paid an additional share premium of INR 17,554,239,705 to CIL for the shares it had subscribed for in October. This was to ensure that the price paid by CUHL for its shares in CIL was not less than the highest price per share at which the CIL shares were to be marketed in the IPO.103 The Tribunal understands that CUHL obtained these funds through the second tranche of the Daylight Loan.104

63.

On that same date, CIL used the funds obtained through CUHL's subscription of shares in order to purchase from CUHL an additional 5.3% of shares in CIHL, specifically a further 13,390,789 shares at a price of INR 17,554,239,705 (the "Second CIHL Acquisition").105 This allowed CUHL to repay the second tranche of the Daylight Loan.106 Once again, the Parties dispute whether this transaction meets the MPC requirement and SEBI regulations generally.107

64.

The Second CIHL Acquisition brought CIL’s total holdings in CIHL to 21.8%.108 This acquisition is also one of the transactions subject to the taxation measures at issue in this arbitration.

65.
Once the IPO price range was set, CUHL was required to pay an additional share premium to ensure that it did not acquire the CIL shares at less than the higher end of the price range.109 Accordingly, on 8 December 2006, CUHL paid a further additional share premium of INR 1,427,262,991.18 to CIL, in respect of the 365,028,898 shares issued by CIL on 12 October 2006.110
66.

The following diagram illustrates the ownership structure of Cairn’s Indian assets at this point in time:111

(ii) Step 2 : CIL acquires the remaining 78.2 per cent of CIHL

67.

The bidding period for CIL’s IPO opened on 11 December 2006, and ran through 15 December 2006.112 Shortly thereafter, CIL acquired the remaining 78.2% shareholding in CIHL also in two tranches.113

68.

On 20 December 2006, CIL acquired 53.9 per cent of CIHL through a share swap with CUHL. More specifically, CIL acquired 135,267,264 shares in CIHL from CUHL, for which it issued 861,748,893 of its own shares to CUHL in consideration (the "Third CIHL Acquisition").114 The Third CIHL Acquisition is one of the transactions subject to the taxation measures at issue in this arbitration.

69.

According to the Respondent, "[t]he value of the CIL shares so transferred was INR 160 per share. This value was fixed by the price achieved for CIL’s shares in the IPO brought in the Indian Capital Market for General Persons on 29 December 2006. This was the value declared, for instance, to the Transfer Pricing Officer in Form 3CEB filed on 30 October 2007. Accordingly, the total consideration for the third tranche of shares was INR 137,882,382,880[…]"115 The Claimants have not disputed this value, and indeed accept that the Income Tax Department ("ITD") confirmed that the cost basis of the CIL shares INR 160 per share (noting however that, depending on the date, that value was INR 190 per share).116

70.

The share swap between CIL and CUHL can be illustrated as follows:117

Share Swap Between CIL and CUHL (20 December 2006)

71.

On 29 December 2006, following completion of CIL's pre-IPO placement and IPO, CIL acquired the remaining 24.3 per cent of CIHL from CUHL for cash consideration, using a portion of the proceeds from the IPO (the "Fourth CIHL Acquisition").118 Specifically, CIL acquired 61,073,032 shares in CIHL for a consideration of INR 61,008,099,631.119 The Fourth CIHL Acquisition is one of the transactions subject to the taxation measures at issue in this arbitration.

72.

The Fourth CIHL Acquisition can be illustrated as follows:120

Cash Acquisition of CIHL Shares by CIL (29 December 2006)

73.

Following the IPO and the Third and Fourth CIHL Acquisitions:

a. CIHL was a wholly-owned subsidiary of CIL, and

b. CIL in turn was 69 per cent owned by CUHL, with the remaining 31 per cent of CIL shares held by the public.121

c. Following the IPO, CIL became one of India’s top 25 listed companies by market capitalisation.122

74.

The IPO raised nearly US$ 1.98 billion.123 The Claimants assert that these funds were distributed as follows:

a. "US$ 600 million was for the account of CIL, and was earmarked to fund further exploration and development activities in Rajasthan and elsewhere in India."124 The Tribunal understands that these US$ 600 million remained in CIL and were used to fund its normal operations, as well as further exploration and development activities.

b. "Approximately US$1.35 billion went to CUHL and then to CEP, which returned roughly US$940 million to its shareholders and used the remaining funds for its on-going business and operations."125 The Tribunal understands that CUHL received those US$ 1.35 billion as consideration for the sale of CIHL. In turn, the Tribunal understands that CEP distributed US$ 940 million to its shareholders as dividends,126 retaining approximately US$ 440 million to fund its business operations.127

75.
It is CIL’s acquisition of CIHL from CUHL (performed in four stages, through the First to Fourth CIHL Acquisitions) that is the subject of the tax measures at issue in this arbitration. The Tribunal will refer to these four acquisitions jointly as the "CIHL Acquisition."
76.
According to the Respondent, "by the conclusion of the 2006 Transactions, CUHL had:

a. Acquired the shares in CIHL at a cost of £251,224,744 (INR 21,783,697,552 at an average conversion rate of INR 86.7139);

b. Transferred those shares to CIL in return for a total consideration in cash and shares of INR 266,818,710,140; and

c. Thereby achieved a short-term capital gain of INR 245,035,012,588 (i.e., approximately US$ 3.6 billion)."128

77.
As discussed in Section VII.A.1.b(iii)(1) below, the Claimants dispute this, arguing that no capital gain was made.
78.

The Claimants acknowledge that, through the sale of 31% of CIL shares to the public in the IPO, they made an "exceptional gain of US$ 1,537 billion."129 Ms [Person 1] explains that "[t]his exceptional gain of US$ 1,537 billion reflects how CEP recorded in its consolidated group accounts its 69 per cent portion of the US$ 1.98 billion in proceeds from the IPO, offset by the historical net book value of those assets now attributable to minority shareholders."130 However, this capital gain has not been the subject of any taxation measures by the Respondent. It is undisputed that, pursuant to Indian law, capital gains made through a fresh issue of shares in an IPO are not chargeable to tax.131

c. The transfer pricing assessment by the ITD

79.

During the course of 2007, CIL was subjected to a transfer pricing assessment by the ITD. As the Claimants explain (and the Respondent does not dispute) that the ITA 1961 requires Indian taxpayers who entered into an international transaction in the previous year to file a report on that transaction with the Transfer Pricing Officer ("TPO") in the Office of the Additional Commissioner of Income Tax. The task of the TPO is to ensure that the transaction has been carried out at arm’s length pricing,132 and more specifically, "to ensure that India does not lose any tax revenues as a result of a multinational group intentionally allocating its profits to low-tax jurisdictions via non-arms’ length pricing."133

80.
On 30 October 2007, CIL (through its chartered accountants, BSR & Co.), filed a Form 3CEB with the ITD providing details of the international transactions in which CIL had been involved in during 2006, including the transactions related to the CIHL Acquisition.134 Specifically, the form reflected CIL’s investment in CIHL for a total amount paid or payable of INR 289,083,710,140, with the following explanation:

During the year assessee [i.e., CIL] has acquired 272,389,192 ordinary shares of £1 each, in Cairn India Holdings Limited out of which 251,224,744 shares has been acquired from its holding company Cairn UK Holdings UK for total purchase consideration of Rs 266,818,710,140 for which it has issued 861,764,893 shares shares [sic] at Rs 160 each to Cairn UK Holdings Limited by way of share swap arrangement for acquiring 135,267,264 ordinary shares of Cairn India Holdings Limited. The said transaction does not impact P&L account and is in accordance with the provisions of Foreign Exchange Management Act (FEMA) and CCI guidelines. Thus, the transaction is considered to be at arm's length.

81.

On 29 December 2009, the ITD requested CIL to provide detailed information regarding the arm's length price of its international transactions during the fiscal year 2006-2007.135 During the course of 2010, CIL representatives attended hearings with the ITD and submitted "detailed information about the pricing of the CIL shares and underlying CIHL assets and the process of their acquisition by CUHL", including certain key documents prepared during the course of the restructuring, such as the FIPB and RBI approvals, the Rothschild valuation and the final CIL prospectus.136

82.
The TPO issued its order on 5 October 2010, holding that "no adverse inference is drawn in respect of the arm's length price in respect of 'international transactions' entered into by the assessee during the year."137
83.

The Claimants allege, and the Respondent has not disputed, that the TPO communicated this finding to the assessing officer, who reviewed the TPO's determination and the evidence submitted by CIL, and then closed the assessment, without imposing any tax on CIL in connection with the assessment.138 It is also undisputed that between 2006 and 2010, the ITD never suggested to CIL or CUHL that CUHL was liable to pay capital gains tax for the CIHL Acquisition.139

4. Cairn’s divestments of its shareholding in CIL

84.

Between 2009 and 2010, CUHL sold much of its shareholding in CIL to third parties. The most important transactions were two off-market share sales: one to Petronas International Corporation Ltd. ("Petronas") in 2009, and another to a subsidiary of Vedanta Resources Plc ("Vedanta") in 2010.140

a. The Petronas transaction

85.

In October 2009, CUHL sold 2.3 per cent of CIL’s issued share capital to Petronas.141 This transaction involved the off-market sale of shares in an Indian company, and it is undisputed that any capital gains deriving from this transaction were taxable in India. The ITD considered this to be a short-term capital gain, and applied a rate of 20%, with the result that CUHL paid approximately INR 820 million (approximately US$ 17.8 million) in short term capital gains tax for this transaction.142

86.

In its application to ITD for a withholding certificate, CUHL had argued that long-term capital gains tax at a rate of 10 per cent (rather than 20 per cent) should apply.143 To support this argument, CUHL had provided information on how it had acquired CIL’s shares, including the consideration it had given for them (i.e., cash and exchange of shares in CIHL).144 However, the ITD rejected this request, and CUHL contested the ITD’s decision before the Indian courts.145 The Delhi High Court ultimately agreed that the ITD should have applied a 10 per cent rate, and that CUHL had a right to a rebate of half the US$ 17.8 million withheld.146 The Claimants allege that, to date, CUHL has not been paid this rebate.147

87.

The Parties dispute the role of the ITD in reviewing this transaction. It is however undisputed that, when assessing the Petronas transaction, the ITD did not suggest that CUHL was liable to pay capital gains tax for the CIHL Acquisition.148

b. The Vedanta transaction

88.

In August 2010, CEP and CUHL entered into a share purchase agreement with Twin Star Energy Holdings Ltd. (then THL Aluminium Limited), a subsidiary of Vedanta for the sale of 51 per cent of CIL’s share capital.149 Since the sale was potentially for a controlling interest in CIL, it required approval from the Indian Government, which was granted in July 2011.150

89.

The sale was completed in December 2011. CUHL ultimately sold 40 per cent of CIL’s issued share capital, as follows:

a. 38.5 per cent of the shares were sold in an off-market transaction, in two tranches: the first for approximately 10 per cent of the fully diluted equity share capital of CIL (191,920,207 shares), and the second for 28.5 per cent (546,953,379 shares).151

b. Approximately 1.5 per cent of the shares (29,907,241 shares) were sold on market.152

90.

It is undisputed that any capital gains made through the off-market portion of the sale would be subject to capital gains tax in India, as they involved the private sale of shares in an Indian company.153 As with the Petronas transaction, CUHL applied for a tax withholding certificate in which it requested the application of a 10 per cent tax rate.154 Once again, the ITD rejected this request, and applied a tax rate of 20 per cent.155 On this basis, Vedanta withheld approximately INR 26.7 billion (about US$ 536 million).

91.

Once again, the Parties dispute the ITD’s role in reviewing this transaction. It is however undisputed that, when assessing the Vedanta transaction, the ITD did not suggest that CUHL was liable to pay capital gains tax for the CIHL Acquisition.156

c. Other divestments

92.
In June and September 2012, and in January 2014, CUHL sold additional shares in CIL in on-market transactions, amounting to 3.5%, 8%, and 2.5%, respectively, of the issued share capital of CIL. CUHL paid an aggregate amount of INR 79 million as securities transaction tax in accordance with applicable Indian law.157
93.
On the date of the Notice of Arbitration (22 September 2015), CUHL held 9.82 per cent of the issued share capital of CIL.158 According to the Claimants, in January 2014 (when the ITD issued its attachment order) those shares were valued at approximately US$ 1 billion. However, by the date of the Notice of Arbitration, the value of the shares had decreased by almost 60% (according to the Claimants, largely as a result of the decline in the global price for oil) to approximately US$ 400 million.159

C. Evolution of the legal framework relevant to capital gains tax in India

1. Background to the Income Tax Act 1961

94.
A capital gains tax was introduced in India in 1947 pursuant to the Income Tax and Excess Profits Tax (Amendment) Act. This tax was applied to non-residents by amending the scope of the "deeming fiction" in Section 42(1) of the Income Tax Act 1922, according to which certain income that accrued, arose, or was received outside of India would be deemed to accrue, arise, or be received in India. Specifically, this deeming fiction now encompassed gains arising or accruing "through or from the sale, exchange or transfer of a capital asset in the taxable territories."160
95.
In 1956, the Government appointed the first Law Commission of India (the "Law Commission") to restructure and simplify the Income Tax Act. The Law Commission found that Section 42(1) was ambiguous, and made the following recommendation:

The words 'sale [...] of a capital asset in the taxable territories' in the existing section 42(1) are slightly ambiguous, since 'in the taxable territories' can be read either with 'sale' or with 'capital asset'. To remove this ambiguity, the word 'situate' has been added after 'capital asset.'161

96.
The ITA 1961 adopted the Law Commission's recommendations. Section 9(1)(i) of the ITA 1961, which was the law in force at the time of Cairn's 2006 restructuring and of the CIHL Acquisition, provided as follows:

Income deemed to accrue or arise in India.

9. (1) The following incomes shall be deemed to accrue or arise in India :-

(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.162

97.
In 2002, the Indian Government constituted a Task Force on Direct Taxes (the "2002 Task Force"), which was tasked with, among other objectives, "(i) [the] [r]ationalisation and simplification of the direct taxes with a view to minimising exemptions, removing anomalies and improving equity".163 The 2002 Task Force indicated that its approach "ha[d] been influenced by the recognition that in the recent past economies have increased their tax revenue-to-GDP ratio not by increasing tax rates but by simplifying tax structures, widening the tax base and improving tax administration."164 It noted that it had "examined best tax practices in the world, deliberated on ways to reduce costs of tax administration and extensively debated means of empowering Central Board of Direct Taxes (CBDT) to fulfill its function effectively."165 With respect to the taxation of non-residents, the 2002 Task Force stated:

Non-residents are taxed only on Indian-sourced income and on income received, accruing or arising in India.

Nonresidents may also be taxed on income deemed to accrue or arise in India through a business connection, through or from any asset or source of income in India, or through the transfer of a capital asset situated in India (including a share in a company incorporated in India).166

98.
It is undisputed that the 2002 Task Force "made no mention of the possibility of enacting a tax on indirect transfers of Indian assets through the sale of shares in foreign companies."167
99.
The 2002 Task Force recommended the creation of a Working Group led by the Director General of Income Tax for International Taxation to examine various issues related to the taxation of non-residents. The Working Group issued its "Report on Non Resident Taxation" in January 2003. It is undisputed that the report "limited its general anti-abuse recommendations to the introduction of Controlled Foreign Corporation regulations, consistent with the UK and the US models, and provided the recognition of income and creditable tax at the parent company level to prevent companies from accumulating profits in low-tax jurisdictions", and "did not refer to taxation of income of non-residents arising through indirect transfer of shares as an avenue for combatting tax avoidance."168 It is also undisputed that, in the context of Section 9(1)(i) of the ITA 1961, the report suggested that the term "business connection" be amended to include an "agency PE" (permanent establishment), and that the provision should be amended "to deem that the income in respect of artistes [sic] and sportspersons shall accrue in India if the income earned is in respect of personal activities performed in India";169 it did not issue comments or suggest an amendment of the last limb of Section 9(1)(i) of the ITA.170
100.
In 2003, the OECD updated its Model Convention on Income and Capital. The updated Model Convention included for the first time a provision contemplating the taxation of capital gains arising from transfers of shares in offshore companies by non-residents. Pursuant to Article 13(4), these are taxable only where 50 per cent of the value of the offshore company ultimately derives from immovable property located in the taxing State, as follows:

Gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.171

101.
By the date of the Statement of Claim, only a few OECD States (namely Australia, Canada, Japan, and the United Kingdom) had adopted a similar provision in their legislation or tax treaties.172 According to the Claimants, "in all such countries, this new tax was applied on a prospective basis only".173

2. The Vodafone case - Part 1

102.
It is necessary to now turn to a separate legal proceeding also involving a claim to tax a transaction which effected an indirect transfer of Indian capital assets under Section 9(1)(i) of the ITA, because that matter went up to the Supreme Court of India (the "Supreme Court"). This case was the first time that the fourth limb of Section 9(1)(i) was ever subjected to judicial consideration since the ITA’s enactment in 1961. The Supreme Court’s decision and steps taken thereafter by the Parliament of India ("Parliament") are highly relevant facts for the instant case. As shall be seen, the Supreme Court rejected the ITD’s attempt to tax an indirect transfer of capital assets situated in India. This led Parliament to quickly enact what has been referred to by the Claimants as the "Retroactive Amendment" and by the Respondent as the "2012 Clarification" and this amendment to the ITA formed the legal basis for the ITD’s FAO levied in connection with Cairn’s reorganisation culminating in the IPO which is said to have generated a taxable capital gain.
103.
In 2007, Hutchison Telecommunications International Ltd. ("Hutchison"), a company incorporated in the Cayman Islands, sold a single share in CGP Investments ("CGP"), another company incorporated in the Cayman Islands, to Vodafone International Holdings BV ("Vodafone"), a company incorporated in the Netherlands, for approximately US$ 11.1 billion.174 CGP held various subsidiaries in Mauritius, which, together with certain Indian entities, ultimately held a 67 per cent stake in Hutchison Essar Ltd. ("HEL").175 As the Claimants note, "the transaction was a sale by a non-resident of an interest in a non-Indian company (which indirectly derived value from its underlying Indian assets)".176 Hutchison realised a capital gain before tax of approximately US$ 9.5 billion from the sale of the share.177
104.
In March 2007, the ITD sought information from HEL regarding the transaction.178 On 6 August of that year, it issued HEL (then called Vodafone Essar Ltd, "VEL"), a notice to show cause, specifically to explain why it should not be treated as a representative assessee of Vodafone.179
105.
On 19 September 2007, the ITD issued Vodafone, as purchaser in the Hutchison-Vodafone transaction, a notice to show cause as to "why it should not be treated as an assessee-in-default for failure to withhold tax" from the consideration paid to Hutchison for the acquisition of CGP.180
106.
On 3 December 2008, the Bombay High Court declined to exercise its jurisdiction in a challenge to the show cause notice.181 The matter was taken to the Supreme Court, which directed the ITD to determine the jurisdictional challenge, reserving Vodafone's right to challenge any decision before the Bombay High Court, leaving all questions of law open.182
107.
On 30 October 2009, the ITD issued Vodafone a second notice to show cause, to which Vodafone replied on 28 January 2010. On 31 May 2010, the ITD upheld its jurisdiction.183
108.
Also on 31 May 2010, the ITD issued Vodafone another notice to show cause as to "why it should not be treated as an agent/representative assessee of [Hutchison]",184 and alleging its failure to withhold capital gains tax from its payment to Hutchison for the acquisition of CGP.185 According to the ITD, Section 9(1)(i) of the ITA was a "look through" provision, and covered income that derived indirectly from the transfer of a capital asset, even if the transfer took place abroad.186
109.
As discussed in Section II.C.4 below, Vodafone challenged this notice and the ITD’s assertion of jurisdiction to tax the offshore transaction before the Bombay High Court, and later before the Supreme Court.187 Its main argument was that the transaction concerned the sale of a share in a company incorporated in the Cayman Islands. As this share was a capital asset situated outside of India, it contended, no income had accrued or arisen, or could be deemed to have accrued or arisen in India under Section 9(1)(i) of the ITA, even if the company, the share of which was sold, had capital assets situated in India. In response, the ITD argued that the real object of the transaction was an indirect transfer of rights in HEL held by Hutchison, which resulted in an accrual or deemed accrual of income for Hutchison from a source of income in India.188
110.
The parties diverge as to whether this was the first time the ITD sought to tax indirect transfers of Indian capital assets by non-residents.189 The Claimants allege that high-ranking officials of the Central Board of Direct Taxes ("CBDT") publicly acknowledged that the ITD’s tax of the capital gains arising from the Hutchison-Vodafone transaction was a "test case".190
111.
The Vodafone case attracted considerable international attention. The following evidence and allegations arise from the record:

a. The Economic Times on 5 February 2010 reported that the then British Prime Minister, Gordon Brown, had written to Prime Minister Singh in relation to the Vodafone case. According to the article, Mr Brown had stated that taxing cross-border deals such as Vodafone’s could "create uncertainty for foreign investors and affect the country’s investment climate".191

b. On 5 February 2010 Indian Prime Minister Singh responded to Prime Minister Brown’s letter assuring him that Vodafone would "have the full protection of the law" and indicating his understanding that "there is no retrospective application of taxation and a recent court judgment has affirmed this position". Prime Minister Singh also provided his assurance that the Government of India was "fully committed to providing a transparent and growth oriented environment for profitable international investment".192

c. Acting chairman Sudhir Chandra of the CBDT was quoted as saying "This (Vodafone case) is a test case, we will look at similar cases" in an article published in The Hindu on 9 September 2010. The article also said:

The government will look into more cross-border mergers involving Indian assets, like the Vodafone-Hutchison deal, after the Bombay High Court rejected the UK-based Vodafone’s petition against the imposition of tax by authorities here. [...] Recently, London listed Vedanta Group has signed a deal to acquire UK-based Carin Energy’s Indian arm for USD 8.43 billion. Chandra said, "(Income Tax) Department’s position stands vindicated. It is a clear cut case of deliberate non-compliance to law on misplaced legal advice."

Tax authorities had slapped a notice on Vodafone over its acquisition of Hong Kong’s Hutchison Telecommunications, involving its Indian telecom JV Hutch Essar, for over USD 11 billion in 2007.

They said that in this case the buyer, Vodafone, was liable to pay capital gains tax even if it failed to deduct it at source, that is, while making payment to Hutch for the deal that happened overseas. Vodafone challenged the notice.

[...]

Although he did not name the companies or deals that could be investigated, Chandra said, "There are already some cases under investigation.193

112.

After the Vodafone decision was issued, the United States, the United Kingdom and the European Union issued the following joint statement, which was cited by the Minister of State in the MoF Shri S. S. Palanimanickam:

Indian Revenue Authorities have asserted the unprecedented view that India is entitled to capital gains on transactions taking place wholly outside India and that they have imposed retroactive taxing jurisdiction in transactions involving the transfer of shares in a company not resident in India, in which both the buyer and seller are also nonresidents of India.194

3. The Direct Tax Code Bills of 2009 and 2010

113.
While the ITD was seeking to tax the Hutchison-Vodafone transaction, the MoF was proposing amendments to the country's tax laws. In August 2009, the MoF introduced in Parliament a Direct Tax Code Bill (the "DTC 2009"), which included a provision that taxed "the transfer, directly or indirectly, of a capital asset situate in India".195 Specifically, Clause 5(1) of the DTC 2009 provided:

(1) The income shall be deemed to accrue in India, if it accrues, whether directly or indirectly, through or from [...] (d) the transfer, directly or indirectly, of a capital asset situate in India.196

114.
According to the Claimants, the DTC 2009 also incorporated a General Anti-Avoidance Rule ("GAAR") granting the ITD the statutory power to "look through" a transaction to determine whether it lacked commercial substance and was primarily intended to avoid tax in India.197
115.
The DTC 2009 was not enacted into law. It was subsequently revised based on suggestions from stakeholders and replaced by the Direct Tax Code Bill of 2010 (the "DTC 2010"), introduced in Parliament by the Finance Minister in August 2010. Proposed Clause 5(1) of the DTC 2010 provided as follows:

The income shall be deemed to accrue in India, if it accrues, whether directly or indirectly, through or from: [...] (d) the transfer of a capital asset situated in India.198

116.
Clause 5(4)(g) then specified as follows:

The income deemed to accrue in India under sub-section (1) shall, in the case of a non-resident, not include the following, namely: — [...] (g) income from transfer, outside India, of any share or interest in a foreign company unless at any time in twelve months preceding the transfer, the fair market value of the assets in India, owned, directly or indirectly, by the company, represent at least fifty per cent of the fair market value of all assets owned by the company.199

117.
In other words, the DTC 2010 proposed to tax the "transfer, outside India, of any share or interest in a foreign company" if "the fair market value of the assets in India, owned, directly or indirectly, by the company, represent at least fifty per cent of the fair market value of all assets owned by the company".200 Clause 5(6) of the DTC 2010 proposed a formula for calculating the income that would be taxable in such an indirect transfer, as follows:

Where the income of a non-resident, in respect of transfer, outside India, of any share or interest in a foreign company, is deemed to accrue in India under clause (d) of sub-section [5](1), it shall be computed in accordance with the following formula -

A x B / C where

A = Income from the transfer computed in accordance with provisions of this Code as if the transfer was effected in India;

B = fair market value of the assets in India, owned, directly or indirectly, by the company;

C = fair market value of all assets owned by the company.201

118.
Parliament referred the DTC 2010 to the Standing Committee on Finance ("Standing Committee") on 9 September 2010. In its official report on the DTC 2010 (the DTC 2010, Forty-Ninth Report, or "Standing Committee Report"), the Standing Committee noted that "Clause 5(1)(d) read with Clause 5(4)(g) and Clause 5(6) seek to tax income of a non-resident, arising from indirect transfer of capital asset, situated in India."202 The Standing Committee Report noted in this respect that the "IT Act does not contain a provision analogous to clause 5(4)(g) and Clause 5(6) of the DTC, 2010."203 The Standing Committee recommended that there be certain exemptions added to this provision, as well as clarifications in relation to the criteria for computing the fair market value of assets situated in India. In particular, it recommended that "exception may also be provided to intra group restructuring outside India, when the Code itself provides exemption from capital gains in cases of business reorganization through Clause 47(1)(g) and Clause 47(1)(h) of the Code."204
119.
The Standing Committee also explained that the DTC 2010 proposed to introduce GAAR principles for the first time to combat tax avoidance, specifically "to prevent a tax payer from using legal construction or transactions to gain undue fiscal advantage."205 The Standing Committee noted however that this had raised serious concerns among stakeholders, and recommended that "the Ministry and the CBDT should seek to bring greater clarity and preciseness to the scope of the provisions", so that "widely worded and [...] subjective" concepts such as "misuse or abuse of DTC provisions", "manner applied for the arrangements not for bona fide business purpose", and "lacks commercial substance", would "need to be more specifically defined to avoid undue discretion to tax authorities."206 In the Standing Committee’s view, "the onus should rest on the tax authority invoking GAAR and this should not be shifted to the taxpayer."207 The Standing Committee specifically recommended that "[t]he provisions to deter tax avoidance should not be end up penalizing tax-payers who have genuine reasons for entering into a bonafide transaction",208 and that "[i]t would also be fair to apply GAAR provisions prospectively so that it is not made applicable to existing arrangements/transactions. Alternatively, suitable grandfathering provisions may be made to protect the interest of the tax- payers who have entered into structures / arrangements under the existing law."209

4. The Vodafone case - Part 2

120.
On 8 September 2010, the Bombay High Court issued its decision in Vodafone, dismissing Vodafone’s petition and confirming the ITD’s jurisdiction. Specifically, it found that the transaction had involved the transfer of "put" and "call" options between two Indian entities, which could be considered "assets situate in India".210 On this basis, it found that "the transaction in question had a significant nexus with India", as the essence of the transaction was a change in the controlling interest in HEL which constituted a source of income in India.211 Accordingly, the ITD had jurisdiction to assess capital gains tax in respect of the transaction.212 Vodafone appealed to the Supreme Court.
121.
On 20 January 2012, the Supreme Court issued a decision in Vodafone’s favour, in which all three judges concurred in the result213 finding that Section 9(1)(i) was not a "look through" provision; i.e., that it did not allow the ITD to "look through" the transfer of a share in a foreign company so as to tax the indirect transfer of underlying assets in India.214 The Supreme Court also found on the facts of that case that the Hutchison-Vodafone transaction had not been a sham or tax avoidant transaction, and thus was not subject to tax under the "look at" doctrine.215
122.
The Claimants maintain (and the Respondent has not disputed) that the ITD applied for a review of the Vodafone decision, but its application was dismissed by the Supreme Court on 20 March 2012.216

5. The 2012 Amendment

123.
On 16 March 2012, the MoF introduced in Parliament the Finance Bill 2012, which inter alia amended Section 9(1)(i) by way of certain "Explanations", which had the effect of including in the scope of this provision indirect transfers of capital assets by non-residents.217
124.
The Finance Act 2012 received assent on 28 May 2012, and introduced into law the amendment to Section 9(1)(i) made in the bill.218 The 2012 Amendment was passed with retroactive effect as of 1 April 1962, and provided as follows:

Amendment of section 9.

4. In section 9 of the Income-tax Act, in sub-section (1),—

(a) in clause (i), after Explanation 3, the following Explanations shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1962, namely:—

Explanation 4.—For the removal of doubts, it is hereby clarified that the expression "through" shall mean and include and shall be deemed to have always meant and included "by means of", "in consequence of or "by reason of".

Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India'.219

125.
The Parties dispute whether the amendments merely clarified the existing law, or whether they introduced a new retroactive measure.220
126.

The 2012 Amendment raised concerns and uncertainty amongst the business community.221 To address the business community's concerns, three different committees were formed to examine the 2012 Amendment.

127.

On 30 July 2012, the Prime Minister appointed a special tax expert committee (the "[Person 3] Committee") to examine the implications of the 2012 Amendment. The committee was led by Dr [Person 3], an advisor to the Finance Minister. The [Person 3] Committee issued its draft report on 1 October 2012.222

128.

In August 2012, in response to the World Bank’s Doing Business Report which had ranked India at the bottom of certain indices, the Ministry of Corporate Affairs established the Committee for Reforming the Regulatory Environment for Doing Business in India (the "[Person 2] Committee"). The Committee was chaired by Mr [Person 2], the former Chairman of SEBI, and included representatives from the federal government, state governments, public sector enterprises, and regulatory bodies.223 The Committee addressed a number of issues, including that of retroactive taxation.224

129.

In May 2014, an expert group (consisting of Dr [Person 3] and former government officials) which had been tasked with "address[ing] the thus-far missing elements of best practices in tax administration in a comprehensive manner"225 released the "First Report of the Tax Administration Reform Commission" (the "TARC Report"). Amongst many of its observations, the committee indicated a series of "major fault lines in the tax administration", and commented on the 2012 Amendment.226

6. Further clarifications to the 2012 Amendment

130.
The Government issued new clarifications to the 2012 Amendment in the subsequent months and years. At the same time, it continued its tax reform efforts.
131.
In May 2012, the CBDT issued a circular indicating that "in case[s] where assessment proceedings have been completed [...], before the first day of April, 2012, and no notice for reassessment has been issued prior to that date, [...] such cases shall not be reopened."227
132.
In April 2014, the MoF proposed a revised Direct Tax Code Bill (the "DTC 2013"). The DTC 2013 revised Clause 5(4)(g) of the DTC 2010 to clarify instances in which income from an indirect transfer of capital assets situated in India would be deemed to accrue in India. In particular, Clause 5(2) provided:

[A]n asset or a capital asset, being any share of, or interest in, a company or entity registered or incorporated outside India shall be deemed to be situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets (whether tangible or intangible) located in India.228

133.
The DTC 2013 also provided that shares in foreign companies would be deemed to be situated in India if only 20 per cent of the company’s value (rather than 50 per cent, as the DTC 2010 proposed) was attributable to assets in India.229 Clause 5(3) provided:

The share or interest, referred to in sub-section (2), shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of such assets, (i) exceeds the amount as may be prescribed; or (ii) represent at least twenty per cent of the fair market value of all the assets owned by the company or entity, as the case may be.230

134.
The DTC 2013 was not enacted into law.

7. The BJP assumes power

135.
Following the general election in 2014, the Bharatiya Janata Party (the "BJP") assumed power in India. The BJP’s election manifesto criticised the preceding government for having unleashed "tax terrorism" and "uncertainty", which "negatively impact[ed] the investment climate".231
136.

In his first budget speech in July 2014, the new Finance Minister, [Person 11], proposed that a CBDT-supervised "High Level Committee" be implemented to scrutinise fresh cases that had arisen following the 2012 Amendments. After stating that, "[t]his Government will not ordinarily bring about any change retrospectively which creates a fresh liability", he announced that "henceforth, all fresh cases arising out of the retrospective amendments of 2012 in respect of indirect transfers and coming to the notice of the Assessing Officers will be scrutinized by a High Level Committee to be constituted by the CBDT before any action is initiated in such cases."232

137.
On 28 August 2014, the CBDT established the abovementioned High Level Committee, directing assessing officers that in cases where no notice had been issued or proceedings commenced, no action should be taken without its prior approval.233
138.

In a live interview on Indian television on 7 November 2014 (which also featured the former Finance Minister, Mr [Person 12]), the Finance Minister admitted that it was not on his immediate agenda to repeal the 2012 Amendment, but insisted that his government had taken a "policy decision that as far as this government is concerned [...] even though there is a sovereign power of retrospective taxation, we are not going to exercise that power."234

139.

On 13 January 2015, Mr [Person 11] was quoted in The Indian Express as saying the 2012 Amendment had "scared away investors from India", and that "the government ha[d] no intention of using the retrospective tax provision".235

140.

This view was confirmed by Prime Minister [Person 13] on 14 February 2016. The Prime Minister was quoted in the Financial Times as saying that the government "will not resort to retrospective taxation; we are making our tax regime transparent, stable and predictable".236

8. Further legislative changes

141.

In February 2015, Finance Minister [Person 11] introduced a new 2015 Finance Bill which would "clean[] up" certain "ambiguities" in Section 9(1)(i).237 For example, the bill defined "substantially" in Section 9(1)(i) to mean that at least 20 per cent of value of the foreign company was attributable to assets in India (as opposed to 50 per cent proposed under the DTC Bill 2010). The 2015 Finance Bill also proposed the insertion of further explanations to Section 9(1)(i) which clarified the situations in which indirect transfers of capital assets situated in India could be taxed, and which would apply only prospectively.238

142.
The Finance Act 2015 introduced Explanations 6 and 7 (on a prospective basis), clarifying inter alia that Explanation 5 would only apply to those share transfers which were valued above Rs. 10 crores or the company derived not less than 50% of its value from Indian assets,239 or to cases in which the transferor held the right to manage or control the company which directly or indirectly held the Indian assets.240
143.
In March 2015, the CBDT issued a circular clarifying that the 2012 Amendment did not apply to a dividend declared by a foreign company with substantial assets in India.241
144.
In 2016, the Government introduced a method for computing the value of the underlying assets, as well as several exemptions to the tax on indirect transfers.242
145.
In May 2016, the Government proposed a methodology for calculating gains.243

D. The ITD’s investigation into the CIHL Acquisition

146.

By late 2013, Cairn held approximately 10 per cent of the shares of CIL. According to Ms [Person 1], "[p]rompted by a downward trend in the Indian economy, as well as global macroeconomic uncertainty, CEP decided that it was the appropriate time to monetise that shareholding."244 It had been reported in the press that CIL was planning to use its significant cash reserves to buy back some of its shares, and Cairn’s management decided to participate in such a buy-back programme, should one be offered.245

147.

On 26 November 2013, CIL publicly announced that it was contemplating a buy-back of its shares.246 On 4 December 2013, CEP’s board approved the company’s participation in any buy-back programme.247 As explained by Ms [Person 1]:

To benefit from a tax exemption under UK law,248 Cairn Energy was required to sell its entire shareholding within 12 months of its holding dropping below 10 per cent. Given that Cairn Energy did not expect to be able to dispose of its entire remaining stake through the buyback programme, the board also authorised the sale of any residual shareholding through on-market transactions, such that all of our shares in CIL would be sold. Based on market considerations, Cairn Energy expected to sell most of its shares in CIL through the buyback programme (approximately 6-7 per cent of CIL’s shares) by March 2014 and its remaining shares by May 2014.249

148.

On 14 January 2014, CIL formally announced its intention to buy back shares with up to 14.98 per cent of its total paid-up share capital and free reserves, at a maximum price of INR 335 per share (the "Buy-Back Programme"). The Buy-Back Programme was scheduled to open on 23 January 2014.250 That same day, the Economic Times published an article entitled, "Cairn India’s Rs 5,725 crore share buyback starts on January 23", which noted that "[t]he purchase may include a part of the 10.3 per cent stake held by former promoter Cairn Energy Plc." The article quoted an analyst stating that "Cairn Energy is a known seller for a long time and the share buyback may present it with an opportunity to exit from Cairn India".251

149.

On 15 January 2014, the Investigation Wing of the Income Tax Authority in New Delhi, led by Mr [Person 14], conducted an unscheduled survey of CIL’s premises in Gurgaon, to review the files relating to the 2006 restructuring.252 The Claimants maintain that the visit was triggered by CIL’s announcement of the buy-back, and "was plainly an excuse to initiate tax proceedings against CUHL based on the Retroactive Amendment more than seven years after the 2006 restructuring and to block Cairn from selling its investment."253 The Respondent states that the timing was merely coincidental and that the case against CIL had been under consideration for months. According to the Respondent "[t]he purpose of the survey was twofold: (a) to seek information relating to the failure of CUHL to disclose the write-off of an investment of INR 149,527,800,000 (INR 14,952.78 crores) in the Financial Year 2012-13; and (b) to obtain further information relating to the prima facie case of taxability that Mr [Person 14] believed to exist based on his study of the financials of CIL for the Financial Year 2006-2007".254

150.

Mr [Person 14], the Investigation Officer who conducted the initial investigation, testified that his investigation was prompted by information discovered on the "Offshore Leaks Database" published by the International Consortium of Investigative Journalists ("ICIJ"). The database provides a "comprehensive list of offshore companies and the beneficial owners behind them". Mr [Person 14] said that he studied the database and profiled cases that in his opinion fell within the jurisdiction of Delhi, Unit IV-2 of the ITD, and which raised suspicions of undisclosed income. Mr [Person 14] found the name of Mr [Person 15], who was named as the Chairman of the Corporate Advisory Board of CIL, on this list. Mr [Person 14] further explains in his witness statement:

I decided to follow up on that lead [finding Mr [Person 15]'s name] by looking through the Balance Sheets of CIL for the year 2012-2013, which were available in the public domain, so as to gain a basic understanding of the nature of the business of the company. In doing so, I discovered that CIL had accounted for a massive write-off of an investment of Rs. 149,527,800,000 (this amount being also referred to as "INR 14,952 crores") in the context of a corporate reorganization conducted by CIL in 2013. Coming from a background in the analysis of transfer pricing, I queried whether the initial purchase was correctly valued, given perhaps that an inflated value was used which was subsequently required to be written off. In pursuing this matter, I decided to look at the Balance Sheets and Annual Reports of CIL and CEP, CIL's original holding company and, at the time, minority shareholder, in previous years (i.e. from 2013 backwards), to determine the nature of the transactions by which CIL acquired its assets.255

151.

Mr [Person 14] testified that in July 2013256 he located the "relevant transaction documents [...] and discovered that CUHL had not filed a tax return for the Assessment Year 2007-08" and accordingly "no tax had been paid, nor had the transaction been disclosed to the relevant Assessing Officer." He explains:

[T]he transaction seemed to involve the sale of Indian oil and gas assets held by the Cairn Energy group, headed by CEP, through an Indian IPO, merely routed through a network of offshore companies. None of the offshore companies, including CIHL, which was incorporated for the purpose of the 2006 Transactions, seemed to have any business or assets of their own, and as such, all shareholding in CIL seemed to derive its value from underlying Indian assets. Having thus studied the financials of CIL, CUHL and CEP for the Financial Year 2006-2007 and thereafter, including in particular the Draft Red Herring Prospectus issued by CUHL in relation to the IPO of CIL shares, and having checked internally that CUHL had not filed a tax return for the Assessment Year 2007-08, I was of the opinion that there arose strong reasons to believe that certain income had escaped assessment in relation to the sale of Indian assets. This was prima facie within the scope of Section 9 of the ITA, which is the provision in the ITA which defines what income is deemed to accrue or arise in India.257

152.

At this time, Mr [Person 14] "formally requested permission to carry out a survey at the two office premises of CIL under s. 133A of the ITA."258 On 13 January 2014, Mr [Person 14] drafted a "satisfaction note" to his immediate superior, the Additional Director of Income Tax (Investigation), in which he recorded his reasons for believing that certain income had escaped assessment. Mr [Person 14] indicates that two issues warranted investigation: (1) the first was "in relation to the failure of CUHL to disclose the write-off of an investment of INR 149,527,800,000 (INR 14,952.78 crores) in the Financial Year 2012-13"; and (2) the second was "in relation to the prima facie case of taxability that [he] believed to exist based on my study of the financials of CIL for the Financial Year 2006-2007".259 Also on 13 January 2014, the Additional Director of Income Tax (Investigation)-Unit IV granted his approval for the survey and ordered Mr [Person 14] to seek a second approval by the Additional Director of Income Tax (Investigation)-Faridabad.260

153.

By 15 January 2014, Mr [Person 14] had received the second approval required to conduct the search. On that same day, Mr [Person 14] led the unscheduled survey of CIL’s offices in Gurgaon discussed at paragraph 149 above.261

154.

On 16 January 2014, Mr [Person 14] submitted a 125-page interim report in relation to the survey proceedings carried at CIL’s offices in Gurgaon.262

155.
On 21 January 2014, the ITD notified CUHL pursuant to Section 148 of ITA 1961 (the "Section 148 Notice") that it had "reason to believe that [CUHL’s] income chargeable to tax for the Assessment Year 2007 - 2008 has escaped assessment within the meaning of section 147 of the [ITA] 1961." It thus "propose[d] to assess/re-assess the income/re-compute the loss/depreciation allowance for said assessment year" and required CUHL to file a return for the Assessment Year 2007-08 within 30 days.263
156.
On 22 January 2014, invoking Section 131 of ITA 1961, the ITD summoned CUHL’s "Principal Officer" or an authorised representative to appear in person before the Deputy Director of Income Tax in New Delhi eight business days after the date of the summons in order to provide information on the CIHL Acquisition (the "Section 131 Notice").264
157.
Also on 22 January 2014, the Deputy Director of Income Tax issued an order pursuant to Section 281B of ITA 1961 (the "Section 281B Order") notifying CUHL that, during the survey of 15 January 2014, the ITD had found evidence that CUHL had failed to report a short term capital gain of INR 245,035,012,588 based on its 2006 sale of 251,224,744 shares of CIHL to CIL. The order provisionally froze CUHL’s remaining 184,175,764 equity shares in CIL (the "Frozen Shares"), as well as any dividends payable by CIL to CUHL.265 Specifically:

a. The Deputy Director of Income Tax stated that, "[d]uring the course of survey proceedings, it was found" that CIL had purchased 251,224,744 shares in CIHL from CUHL, for a sum of INR 266,818,710,140.266 As CUHL had acquired these shares for INR 21,783,697,552, it was "evident" that this amount exceeded the book value of the CIHL shares "by a sum of [INR] 254,225,134,287/ which is represented by Goodwill in the consolidated financial statements, clearly indicating that substantial gains or to be more precise 'short term capital gains’ have accrued to the assessee company [CUHL]."267 The Order noted that, according to CUHL’s financial statements, "no tax has been paid on these gains in any tax jurisdiction including India and United Kingdom".268

b. The Deputy Director of Income Tax then invoked Explanation 5 to Section 9(1)(i) of the ITA 1961 as basis for taxing this capital gain. The Deputy Director of Income Tax stated that, during the survey operations, the ITD had obtained the Rothschild valuation report prepared for the 2006 reorganisation and IPO, and that this report "ma[de] it amply clear that all the assets of [CIHL] and its subsidiaries [were] located in India alone."269 The Deputy Director of Income Tax also cited statements by CIL’s CEO and CFO, affirming that during 2006, the assets of CIHL’s subsidiary companies "derived [their] value directly or indirectly, substantially from the assets i.e. oil and gas rights / reserves located in India."270 As a result, the Deputy Director of Income Tax concluded that "it is evident that the shares of [CIHL] which were acquired by [CIL] from the assessee company [CUHL] derive [their] value solely from the assets located in India and therefore in accordance with the provisions of Explanation 5 to Section 9(1)(i) of the [ITA] shall be deemed to have been situated in India and consequently any gains arising from [the] transfer of such shares is chargeable to tax under the [ITA 1961]."271

c. The Deputy Director of Income Tax noted further that CUHL’s shares in CIL were being frozen to prevent their sale in CIL’s Buy-Back Programme:

During the course of the survey proceedings, it was noticed that as on 31.12.2013, [CUHL] was holding 196,174,600 shares of [CIL]. During the course of survey action it was also noticed that on 14.01.2014, CIL has made a public announcement for Buy Back of its shares. The date of opening of the Buy Back of shares as per the public announcement is 23.01.2014. [...] Possibility of [CUHL] selling off its shares in [CIL] in this buy back cannot be ruled out.272

158.
In view of the above, the Deputy Director of Income Tax concluded that "for the purpose of protecting the interests of the revenue and in terms of the provisions of section 281B of the Act, it is necessary to attach provisionally" CUHL’s 196,174,000 shares in CIL, as well as any receivables from CIL. The Deputy Director of Income Tax thus made the following order:273

(A) As per provisions of schedule II, para-26, the principal officer of Cairn India Limited is directed not to do/permit any transfer of these shares to anybody.

(B) So far as the receivables by Cairn UK Holdings Ltd in the books of Cairn India Limited are concerned the Principal Officer of Cairn India Limited is directed not to remit/pay any amount to Cairn UK Holdings Ltd.

(C) It is ordered that the assessee or its nominee or any other person on behalf of the assessee is prohibited and restrained from creating a charge on or part with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer, whatsoever) of the properties mentioned in [the] schedule below, without prior sanction of the undersigned. Any such charge or transfer, shall be void as against any claim in respect of any income tax of other sum payable by the assessee as a result of completion of the assessment proceedings[…]

159.
Both CEP and CUHL received additional notices from the ITD in March 2014. Specifically, on 29 March 2014, CEP received a notice pursuant to Section 148 of ITA 1961, informing it that certain income for the assessment year 2007-2008 had "escaped assessment" and requiring CEP to file a tax return for its income chargeable to tax for that year within 30 days.274
160.
On 31 March 2014, CUHL received a notice pursuant to Section 201 of ITA 1961, informing it that, during the survey of CIL’s offices, the Investigation Wing had found evidence of dividends paid by CUHL to CEP between 2007 and 2012, which the ITD believed were chargeable to tax in India.275 The ITD again indicated that the tax arose from Section 9(1)(i), as amended by the 2012 Amendment.276 The ITD requested CUHL to show cause as to why it should not be deemed to be an assessee in default for failing to deduct tax at source.277
161.

On 2 April 2014, CUHL responded to its Section 148 Notice, challenging the ITD's jurisdiction and submitting that the Section 148 Notice and the Section 281B Order were issued on the basis of Explanation 5 and that such retrospective application was "unconstitutional".278 However, it complied with the notice and filed a tax return for the financial year 2007/2008, indicating a "nil" income.279

162.
On 12 May 2014, CEP responded to its Section 148 Notice, challenging the ITD's jurisdiction, arguing that the application of the 2012 Amendment was unconstitutional280 and providing tax returns on a without prejudice basis.281
163.
In the weeks that followed, CUHL and CEP received notices from the ITD requesting them to provide information and/or appear at hearings in relation to the tax consequences of the CIHL Acquisition. The Parties exchanged significant correspondence in this respect, with the Claimants seeking several extensions to reply.282
164.
On 18 July 2014, the ITD extended by six months the Section 281B Order, in respect of CUHL's 184,175,764 equity shares in CIL and any other receivables, including any dividends.283
165.
By letter of 25 July 2014, the ITD wrote to CEP to provide the reasons for reopening the assessment proceedings under Section 148 of the ITA 1961.284 The Claimants also assert that it was only on that date that they received the ITD’s letter to CUHL of 21 January 2014 providing the reasons for reopening assessment proceedings.285
166.
During the months of September and October, CUHL and CEP received additional notices requesting representatives to appear for hearings to provide details of the CIHL Acquisition.286 The Claimants requested several extensions to reply.287
167.
On 16 October 2014, both CEP and CUHL responded to their respective Section 148 and 142(1) Notices.288 CEP argued, inter alia, that dividends paid to CEP fell outside of India’s jurisdiction, and that CEP stated that the facts sought by the ITD had been within the knowledge of the Indian authorities since 2006-2007.289 In turn, CUHL argued, inter alia, that the facts sought by the ITD had been within the knowledge of the Indian authorities since 2006-2007. In particular, CUHL emphasised that the details of all relevant share transfers were reported in its FIPB Application dated 10 August 2006, in Form 3CEB filed by CIL with the ITD and in a Transfer Pricing Report filed by CIL. According to CUHL, the Transfer Pricing Order issued on 5 October 2010 confirmed that the relevant transactions were "at arm’s length". CUHL also argued that the ITD’s calculation of the alleged gain confused tax and financial accounting principles.290
168.
Between November 2014 and February 2015, the ITD and the Claimants exchanged further correspondence on the disputed transactions.291
169.
On 16 January 2015, the Section 281B Order was extended again, to 30 April 2015 in respect of CUHL’s 184,175,764 equity shares in CIL and any other receivables, including any dividends.292
170.
On 19 February 2015, the ITD rejected CUHL’s objections to the Section 148 Notice dated 21 January 2014, emphasising that it relied on the 2012 Amendment as the source of its authority in the proceedings.293
171.
On 9 March 2015, the ITD issued a draft assessment order (the "DAO") against CUHL in respect of fiscal year 2006/2007 in the amount of INR 102,473,642,264.294 The content of the DAO is discussed in Section VII.A.3.a below.
172.
On 11 March 2015, the Claimants served a Notice of Dispute to India, arguing that India had violated its obligations under the UK-India BIT.295
173.
On 16 March 2015, CEP received a Disposal of Objections Notice in respect of the issues raised in the Section 148 Notice, rejecting all objections raised by CEP and indicating that proceedings would continue.296
174.
On 30 March 2015, CEP filed a submission in respect of proceedings under Sections 147 and 148. It noted that Circular No. 4/2015 provided that dividend income was not taxable, and requested that the proceedings be dropped immediately.297 On that same day, CEP received a notice under Section 148 stating that Circular No. 4/2015 clarified the application of the 2012 Amendment and that assessment proceedings in the case of CEP for Assessment Year 2007-2008 had been dropped.298
175.
On 6 April 2015, CUHL submitted its objections to the DAO before the relevant domestic mechanism, the Dispute Resolution Panel ("DRP"). CUHL filed its objections without prejudice to the present arbitration proceedings, noting that the Claimants had filed a Notice of Dispute on India on 11 March 2015. In its objections, CUHL raised many substantive objections to the DAO, including its reliance on the 2012 Amendment. CUHL also noted the failure of the DAO to appreciate the difference between tax and financial accounting in respect of the calculation of the alleged gain.299
176.
Also on 6 April 2015, the Section 281B Order dated 22 January 2014 was extended again in respect of CUHL’s 184,175,764 equity shares in CIL and any other receivables, including any dividends, to 20 January 2016.300
177.
On 7 August 2015, the DRP issued a Notice under Section 144C(11) setting a hearing before the DRP on 7 September 2015.301
178.
On 3 September 2015, CUHL requested that the DRP suspend the DRP proceedings pending the resolution of these arbitral proceedings in order that this Tribunal might make a full and final determination on the matters in dispute.302
179.
On 22 September 2015, the Claimants filed their Notice of Arbitration under the BIT.
180.
CUHL challenged the DAO through the DRP, the mechanism available for raising objections of this nature, on 29 September 2015 and 6 November 20 1 5.303 During the month of November, CUHL made further submissions and provided further evidence to the DRP.304
181.
On 3 December 2015, the Deputy Commissioner of Income Tax, New Delhi commented on CUHL's objections to the DAO.305
182.
On 31 December 2015, the DRP rejected all of CUHL's objections raised during the review of the assessment proceedings and confirmed the DAO (the "DRP Ruling").306
183.
On 14 January 2016, the Section 281B Order dated 22 January 2014 was extended again in respect of CUHL's 184,175,764 equity shares in CIL and any other receivables, including any dividends, to 31 March 2016.307
184.
On 20 January 2016, CUHL received a request for information regarding its 184,175,764 equity shares in CIL,308 which it provided on 22 January 2016.309

E. The Final Assessment Order and enforcement measures

185.
On 25 January 2016, the Respondent issued a FAO under Sections 148, 143(3), and 144C(13) of the ITA, confirming the DAO.310 The content of the FAO is discussed at Section VII.A.3.a below.
186.
Along with the FAO, the ITD also issued a notice of demand under Section 156 of the ITA 1961 (the "Notice of Demand"), which was received by CUHL on 4 February 2016. It provided 30 days from the date of service (5 March 2016) for CUHL to pay INR 291,025,144,030, or approximately US$ 4.4 billion at that time.311 This included interest under Sections 234A and 234B of the ITA 1961 that had allegedly accrued at a rate of two per cent per month on the US$ 1.6 billion principal.312
187.

The Parties dispute the extent to which the Claimants cooperated with the authorities in the lead up to the DAO and the FAO. The Claimants maintain they were fully cooperative and supplied all requested information.313 The Respondent maintains that the Claimants were not cooperative, took a long time to respond, and did not submit the appropriate requested information.314

188.
On 4 February 2016, CUHL received a Section 274 Notice (the "Section 274 Notice") requiring it to "show cause as to why an order imposing a penalty" for allegedly concealing the particulars of income or furnishing inaccurate particulars of income in the assessment year 2007-2008 "should not be made under Section 271(1)(c) of the ITA 1961."315 Statutorily available penalties under this provision, which the Respondent has the authority to invoke, would, according to the Claimants, increase the overall tax claim by billions of dollars.316
189.
On 14 February 2016, Cairn reiterated its request that the Respondent refrain from taking any prejudicial enforcement actions against Cairn and the remaining portion of its investment during the pendency of these arbitration proceedings. On 15 February 2016, CUHL made an application directly to the Assessing Officer, requesting a stay of recovery proceedings and requesting that the Assessing Officer hold the demand in abeyance pending the outcome of this arbitration.317
190.
On 23 February 2016, representatives of CUHL and the Assessing Officer met to discuss the penalty proceedings. At this time CUHL submitted a further application for such proceedings to be stayed or dropped entirely. According to the Claimants, the Assessing Officer explained that the ITD would consider staying the penalty proceedings if CUHL filed an appeal before the Income Tax Appellate Tribunal (the "ITAT"), which CUHL did, "expressly without prejudice to these arbitration proceedings and Cairn’s rights, claims, and remedies therein."318
191.

On 3 March 2016, Mr [Person 6], Commissioner of Income Tax and a witness for the Respondent in this arbitration, sent a letter to the Joint Commissioner of Income Tax, copying CUHL, referring to the Finance Minister's budget speech of 29 February 2016 in which an offer was made of a "one time scheme of Dispute Resolution" for past cases which were "ongoing under the retrospective amendment". The offer indicated that interest and penalty fees incurred would be dropped subject to the assessee's withdrawing from any pending case before "any court or tribunal". The letter stipulated that the Claimant, being a party to the present arbitration, should have "some time to consider the offer" and stated that a deadline of 30 June 2016 was accordingly set before the tax demand of 25 January 2016 could be pursued.319

192.

On 8 March 2016, Cairn representatives met with the ITD. The Claimants assert that, during this meeting, the ITD officials indicated that, after 30 June 2016, the Department would immediately start liquidating CUHL's shares in CIL unless CUHL agreed to pay the entire principal of the disputed tax demand and withdraw its claims in the arbitration.320 The Respondent has not disputed this.

193.
On 30 March 2016, CUHL lodged an appeal against the FAO with the ITAT, without prejudice to the arbitral proceedings.321 On 4 April 2016, CUHL formally notified the ITAT by letter regarding its appeal.322
194.
On 5 April 2016, CUHL received a notice from the ITD, dated 31 March 2016, reiterating the Department's intent to pursue its tax demand after 30 June 2016 and stating that CUHL remained prohibited from transferring CUHL's shares in CIL or receiving any dividend in respect thereof.323
195.
As discussed in Section III below, on 13 April 2016 the Claimants filed a request for interim measures ("RIM"), noting that they would withdraw this request if the Respondent undertook not to pursue any further enforcement measures against the Claimants' shares in CIL.324 After several exchanges between the Parties and a proposal from the President, on 11 May 2016 the Respondent undertook that it would "take no steps to purport to transfer, sell, encumber or in any other way dispose of the shares during the pendency of these arbitral proceedings, without giving [CUHL] three months' written notice of its intention to do so."325
196.
On 12 October 2016, CUHL wrote to the Assistant Commissioner of Income Tax Circle 1(2)(1), International Taxation, New Delhi (the "ACIT") seeking confirmation that CIL would be able to release any outstanding dividends owed to CUHL.326 By letter of 30 December 2016, the ACIT indicated that the provisional attachment on the CIL dividends had expired on 31 March 2016, and that no attachment remained in force; as a result of which "[t]he decision to release the dividend to CUHL is an internal matter between two companies and the same may be dealt accordingly."327 As discussed in Section III below, the Respondent maintained this position throughout the arbitration and refused to offer written confirmation to CIL that the dividends could be released to CUHL. The Claimants’ sought, unsuccessfully, to have CIL (which had by then been merged with Vedanta Limited ("CIL/VIL" or "VIL"))328 release the dividends to CUHL. The Claimants sought relief from the Tribunal in this regard, and on 9 June 2017 the Tribunal issued Procedural Order No. 7 ("PO7") addressing the Parties’ requests for relief on this matter. The Tribunal understands that the Claimants were ultimately unable to obtain the release of the dividends, which were garnished by the Respondent and used to pay part of the tax demand.329
197.
On 9 March 2017, the ITAT issued its order (the "ITAT Order"). While it upheld the tax demand under Section 9(1)(i) as interpreted by Explanation 5, it also overturned the imposition of interest under Sections 234A and 234B of the ITA. The ITAT indicated that the Claimants "could not have visualize[d] its liability for payment of advance in the year of transaction therefore, there cannot be any interest payable by the assessee u/s 234A and 234B of the Act [...]. [W]e are of the opinion that assessee cannot be burdened with interest u/s 234A and 234B of the Act on tax liability arising out of retrospective amendment [with effect from] 01.04.1962 in the provision of section 9(1) of the Income Tax Act".330
198.
On 14 March 2017, the Office of the ACIT issued a letter to CUHL demanding payment of the tax due, as confirmed by the ITAT, by 15 June 2017, failing which recovery proceedings would be initiated under the ITA.331 As discussed in Section III below (Procedural History), this letter caused the Claimants to renew their RIM.
199.
On 31 March 2017, the ITD sent to CUHL a new notice demanding payment within 30 days of service and warning that, if payment was not received, proceedings for the recovery of the tax demand would ensue.332
200.
On 26 April 2017, the Tax Recovery Officer issued a warrant attaching CUHL’s movable property.333 On 18 August 2017, the Tax Recovery Officer issued an order prohibiting and restraining CUHL from making any transfer of the shares in CIL/VIL and/or from receiving any dividends on those shares.334
201.
On 15 June 2017, the Tribunal denied the Claimants’ renewed RIM (the "Renewed RIM") and related applications.335
202.
On 16 June 2017, the ITD issued a Tax Recovery Certificate and a Notice of Demand in accordance with Rule 2 of the Schedule II to the ITA, requiring payment to be made within 15 days, failing which recover proceedings would be commenced. The Tribunal understands that CUHL did not pay, and recovery proceedings were thus commenced.
203.
On 16 June 2017, the ITD issued a notice to CIL/VIL under Section 226(3) of the ITA, requiring CIL/VIL to pay to the ITD any amount due from CIL/VIL to CUHL or held by CIL/VIL for or on account of CUHL up to the outstanding tax liability of CIHL, including all future liabilities. According to the Respondent, "[CIL/VIL] was notified that if it discharged any liability to CUHL after receipt of this notice, it would become personally liable to the ITD to the extent of the liability so discharged. [CIL/VIL] has thereafter paid the outstanding dividend amounts to the ITD".336 The Claimants have not disputed this.
204.
On 29 September 2017, the Respondent issued a lump sum Penalty Order against CUHL for approximately US$ 1.6 billion (the "Penalty Order").
205.
In the months that followed, the Respondent engaged in the forced sale of 27,019,548 of CUHL’s shares in CIL/VIL.337 By 27 November 2018, the Respondent had sold a total of 181,764,297 shares, i.e., 98.72% of CUHL’s shareholding in CIL/VIL, as well as 736,503,056 of CUHL’s redeemable preference shares in CIL/VIL.338

III. Procedural History

206.
The present proceedings were complex, with numerous issues arising simultaneously and applications briefed and decided in parallel. By the end of the arbitration, the Claimants had submitted 314 communications to the Tribunal (including procedural letters and applications, identified as "CCom-XX"), while the Respondent had submitted 405 communications to the Tribunal (including procedural letters and applications, identified as "RCom-XX"). In response to these applications and correspondence, the Tribunal issued 19 Procedural Orders and 345 communications to the Parties (some giving directions, and others ruling on discrete issues, all identified as "AT-XX").
207.
In the pages that follow, the Tribunal has attempted to present a faithful portrayal of the various procedural incidents and applications that were raised during these proceedings. The Tribunal sets out the main procedural steps in chronological order; however, given the proliferation of parallel applications, it has made certain parentheses in the chronology to address specific applications.

A. Commencement of the proceedings

1. Constitution of the Tribunal

208.

On 22 December 2015, the Claimants filed a Notice of Arbitration pursuant to Article 9(3)(c) of the UK-India BIT and Article 3(1) of the United Nations Commission on International Trade Law Arbitration Rules 1976 (the "UNCITRAL Rules").

209.

In accordance with Article 9 of the UK-India BIT, on 2 April 2015 the Claimants informed the Respondent that they had appointed Mr Stanimir Alexandrov, a national of Bulgaria, as arbitrator. Mr Alexandrov accepted his appointment on 1 April 2015.

210.

As the Respondent did not appoint an arbitrator within the time limit set out in Article 9 of the UK-India BIT, on 12 August 2015 and in accordance with Article 9(3)(c)(ii) of the UK India-BIT, the Claimants requested the President of the International Court of Justice, H.E. Judge Ronny Abraham, to act as appointing authority. Ultimately, on 9 November 2015, the Respondent informed the Claimants that it had appointed Mr J. Christopher Thomas, QC, a national of Canada, as arbitrator. Mr Thomas accepted his appointment on 20 November 2015.

211.
On 13 January 2016, in accordance with Article 9 of the UK-India BIT, the co-arbitrators notified the Parties that they had appointed Mr Laurent Lévy, a national of Switzerland and Brazil, as Presiding Arbitrator in this matter (the "President of the Tribunal" or the "President"). Mr Lévy confirmed that he accepted his appointment that same day.
212.
On 16 February 2016, the President of the Tribunal confirmed that the Tribunal had been duly constituted and invited the Parties' views on certain organisational and procedural matters including: (i) determining the seat of the arbitration, and (ii) the date for the first procedural hearing. The Claimants and the Respondent submitted their comments on 4 and 16 March 2016, respectively.

2. First procedural hearing; procedural calendar; seat of the arbitration; the Claimants’ request for interim measures

213.
Between 11 and 18 April 2016, the Parties and the Tribunal exchanged correspondence with respect to the organisation of the proceedings.
214.
In particular, on 12 April 2016 (AT-5), the Tribunal circulated the following documents: (i) the draft Terms of Appointment of the Tribunal ("ToA"), (ii) draft Procedural Order No. 1 ("PO1") setting out the Tribunal’s proposed procedural rules for the arbitration, and (iii) the CV of the proposed Secretary of the Tribunal, Ms Sabina Sacco, a lawyer of Chilean, Italian, and Salvadoran nationality, from the President’s firm. The Tribunal requested the Parties to submit their respective comments on the drafts at or before noon CET Friday 15 April 2016, which the Parties subsequently did.339 The Tribunal also invited the Parties to formulate by the same time limit their comments and suggestions about the agenda for the case management hearing scheduled for 18 April 2016.
215.
During this period, on 11 April 2016 (RCom-4), the Respondent announced its intention to make an application for a stay of the proceedings. By letter of 15 April 2016 (CCom-10), the Claimants objected to any such application.
216.
By letter of 13 April 2016 (CCom-8), the Claimants filed a request for interim measures of protection (RIM), in which they invited the Respondent to undertake not to pursue any further enforcement measures against the Claimants’ equity shares (the "Shares") in CIL during the pendency of the arbitration. The Claimants stated that, upon such an undertaking by the Respondent, they would withdraw their RIM.340 The Claimants further represented that "Cairn will not seek the release of [CUHL’s shares in CIL] in this arbitration so long as India agrees to retain them without selling them pending a decision by this Tribunal as to their rightful disposition."341 In the absence of such an undertaking, the Claimants made a series of requests for relief from the Tribunal.342
217.
By email of 14 April 2016 (AT-6), the Tribunal invited the Respondent to comment, and noted that in any event the RIM would be addressed during the procedural hearing scheduled for 18 April 2016, where it would give both sides an opportunity to make short submissions on that matter.
218.

The first procedural hearing was held on 18 April 2016 in Paris. The following participants attended the hearing:

Tribunal
Mr Laurent Lévy (Presiding Arbitrator)
Mr Stanimir Alexandrov (via teleconference) (Co-arbitrator)
Mr J. Christopher Thomas QC (via teleconference) (Co-arbitrator)
Ms Sabina Sacco (Secretary of the Tribunal)

Claimants
Mr Mark McNeill (Shearman & Sterling LLP)
Ms Natalia Mikolajczyk (Shearman & Sterling LLP)
Mr Wesley H. Pang (Shearman & Sterling LLP)
Mr Robert L. Nelson Jr. (Shearman & Sterling LLP) (via teleconference)
Mr [Person 16] (CFO, Cairn Energy PLC)
Mr [Person 17] (Group Legal Manager, Cairn Energy PLC)
Ms [Person 18] (Cairn Energy PLC)

Respondent
Mr Salim Moollan QC (Essex Court Chambers)
Professor Chester Brown (Essex Court Chambers)
Mr Shreyas Jayasimha (Aarna Law)
Mr Mysore R. Prasanna (Aarna Law)
Mr [Person 6] (Commissioner of Income Tax, International Taxation, Department of Income Tax)

219.
During the first procedural hearing, the Parties discussed, inter alia, the following matters:

a. The Respondent’s application on the applicable transparency regime for the present arbitration;

b. The Respondent’s intention to file an application for a stay and the relevant briefing schedule. At this juncture, the Respondent also indicated that it intended to wait until the Claimants filed their Statement of Claim before formulating its objections to jurisdiction and admissibility, and proposed that whether those objections should be heard in a preliminary bifurcated phase should be determined thereafter; and

c. The Claimants’ RIM. In particular, the President proposed language for a possible undertaking by the Respondent.343

220.
On 21 April 2016 (AT-7), the Tribunal wrote to the Parties to follow up on various matters discussed during the first procedural hearing. With respect to the question of bifurcation, the Tribunal recorded the agreement reached at the procedural hearing as follows:

If, once the Respondent has received the Claimants’ Statement of Claim, the Respondent wishes to raise objections to jurisdiction and/or admissibility, it may file a request for bifurcation and should do so as soon as reasonably possible, failing which the Respondent will submit its Statement of Defense in full. If the Respondent does request a bifurcation, the Tribunal would then allow the Claimants to comment and will ultimately make a decision.344

221.
With respect to the date of filing for the Respondent’s Statement of Defence, the Tribunal advised that it would set a time limit for the Respondent’s full Statement of Defence unless the Parties reached an agreement. The Tribunal noted that the Respondent requested such deadline be set for November or December 2016, while the Claimants requested that it be set no later than October 2016.
222.
By letter of 6 May 2016 (AT-8), the Tribunal informed the Parties that, in view of the Parties' failure to reach an agreement, it had chosen The Hague, the Netherlands, as the seat of the arbitration.
223.
Following a proposal by the President at the first procedural hearing345 and exchanges between the Parties, on 11 May 2016 (RCom-10) the Respondent represented that "[t]he Income Tax Department of the Department of Revenue of the Government of India hereby confirms the following:

Having taken due note of the Claimants' representation in their Request for Interim Measures dated 13 April 2016 not to attempt or purport to transfer, sell, encumber, or in any way dispose of the shares during the pendency of these arbitral proceedings, the Income Tax Department of India (which is solely responsible for pursuit and enforcement of the assessment) confirms and represents that with respect to the tax demand at issue in the present arbitral proceedings (i.e. the tax demand against Cairn UK Holdings Ltd for Assessment Year 2007-08), it will take no steps to purport to transfer, sell, encumber or in any other way dispose of the shares during the pendency of these arbitral proceedings, without giving Cairn UK Holdings Ltd three months' written notice of its intention to do so.346

224.
The Respondent stated that this confirmation was made in the understanding that the Claimants' representation made in their RIM347 held good and requested confirmation of that from the Claimants. It also stated that, in light of this confirmation, there could be no further basis for the RIM, and requested the Claimants to confirm its withdrawal.
225.
In light of the Respondent's undertaking, on 16 May 2016 (CCom-14), the Claimants suspended their RIM, but reserved the right to renew it or seek other measures of protection should such need arise. The Claimants further confirmed that CUHL's shares in CIL would not be disposed of or transferred during these arbitration proceedings without India's prior consent.348
226.
On 27 May 2016 (CCom-20), the Claimants requested the Tribunal to order the Respondent to produce two categories of documents, which are addressed in Section III.E below.

B. The Respondent’s applications for a stay and bifurcation of the proceedings; timetable for the written phase

227.
On 6 June 2016 (RCom-18), the Respondent filed an application for a stay of the present proceedings (the Respondent's "Stay Application"). Essentially, the Respondent argued that this arbitration should be stayed pending the determination of another arbitration initiated by Vedanta against the Respondent (the "Vedanta arbitration"), and pending the determination of any cross-litigation between Cairn and Vedanta and/or its subsidiary CIL.349 According to the Respondent, this arbitration and the Vedanta arbitration constitute "parallel arbitration proceedings" that "are based on identical issues of fact and law",350 and the links between the two cases create a risk of irreparable harm to India which requires adequate coordination, preferably in the form of a stay of these proceedings in favour of the Vedanta arbitration. The procedural history related to the Stay Application is summarised in Procedural Order No. 3 ("PO3"); despite this, the Tribunal has summarised the most important procedural steps in the paragraphs that follow.
228.
On 22 June 2016, following an invitation from the Tribunal to provide comments on the draft versions of the ToA and draft PO1, the Claimants requested that the Tribunal fix a date for the Respondent to file its full Statement of Defence.351
229.
On 28 June 2016 (RCom-24), the Respondent requested that the Tribunal maintain its decision not to set a date for the filing of a full Statement of Defence until such time as the Tribunal had made a determination on the Respondent’s Stay Application and potential application for bifurcation of the proceedings. The Respondent reiterated arguments made at the procedural hearing, namely that the setting of a date for the filing of a full Statement of Defence would "potentially undermine and pre-empt the Respondent’s Stay Application; and would also remove any possible efficiencies that might be gained by bifurcated proceedings following the application for bifurcation which the Respondent has indicated it proposes to make".352
230.
Also on 28 June 2016, the Claimants filed their Statement of Claim.
231.
By letter of 1 July 2016 (AT-20), the Tribunal determined that the proceedings would not be suspended pending its decision on the Stay Application. Should that application be rejected, the Tribunal fixed the time limit for the filing of the Respondent’s Statement of Defence for 11 November 2016, noting that the Parties should then consult with a view on agreeing on the remainder of the procedural calendar. The Tribunal also indicated that if the Respondent wished to raise objections to jurisdiction and/or admissibility in a bifurcated proceeding, it should make an application for bifurcation as soon as reasonably possible, failing which it would have to submit its Statement of Defence in full.
232.
Also on 8 July 2016, the Tribunal circulated the ToA for signature. Both Parties and the Tribunal executed the ToA by 19 August 2016. In the ToA, the Parties agreed to the appointment of Ms Sabina Sacco as Secretary to the Tribunal.
233.
Also on 8 July 2016 (RCom-27), the Respondent indicated that it would await the Tribunal’s decision on its Stay Application before filing any application for bifurcation. The Claimants objected to this (CCom-35), and requested the Tribunal to "reject the Respondent’s proposal to delay notification of any preliminary objections and any bifurcation request until after the Tribunal issues a decision on its stay application, and [...] encourage the Respondent to comply with its commitment made at the [procedural] hearing to raise those issues straightaway."353
234.
Separately, in its correspondence of 8 July 2016 (RCom-27), the Respondent requested a hearing on its Stay Application. Following an invitation from the Tribunal to comment, on 18 July 2016 (CCom-35), the Claimants provided their comments, inter alia, indicating that they saw "no need for an in-person hearing"354 and were "concerned about the delay that it may cause to these proceedings, in particular to the filing of the Respondent’s Statement of Defence".355
235.
On 19 July 2016, the Tribunal invited the Respondent to comment on the matters raised in the Claimants’ letter, and in particular to substantiate its request for a hearing on the Stay Application.356 The Respondent provided such comments on 25 July 2016 (RCom-32), responding: (i) that it had only promised to inform the Tribunal and the Claimants "straightaway"357 if it did not wish to raise objections to jurisdiction and admissibility, or whether bifurcation appeared inappropriate, (ii) in view of the formulation of Article 21(3) of the UNCITRAL Rules, it had no obligation to file any jurisdictional objections or file an application for bifurcation prior to the submission of its Statement of Defence, and (iii) given the Respondent’s view that the proceedings should be stayed, it argued that it was "perfectly legitimate"358 for it to await the Tribunal’s decision on its Stay Application before filing its foreshadowed application for bifurcation.359
236.
On 29 July 2016 (CCom-36), the Claimants objected to the Respondent’s request for a hearing on the Stay Application; this objection notwithstanding, they proposed that if the Tribunal decided that a hearing should be held, the Parties should use "any such hearing to address questions of bifurcation, even if India insists on briefing its objections later."360 The Claimants clarified that "[t]he Respondent would only need to be willing to identify those objections it believes warrant bifurcated treatment."361 The Claimants added that this "would allow the Tribunal and the Parties to address in a single hearing two threshold procedural questions, the resolution of which will dispose of the stay application and set a path towards resolving the Respondent’s jurisdictional objections."362
237.
On 4 August 2016 (AT-25), the Tribunal issued directions to the Parties regarding the next procedural steps in relation to the Stay Application and the Respondent’s potential application for bifurcation.363 In its letter, the Tribunal granted the Respondent’s request for a hearing on its Stay Application, which was scheduled for 7 October 2016.
238.
Regarding the timing for an application on bifurcation, the Tribunal noted that, pursuant to Article 21(3) of the UNCITRAL Rules, "[a] plea that the arbitral tribunal does not have jurisdiction shall be raised not later than in the statement of defence or, with respect to a counter-claim, in the reply to the counter-claim."364 That being said, the Tribunal observed that Article 15(1) of the UNCITRAL Rules granted the Tribunal wide discretion to conduct the proceedings as it considered appropriate. In this context, the Tribunal determined that the Parties’ submissions did not in fact call for a revision of its previous directions on this matter. Thus the Tribunal reiterated its direction as contained in its email of 21 April 2016 and letter of 1 July 2016, that "if the Respondent wishes to raise objections to jurisdiction and/or admissibility to the Claimants’ claim, it may file a request for bifurcation and should do so as soon as reasonably possible, failing which the Respondent shall submit its Statement of Defence in full."365 The Tribunal added that "when ruling on a request for bifurcation, it [would] take into consideration whether it was timely made."366
239.
On 8 August 2016 (RCom-36), the Respondent rejected the Claimants’ proposal that it should identify its preliminary objections prior to the hearing on the Stay Application or include a discussion on bifurcation during that hearing, arguing that either "(i) the Respondent would have filed an application for bifurcation before the date of the hearing, in which case, procedural directions can be issued by the Tribunal in writing in the usual way; or (ii) the Respondent would not have filed an application for bifurcation before that date, in which case it would not be appropriate for the Tribunal to require the Respondent to identify objections to jurisdiction in advance of its Statement of Defence given the terms of Article 21 of the UNCITRAL Rules".367
240.
On 12 August 2016, the Tribunal circulated the signed ToA and issued PO1, which set out the procedural rules to be applied in this arbitration and a partial procedural calendar.
241.
Also on 12 August 2016, the Tribunal issued Procedural Order No. 2 ("PO2") ruling on transparency and confidentiality. As discussed in Section III.E below, this did not put an end to the Parties’ exchanges on these matters, which evolved into a discussion on document sharing between the Cairn and Vedanta arbitrations. The procedural history related to the Parties' applications on transparency, confidentiality, and document sharing is summarised in Section III.D below.
242.
On 28 August 2016 (AT-28), the Tribunal invited the Parties to confirm: (i) certain logistical arrangements pertaining to the hearing on the Respondent's Stay Application, and (ii) whether the Parties wished to add any items to the agenda. The Tribunal also noted that the Claimants had suggested that the hearing also be used to discuss the issue of bifurcation,368 and the Respondent's objection to the same (RCom-36). In this regard, the Tribunal informed that given the content of Article 21(3) of the UNCITRAL Rules, it must accept the Respondent's objection on this issue of bifurcation. The Parties submitted their comments on 31 August 2016 (CCom-41; the Respondent's unnumbered email).
243.
By email of 2 September 2016 (AT-30), the Tribunal confirmed the agenda for the hearing on the Stay Application, which included two items requested by the Claimants369 pertaining to (i) a discussion of the procedural calendar, including blocking dates for an evidentiary hearing, and (ii) addressing any outstanding issues regarding the Respondent's response to the Claimants' Document Request No. 2 (discussed in Section III.E.1.a below).
244.
On 16 September 2016 (RCom-38), the Respondent inter alia (i) objected to the inclusion of these items, (ii) indicated that, should the Tribunal decline the Respondent's Stay Application, it intended to apply for a bifurcation of the proceedings, and (iii) should the Tribunal require the presentation of a full memorial on admissibility, jurisdiction, and merits, it was unlikely to meet the time limit currently fixed by the Tribunal.
245.
At the Tribunal's invitation of 2 September 2016 (AT-30), the Claimants provided their comments on 21 September 2016 (CCom-44). The Claimants, inter alia, expressed no objection to the Tribunal's agenda for the hearing, but argued that "had the Respondent been more forthcoming about its plans in respect of bifurcation, as it was invited to do, a parallel briefing and combined hearing could have been organised to address both applications"370 and, as a result, "any request by the Respondent for a separate hearing on bifurcation should receive little sympathy, and in no circumstance should it provide an excuse for the late filing of the Statement of Defence."371 By email of 23 September 2016, the Tribunal invited the Respondent to comment, which the Respondent did on 26 September 2016 (RCom-40).
246.
By letter of 28 September 2016 (AT-34), after hearing the Parties, the Tribunal eliminated from the agenda for the hearing a broad discussion of the procedural calendar, but confirmed that it would include a discussion of the dates for an evidentiary hearing, noting that this item could not be delayed any longer. The Tribunal also reiterated its directions of 21 April, 1 July, and 4 August 2016.
247.
On 6 October 2016, on the eve of the hearing scheduled for the Respondent’s Stay Application, the Respondent filed its application for bifurcation (the "Application for Bifurcation"). The Respondent also proposed a briefing schedule for that application consisting of two rounds and requested a hearing on that application. The procedural history related to the Application for Bifurcation is summarised in Procedural Order No. 4 ("PO4"); despite this, the Tribunal has summarised the most important steps in the paragraphs that follow.
248.
Also on 6 October 2016 (RCom-45), the Respondent requested an extension to file its Statement of Defence.
249.

On 7 October 2016, the Parties and the Tribunal held a hearing to address the Respondent’s Stay Application, as well as certain procedural matters, including the determination of dates for the evidentiary hearing. The hearing took place in Geneva, with the Parties and the President participating in person, and the co-arbitrators participating via telephone conference. The following persons attended the hearing:

Tribunal
Mr Laurent Lévy (Presiding Arbitrator)
Mr Stanimir Alexandrov (Co-arbitrator) (via teleconference)
Mr J. Christopher Thomas QC (Co-arbitrator) (via teleconference)
Ms Sabina Sacco (Secretary of the Tribunal)

Claimants
Mr Mark McNeill (Shearman & Sterling LLP)
Mr Wesley H. Pang (Shearman & Sterling LLP)
Mr Robert L. Nelson Jr. (Shearman & Sterling LLP)
Ms Niti Dixit (S&R Associates)
Mr Uday Walia (S&R Associates)
Mr [Person 16] (CFO, Cairn Energy PLC)
Mr [Person 17] (Group Legal Manager, Cairn Energy PLC)
Ms [Person 18] (Cairn Energy PLC)

Respondent
Mr Salim Moollan QC (Essex Court Chambers)
Professor Chester Brown (Essex Court Chambers)
Mr Adam Board (Essex Court Chambers)
Mr Shreyas Jayasimha (Aarna Law)
Mr Mysore R. Prasanna (Aarna Law)
Mr Mihir Naniwadekar (Aarna Law)
Mr Raag Yadava (Aarna Law)
Mr [Person 19] (Under Secretary, Foreign Tax & Tax Research Division, Central Board of Direct Taxes, Department of Revenue, Ministry of Finance)

Court Reporter
Mrs [Person 28] (Briault Reporting Services)

250.
On 11 October 2016, the Tribunal circulated to the Parties the transcript of the hearing of 7 October 2016.
251.
By letter of 17 October 2016 (CCom-49), the Claimants objected to a hearing on the Respondent’s Application for Bifurcation, arguing that "the Respondent has been tactically withholding its Bifurcation Application, notwithstanding repeated urgings by the Tribunal and the Claimants",372 and that "[h]ad the Respondent done so, the issue could have been briefed and decided long ago, or it could have been addressed in a combined hearing on 7 October 2016, as the Claimants proposed."373
252.
On 3 November 2016 (AT-37), after considering the circumstances described above and in the exercise of its discretion under Article 15(1) of the UNCITRAL Rules, the Tribunal denied the Respondent’s request for a hearing on its Application for Bifurcation. However, it agreed that the application would be briefed in two rounds, with the first round to take place before the filing of the Respondent’s Statement of Defence, and the second round to take place thereafter. The Tribunal also invited the Parties to consult and agree on two timetable proposals, one for a bifurcated proceeding, and one for a non-bifurcated proceeding. In that same letter, the Tribunal granted the Respondent an extension to file its Statement of Defence to 16 January 2017.
253.
On 9 November 2016, the Claimants filed their Response to the Respondent’s Application for Bifurcation.
254.
On 23 November 2016 and 24 November 2016, the Claimants and the Respondent provided their respective calendar proposals (CCom-56, RCom-53).
255.
On 8 December 2016, the Tribunal issued its determination on the procedural timetable that would apply to the arbitration from the submission of the Respondent’s Statement of Defence (scheduled for 16 January 2017) until the Hearing on the Merits scheduled for 15-26 January 2018 (both for non-bifurcated proceedings and bifurcated proceedings) (AT-41).
256.
On 17 December 2016 (RCom-59), the Respondent requested the Tribunal to order the Claimants to "produce all documents, including but not limited to letters, electronic communications, file notes, memoranda, internal correspondence and any other records, however made, evidencing any and all exchanges between the Cairn Claimants and the Vedanta Claimant relating to the two arbitrations from 31 March 2015 onwards".374 The procedural history related to this request is summarised in Section III.E.1.b below.
257.
On 20 December 2016 (CCom-61), the Claimants informed the Tribunal of certain exchanges with the ITD375 with respect to the release by CIL of dividends owed to CUHL, which are addressed in more detail in Section III.C below.
258.
On 9 January 2017 (RCom-61), the Respondent requested a further extension of the time limit to file its Statement of Defence. After hearing both Parties,376 by letter of 20 January 2020 (AT-42) the Tribunal granted the requested extension until 3 February 2017 and set out a revised procedural calendar (attached as Annex A to that letter).
259.
On 12 January 2017 (CCom-65), the Claimants submitted a proposed procedural calendar for non-bifurcated proceedings. The Respondent provided its comments on 16 January 2017 (RCom-63).
260.
On 4 February 2017, the Respondent filed its Statement of Defence.
261.
By email of 14 February 2017 (CCom-71), and pursuant to the Tribunal's directions at paragraph 3 of AT-42, the Claimants on behalf of the Parties provided the Tribunal with jointly proposed amendments to the procedural calendar for bifurcated proceedings.
262.
On 15 February 2017 (RCom-67), and as reiterated by communications of 2, 13, and 17 March 2017, the Respondent requested a second hearing on its Stay Application. The Claimants objected to this second hearing by letter of 7 March 2017 (CCom-79) and submitted their response to these further submissions on the Stay and Bifurcation Applications on 23 March 2017 (CCom-87).
263.
On 19 February 2017, the Respondent filed its Reply to the Claimants' Response to its Application for Bifurcation.
264.
On 21 February 2017, the Claimants filed a request for relief in relation to the release of dividends owed to CUHL by CIL. During the months that followed, the Parties and the Tribunal exchanged correspondence on this matter, as well as on the status of the Respondent's enforcement of the tax demand against CUHL and the Claimants' RIM; this is addressed in Section III.C below.
265.
On 6 March 2017, the Claimants filed their Rejoinder on the Respondent's Application for Bifurcation.
266.
By letter of 27 March 2017, the Tribunal informed the Parties that the Respondent's request for a second hearing on its Stay Application was denied, that the Stay Application was also denied, that a decision with the Tribunal's reasoning would follow shortly, and that the Tribunal would thereafter address the Respondent's Application for Bifurcation.
267.

On 31 March 2017, the Tribunal issued PO3 which set out the Tribunal’s reasons for denying the Respondent’s Stay Application. These reasons included, inter alia, the Tribunal’s conclusion that a stay would cause significant prejudice to the Claimants, while it would not alleviate in any significant manner the harms alleged by the Respondent, in particular the harm of conflicting decisions between the Cairn and Vedanta arbitrations.

268.
On 3 April 2017, the Parties exchanged the scheduled document production requests. The procedural history related to these requests is described in Procedural Order No. 8 ("PO8") and the correspondence that followed and summarised in Section III.E.2 below.
269.

On 19 April 2017, the Tribunal issued PO4 in which it denied the Respondent’s Application for Bifurcation and set forth its reasons for doing so. The Tribunal confirmed that the procedural calendar for non-bifurcated proceedings attached to the Tribunal’s letter of 20 January 2017 (and reattached as Annex A to PO4) would apply to the remainder of the arbitration.

270.
On 8 May 2017 (AT-72), the Tribunal requested both Parties to submit updated lists of their respective representatives that should be included in future correspondence, and asked that throughout the proceedings, at such times when a representative was added or removed from the list, that the respective Party provide an updated list, which the Parties subsequently did.377
271.
On 18 May 2017, the Tribunal issued Procedural Order No. 5 ("PO5"), which addressed the Parties’ Unscheduled Document Requests, and Procedural Order No. 6 ("PO6"), which set out certain enhanced confidentiality protections to be applied to any documents produced in response to the Claimants’ Document Request No. 2. The procedural history of these applications is summarised in those orders; despite this, the Tribunal summarises the most important steps, as well as the related ensuing correspondence, in Section III.E. 1 below.
272.
On 12 June 2017 (RCom-128), the Respondent registered "the strongest possible protest"378 to the reasoning and decisions of the Tribunal in PO3, PO4, and PO5.
273.
On 14 June 2017, the Tribunal invited the Claimants to comment on RCom-128379 within three business days of filing their Statement of Reply.

C. The Claimants’ request for the release of dividends from CIL; Renewed RIM

274.
In parallel with the Respondent’s Applications for a Stay and Bifurcation, the Parties and the Tribunal were addressing the Claimants’ application for the release of dividends from CIL to CUHL (mentioned at paragraph 264 above), and the RIM, which the Claimants renewed on 6 May 2017 (CCom-99). The detailed procedural history of these applications is discussed in PO7, and Procedural Order No. 9 of 10 August 2017 ("PO9"). The Tribunal has nonetheless summarised the most important procedural steps below.
275.
On 20 December 2016 (CCom-61), the Claimants informed the Tribunal that on 12 October 2016 CUHL had written to the ACIT seeking confirmation that CIL would be able to release any outstanding dividends owed to CUHL, but that CUHL had not received any reliable confirmation.380 As a result, the Claimants requested the Respondent to confirm whether CIL could release those dividends and CUHL could repatriate them. If no such confirmation was received by 28 December 2016, the Claimants stated that they would ask the Tribunal to direct the Respondent to provide such confirmation. The Claimants added that, if the dividends were no longer restricted and the relevant transfers could be executed, the Claimants would "naturally withdraw their claims in this arbitration relating to those dividends."381
276.
On 6 January 2017 (RCom-60), the Respondent submitted a letter from the Office of the ACIT dated 30 December 2016, to the Commissioner of Income Tax, International Taxation-1, New Delhi, which stated that:

[T]he provisional attachment order u/s 281B on dividend expired on 31 March 2016 and as on date there is no attachment in force. The decision to release the dividend to CUHL is an internal matter between two companies and the same may be dealt accordingly.382

277.
In light of this letter, the Respondent requested the Claimants to confirm by 9 January 2017 that they would "withdraw all consequent claims in this arbitration as stated in their letter dated 20 December 2016."383
278.

By letter of 21 February 2017 (CCom-73), the Claimants indicated that they had forwarded the ACIT letter of 30 December 2016 to CIL, asking it to release the dividends, but that CIL had refused to do so, alleging that this letter was internal government correspondence that was neither addressed nor copied to CIL, and that it required the certainty of a written confirmation from the ITD before it would act. The Claimants understood that the ITD had advised CIL to make a formal written request for clearance and to await a response from the ITD to release the dividends; however, in meetings between Cairn’s representatives and the ITD, the ITD had informed Cairn that no written confirmation would be given to CIL in this regard. The Claimants argued that this position was at odds with the Respondent’s assertions in its Statement of Defence, in particular with the witness statement of Mr [Person 6], that there was no impediment for CIL to release the dividends to CUHL.384 In light of the Respondent's "inconsistent messages"385 on this matter, the Claimants requested the Tribunal to "invite the Respondent to procure that the [ITD] send a letter to CIL confirming that CIL is not prohibited from releasing the dividends to CUHL. In the alternative, we ask that the Respondent procure that the [ITD] address a similar letter to Cairn indicating that it is intended to be shared with CIL."386 The Claimants reiterated that once CIL had received this confirmation and the dividends had been released to CUHL, they would make the appropriate adjustments to their claims.387

279.
On 22 February 2017 (AT-46), the Tribunal invited the Respondent to confirm its position on the matter by 1 March 2017, giving special attention to the Claimants' request for relief.
280.
By email of 6 March 2017 (RCom-73), after requesting and receiving an extension, the Respondent submitted its comments. The Respondent stated inter alia that "the payment of CUHL dividends [was] a matter between the company (CIL) and its shareholder (i.e. CUHL) and therefore the Office of the [ACIT] ha[d] no role to play."388 As a result, the ITD was not in a position to issue any correspondence to CIL with respect to the payment of CUHL dividends."389 The Respondent further argued that the Tribunal had no jurisdiction over the relationship between India and its assessees, including CIL, nor did it have jurisdiction to order the Respondent to write to CIL to confirm that CIL was not prohibited from releasing the dividends to CUHL.390
281.
On 7 March 2017, the Tribunal noted that, at this juncture and given the content of the Respondent's email of 6 March 2017, it did not see a need for its intervention. Nonetheless, it invited the Claimants to comment on the Respondent's communication and to seek further clarification from the Respondent if they so wished.391
282.

By letter of 9 March 2017 (CCom-81), the Claimants insisted that they required the Respondent to directly inform CIL that it could release the dividends, "because CIL continues to be under direct orders from the Indian Income Tax Authority to withhold the dividends."392 The Claimants explained that "[i]n January 2014, the Income Tax Authority formally directed CIL 'not to remit/pay' the dividends to CUHL, which direction has never been clearly rescinded."393 The Claimants also alleged that "the Income Tax Authority has more recently 'informally advised' CIL not to remit the dividends until CIL receives a specific government 'response’ authorising any such transfer."394 On this basis, the Claimants argued that "it is difficult to accept in good faith India’s representation to this Tribunal that the disposition of the dividends is strictly 'a matter between’ CIL and CUHL with 'no role to play’ for India, when the Income Tax Authority has specifically instructed CIL (off the record) that it must withhold the dividends until further notice."395 However, the Claimants noted that CIL had indicated that it might be willing to accept formal written confirmation by India to this Tribunal that the dividends were legally unrestricted. As a result, in the absence of any reasoned objections by the Respondent, the Claimants indicated that they intended to send to CIL on Friday 10 March 2017 (i) the Respondent’s email of 6 March 2017, together with the appended ACIT letter of 1 March 2017, and (ii) an excerpted and redacted copy of the witness statement of Mr [Person 6], in which Mr [Person 6] confirmed the status of the dividends (which the Claimants attached as Annex C to their letter).396

283.
That same day (AT-51), the Tribunal invited the Respondent to comment on the Claimants’ letter without delay on or before 14 March 2017, noting that in the meantime it would be preferable if the Claimants did not unilaterally send their intended letter to CIL, in order to avoid aggravating the dispute. The Tribunal also entreated the Parties "to cooperate in this matter", stating that it was "confident that the Respondent may be in a position to assist the Claimant albeit possibly without writing to CIL itself."397
284.
By letter of 15 March 2017 (RCom-78), the Respondent argued that the Claimants’ latest request was "entirely contrived",398 noting that the Claimants had to date shared documentation from these proceedings with Vedanta as it suited them, but now purported to give the Respondent 24 hours to raise any reasoned objections to share these two documents (identified in paragraph 282 above) with CIL (which was now controlled by Vedanta). As to the merits of the Claimants’ request, the Respondent noted that it had long advocated for a coordinated document sharing regime to be put in place between the Cairn and Vedanta arbitrations; that the treatment of these two documents should follow the general treatment to be put in place once the Tribunal ruled on this document sharing regime, and that until then there was no reason to treat these documents any differently solely because it was expedient for the Claimants to share them with Vedanta.
285.
On 16 March 2017 (CCom-84), the Claimants (i) stated that they believed that the proposed disclosures were consistent with the confidentiality protections in PO2, (ii) clarified that the proposed disclosure was to CIL and not Vedanta, in CUHL’s capacity as shareholder of CIL, (iii) that such disclosure was "entirely separate from the merits of this arbitration, and is unrelated to ongoing discussions about the exchange of arbitration documents between the Cairn and Vedanta arbitrations", as a result of which "[t]he Respondent’s reference to its proposed document disclosure regime in this arbitration is misconceived",399 and (iv) emphasised the importance of the release of the dividends to Cairn, noting that CIL would soon cease to exist as a separate entity due to its forthcoming merger with VIL, "leaving Cairn a limited window of opportunity to secure CIL's commitment to release the dividends".400 On this basis, the Claimants informed the Tribunal and the Respondent that they intended to provide the documents identified at paragraph 282 above to CIL that week, and that they would request that CIL maintain those documents in strict confidence, in compliance with PO2.
286.
That same day (RCom-79), the Respondent reiterated its position that this issue should be treated together with the general question of document sharing between the Cairn and Vedanta claimants and transparency/confidentiality of this arbitration, and that there was no basis for the Claimants' unilateral disclosure of such documents. The Respondent further requested that if the Claimants had already shared these documents with CIL, that this be made known immediately to the Tribunal and to the Respondent.
287.
On that same date (AT-54), the Tribunal invited the Claimants to confirm within 24 hours if they had already transmitted to CIL the documents identified in paragraph 282 above and, if so, what assurances they had requested or obtained from CIL that the documents would be kept confidential. The Tribunal also invited the Respondent, within the same time limit, to state any good cause that should keep the Tribunal from allowing the Claimants to communicate the documents to CIL, assuming that leave was in fact needed. The Tribunal added that it saw no reason to deny a limited exception to PO2 in the circumstances.
288.
On 17 March 2017 (CCom-85), the Claimants confirmed that the documents listed in paragraph 282 above had not been transmitted to CIL, and indicated that they had notified CIL that "any documents that are permitted to be disclosed to them, as authorised by this Tribunal, shall be maintained as confidential and shall not be disclosed to any third party (save where required by law or regulation - e.g., where required by the Indian Income Tax Authority - or through disclosure to professional advisers bound by duties of confidentiality)."401
289.

On that same date (RCom-81), the Respondent noted that its position as set out in its email of 16 March 2017 remained unchanged, and that it was clear that the Claimants' purported requests were not genuine given the Claimants' past conduct. However, for the sake of cooperation, it stated that it was prepared to accept the communication of the ACIT letter of 1 March 2017, even in advance of the Tribunal's ruling on document sharing. That said, it objected to the communication of Mr [Person 6]'s Witness Statement, whether redacted or not, in advance of that ruling, arguing that such a disclosure would be "particularly intrusive" and there could be "no legitimate reason" to communicate it.402

290.

On 22 March 2017 (AT-56), after noting the Parties’ latest arguments and representations, the Tribunal issued the following directions: (i) it allowed the Claimants to provide CIL with a copy of the ITD’s letter of 1 March 2017, emphasising that the document was subject to confidentiality obligations, but that they should refrain from disclosing Mr [Person 6]'s Witness Statement, (ii) if despite this CUHL did not obtain the release of the dividends, the Claimants should inform the Tribunal and provide a redacted version of Mr [Person 6]’s Witness Statement for the Respondent’s comment, which the Respondent should provide within three business days, (iii) if there was no agreement on the scope of the redactions the Tribunal would then make a determination, and (iv) the Claimants could then submit the final redacted witness statement to CIL, emphasising that the document is subject to confidentiality obligations in this arbitration.

291.
While this exchange regarding the release of dividends was ongoing, the Parties also exchanged correspondence in relation to the status of the Respondent’s tax demand and the enforcement proceedings related to such tax demand. Specifically:

a. On 14 March 2017 (CCom-83), the Claimants informed the Tribunal that on 9 March 2017 the ITAT had issued its order on the appeal initiated by CUHL against the tax assessment at issue in this dispute, confirming the Respondent’s principal tax demand against CUHL, but partially granting CUHL’s appeal on matters of interest and penalty.403 It also attached a letter from the ACIT to CUHL dated 14 March 2017, in which the ACIT stated that "[i]n view of this order, where the tax demand has been confirmed by the Hon’ble ITAT, you are requested to pay the same on or before 15.06.2017, failing which recovery proceedings will be initiated as per the Income Tax Act, 1961."404 The Claimants urged the Respondent to confirm immediately whether the ACIT letter of 14 March 2017 was intended to provide the three-month notice before it commenced enforcement proceedings, in accordance with its undertaking of 11 May 2016. They also stated that "[t]o the extent that India's letter constitutes said notice, the Claimants will have no choice but to reinstate their RIM, as they indicated they would do were India to seek to enforce against the shares."405

b. On 17 March 2017 (RCom-78), the Respondent made certain submissions regarding the implications of the ITAT Order. For present purposes, it suffices to say that the Respondent submitted that the ITAT Order upheld CUHL’s liability to capital gains tax.

292.
At the Claimants’ insistence (CCom-86) and the Tribunal’s invitation (AT-55), on 23 March 2017 (RCom-82) the Respondent (i) reiterated that the ITAT Order had confirmed CUHL’s capital gains tax liability, (ii) stated that, as a result, the ITD "ha[d] no remaining discretion not to enforce the tax demand against the assessee (CUHL)",406 and (iii) confirmed that the ACIT letter of 14 March 2017 "is indeed to be treated as a notice for purposes of the Respondent’s letter dated 11 May 2016."407 The Respondent explained that "this is because the [ITD] [is] duty bound as a matter of Indian law to proceed to recover tax amounts found due and owing by a taxpayer, as is the case under the ITAT Order."408 The Respondent added however that the Claimants could appeal the ITAT Order and apply for a stay of execution from the High Court, noting that "[i]f they do so, and obtain relief from the Court, the [ITD] will of course abide by the decision of the Court", but "[i]f they choose not to do so, the [ITD] have no discretion not to enforce the Order."409 The Respondent thus requested the Tribunal to invite the Claimants to state by 24 March 2017 "(a) whether it has initiated any appeal against the ITAT Order; (b) if not, whether they intend to appeal the ITAT Order; and (c) if not, why not."410
293.
By email of 3 April 2017 (AT-60), the Tribunal invited the Claimants to state whether they had appealed the ITAT Order, but rejected the Respondent’s request that the Claimants be ordered to indicate in advance if they intended to seek relief before the Indian courts or their reasons for doing so, considering that the request did not state the legal basis for which such relief would be predicated.
294.
On 4 April 2017 (RCom-87), the Respondent reiterated its requests, arguing that the legal basis for them was found in Article 15(1) of the UNCITRAL Rules, and the duty not to aggravate the dispute. By email of 5 April 2017 (AT-61), the Tribunal invited the Claimants to comment on this renewed request.
295.
On 7 April 2017 (CCom-90), the Claimants confirmed that they had not filed an appeal against the ITAT Order. As to whether they intended to do so, they stated that "Cairn [was] still in the process of weighing its options, and should not be compelled by India to make a rushed decision and to provide its reasons."411
296.
On 12 April 2017 (CCom-92), the Claimants informed the Tribunal that they had received an appeal effect order dated 31 March 2017 demanding payment within 30 days of service and warning that, if payment was not received, proceedings for the recovery of the tax demand would ensue.
297.
At the Claimants’ request (CCom-92) and the Tribunal’s invitation (AT-64), on 18 April 2017 (RCom-91), the Respondent explained that the demand notice sent on 31 March 2017 was a standard proforma, and that there was "no intention to violate the undertaking given by the Respondent in its letter dated 11 May 2016."412 The Respondent added that, "[p]ursuant to that letter, CUHL has already been notified on 14 March 2017 to pay the tax demand by 15 June 2017, failing which recovery action would ensue."413
298.
On 19 April 2017 (CCom-96), the Claimants wrote to the Tribunal to update it on the status of the dividends payable from CIL (which had by now been merged with VIL414) to CUHL and to request urgent relief in this regard. Specifically, the Claimants requested the Tribunal to "to invite the Respondent as a matter of urgency to confirm in writing directly to VIL (with copies of such confirmation to the Claimants and the Tribunal) that all dividends - both the dividends declared by CIL with respect to the period from 2013-2016 and those resulting from the merger between CIL and VIL - can be released to CUHL without further delay," and to "provide a full and accurate account of what it has been telling CIL/VIL in private meetings in respect of the dividends, and to explain how it reconciles those communications with its representations to this Tribunal that CIL/VIL is free to release the dividends."415
299.
On 26 April 2017 (RCom-96), the Respondent responded to the Claimants’ letter of 19 April 2017, reiterating its position that there was no basis for the Claimants’ request for urgent relief, and stating that the ITD "categorically den[ied] having attempted to inhibit the release of the dividends or having advised CIL in this matter, formally or 'informally’, after 31 March 2016 (when the provisional attachment order under section 281B expired)."416 On 27 April 2017 (RCom-97), the Respondent clarified that "there was no message or advice given by the Hon’ble Revenue Secretary to CIL/Vedanta Limited to hold the dividends payable to CUHL."417
300.
By email of 1 May 2017 (AT-69), the Tribunal invited the Claimants to state if they had anything to add or amend to their request for relief of 19 April 2017. It also invited the Respondent to state whether it would have any objection to the Claimants disclosing RCom-96 and RCom-97 to VIL.
301.

By letter of 2 May 2017 (CCom-98), the Claimants stated that they had difficulty reconciling the Respondent’s statements denying any meeting or communication between the ITD and CIL/VIL. In support of this, they submitted a witness statement of Cairn’s CEO, Mr [Person 4] (the "[Person 4] WS"), in which he testified that VIL had "confirmed to Cairn that it met with the Revenue Secretary on 10 April 2017, and that at this meeting, the Revenue Secretary instructed CIL/VIL not to remit payment pending approval from the Income Tax Authorities."418 The Claimants also submitted documentary evidence which purportedly confirmed Mr [Person 4]'s statements.419 The Claimants acknowledged that this evidence originated from CIL/VIL, but argued that CIL/VIL had repeatedly indicated its desire to discharge its obligation to CUHL, and that they were unaware of any motivation for CIL/VIL to falsely report meetings with and instructions from the Income Tax Authorities. The Claimants also argued that the problem would be exacerbated because, as a result of the merger between CIL and VIL, CUHL was due to receive redeemable preference shares in VIL worth approximately US$ 115 million, raising the total amount payable from VIL to CUHL to approximately US$ 220 million, "with the likely result that the Indian Government will move to garnish all of those outstanding payments as soon as it is legally entitled to do so."420 Given the latest developments, the Claimants argued that "it seems highly unlikely that the disclosure of RCom-96 and 97 will persuade CIL/VIL to disobey the directions they say they have received from senior officers of the Government of India", and as a result they reiterated their request for relief made on 19 April 2017 through CCom-96.421

302.
On 3 May 2017 (AT-70), the Tribunal granted leave to the Respondent to respond to the Claimants' letter of 2 May 2017, and invited it to confirm its final position on whether CIL/VIL could release immediately the dividends to CUHL. The Tribunal also invited both Parties to state whether they would have any objection to communicating, or having the other side communicate, to CIL/VIL the content of the forthcoming Order (or letter from the Tribunal) on this matter.
303.
On 6 May 2017 (CCom-99), the Claimants renewed their RIM, which as noted above had been originally filed on 13 April 2016422 and had been suspended on 16 May 2016, following an undertaking from the Respondent.423 In their Renewed RIM, the Claimants updated their request for relief424 and further stated that "the procedural burden of briefing and deciding this RIM could be avoided entirely if the Respondent undertakes to delay the initiation of recovery procedures against CUHL pending the conclusion of this arbitration."425 If the Respondent did not immediately make such an undertaking of its own accord, the Claimants asked the Tribunal to request the Respondent to do so, or at least to provide any legal authority establishing that it did not have discretion as to the timing of enforcement.
304.
On 8 May 2017 (AT-71), the Tribunal invited the Respondent to comment with urgent priority on the Claimants’ communication, and in particular to state whether it would be willing to delay the initiation of recovery proceedings against CUHL pending the conclusion of this arbitration, as proposed by the Claimants, by Friday 12 May 2017.
305.
On 8 May 2017 (CCom-100), the Claimants confirmed that they had no objection to communicating, or having the Respondent communicate, to CIL/VIL the content of the forthcoming decision by the Tribunal concerning the release of the outstanding dividends held by CIL/VIL to CUHL. In the event that the Respondent was to communicate this decision, the Claimants asked that they be copied on such correspondence.
306.
On 9 May 2017 (RCom-101), the Respondent provided comments, inter alia, to CCom-98 and CCom-99. The Respondent requested a hearing on the Renewed RIM and submitted comments on the dividends.
307.
By letter of 12 May 2017 (CCom-101), the Claimants commented on the Respondent’s email of 9 May 2017 and reaffirmed, with more urgency, their request that the Tribunal order the Respondent "to confirm immediately in writing directly to VIL (with copies of such confirmation to the Claimants and the Tribunal) that all dividends - both the dividends declared by CIL with respect to the period from 2013-2016 and those resulting from the merger between CIL and VIL - can be paid to CUHL without further delay. In the alternative, the Claimants request that the Tribunal issue an order memorialising the Respondent’s numerous representations that the dividends can be released and finding that the Respondent is bound by these representations and does not seek to restrain the payment of dividends to CUHL or the transfer of any such funds outside of India."426 (The Claimants’ requests for relief in CCom-101 are hereinafter referred to as the "Claimants’ Original Request on Dividends"). The Claimants also stated that they did not believe that a hearing on the Renewed RIM was required, but should the Tribunal determine to hold one, they requested it to "temporarily order India not to initiate recovery proceedings or otherwise enforce against any assets of, or due to, the Claimants from 15 June 2017 until such time as the Tribunal rules on the RIM."427
308.
On 15 May 2017 (AT-75), the Tribunal noted that the Claimants’ applications regarding the release of dividends and the Renewed RIM required a prompt ruling from the Tribunal and issued directions on how they would be briefed and heard. Specifically, the Tribunal outlined two alternative briefing schedules, depending on whether the Respondent would be willing to defer the enforcement of CUHL’s shares in CIL/VIL until 15 September 2017, and proposed a hearing date to hear the Renewed RIM. After hearing from both Parties (CCom-103 and RCom-103),428 on 18 May 2017 (AT-77) the Tribunal confirmed that a hearing to hear the Renewed RIM (the "RIM Hearing") would take place in London on 12 June 2017.
309.
On 22 and 30 May 2017 (RCom-108 and RCom-111, respectively), the Respondent lodged a formal protest to the Tribunal’s directions, raising certain procedural objections and requests for clarification. At the Tribunal’s invitation, on 25 May 2017 (CCom-105) the Claimants provided their comments. On 1 June 2017 (AT-81), the Tribunal updated its procedural directions.
310.
On 26 May 2017 (RCom-109), the Respondent submitted its response to the Renewed RIM. The Claimants filed their reply on 31 May 2017 (CCom-107), and the Respondent filed its rejoinder on 8 June 2017 (RCom-117).
311.
On 2 June 2017 (AT-82), the Tribunal invited the Parties to consult and cooperate with respect to the format and organisation of the RIM Hearing. The Parties provided their comments on 9 and 10 June 2017 (RCom-119 and CCom-112, respectively).
312.
On 5 June 2017 (RCom-113), the Respondent indicated that it had not addressed the Claimants’ Original Request on Dividends in its response to the Renewed RIM and that it would do so by 8 June 2017. By email of 6 June 2017 (CCom-110), the Claimants argued that this was inaccurate, as the Respondent’s response to the Renewed RIM expressly mentioned the Claimants’ Original Request on Dividends, and thus the Respondent had already exercised its opportunity to respond to it. Despite this allegation, on 6 June 2017, the Tribunal granted the Respondent the opportunity to make further comments on the Claimants’ Original Request on Dividends, which the Respondent exercised on 8 June 2017 (RCom-118).
313.

On 9 June 2017 (RCom-119), the Respondent confirmed that it wished to cross-examine Mr [Person 4] at the RIM Hearing. Separately on that same day (RCom-120), the Respondent filed a statement from the Office of the Honourable Revenue Secretary rebutting Mr [Person 4]’s witness statement, and noted that the Honourable Revenue Secretary would not be available to be examined at the RIM Hearing due to other commitments.

314.
Also on 9 June 2017, the Tribunal issued PO7 ruling on part of the Claimants’ Original Request on Dividends. In particular, PO7 memorialised India’s representations made in this arbitration concerning the issue of release of dividends by CIL/VIL and allowed the relevant parts of the order to be shared with CIL/VIL.
315.
On 12 June 2017 (RCom-129), the Respondent objected to PO7 and requested that the Tribunal stay its implementation before it had put in place safeguards to ensure the confidentiality of the order. On 14 June 2017, the Tribunal invited the Claimants to comment on RCom-129 within three business days of the filing of their Statement of Reply.
316.

After exchanging several communications concerning the organisation and logistics of the hearing,429 the Parties and the Tribunal held a hearing on the Renewed RIM on 12 June 2017, in London, UK. The following persons participated at the hearing:

Tribunal
Mr Laurent Lévy (Presiding Arbitrator)
Mr Stanimir Alexandrov (Co-arbitrator)
Mr J. Christopher Thomas QC (Co-arbitrator)
Ms Sabina Sacco (Secretary of the Tribunal)

Claimants
Mr Harish Salve SA (Blackstone Chambers)
Ms Ritin Rai (Blackstone Chambers)
Mr [Person 16] (CFO Cairn)
Mr [Person 17] (Group Legal Manager, Cairn Energy PLC)
Ms Claire Busby (Legal Department, Cairn Energy PLC)
Mr Robert L. Nelson Jr. (Shearman & Sterling LLP)
Mr Mark McNeill (Shearman & Sterling LLP)
Mr Wesley H. Pang (Shearman & Sterling LLP)
Mr Robert L. Nelson Jr. (Shearman & Sterling LLP)
Ms Natalia Mikolajczyk (Shearman & Sterling LLP)
Ms Niti Dixit (S&R Associates)
Mr Uday Walia (S&R Associates)
Mr Alastair Brown (Shepherd and Wedderburn)

Respondent
Mr Salim Moollan QC (Essex Court Chambers)
Professor Chester Brown (7 Wentworth Selborne Chambers)430

317.
On 15 June 2017 (AT-85), the Tribunal informed the Parties that it denied the Renewed RIM and related applications of the Claimants431 and indicated that the reasons for the Tribunal's decision would follow.
318.
On 10 August 2017, the Tribunal issued PO9 which provided its reasons for the decisions conveyed in AT-85.

D. Transparency, confidentiality, and document sharing

319.
In parallel with the Respondent’s applications for a stay and bifurcation, and the Claimants’ applications for the release of dividends and Renewed RIM, the Parties had also been briefing the Respondent’s applications for transparency, confidentiality, and document sharing.
320.
As anticipated in paragraph 219 above, from the initiation of this arbitration the Respondent requested the Tribunal to put in place a transparency regime.432 In line with its arguments in its Stay Application, the Respondent argued that the coexistence of the Cairn and Vedanta arbitrations (which it characterised as parallel proceedings dealing with essentially the same issues under the same treaty) created the risk of inconsistent decisions. The Respondent further argued that the Claimants and Vedanta were actively cooperating to avoid any coordination and sharing of information between the two sets of proceedings, but keeping this Tribunal in the dark.433 In order to mitigate these alleged risks and harms, the Respondent first proposed the adoption of a transparency regime.434
321.
The Claimants objected to the adoption of a transparency regime, arguing inter alia that the Respondent had visibility over both proceedings, and that "[t]here is nothing barring India from seeking leave from this Tribunal to introduce into evidence in this proceeding relevant information which has been obtained in the Vedanta arbitration."435 The Claimants also made some requests with respect to confidentiality.436
322.

On 8 August 2016, the Tribunal issued PO2 ruling on transparency and confidentiality. For the reasons given in that decision, it rejected a full transparency regime, but allowed for the publication of certain documents, subject to possible redaction, on the PCA’s website.437 As to the risk of inconsistent decisions between the Cairn and Vedanta arbitrations, the Tribunal concluded it would be better mitigated by document sharing between the two proceedings than by transparency.438

323.
In the weeks that followed the issuance of PO2, the Parties exchanged correspondence on the sharing of documents. The Claimants confirmed that they supported and encouraged the sharing of information between the two arbitrations, consented to the submission of key pleadings and procedural orders from the Cairn arbitration into the Vedanta arbitration, and urged the Respondent to take the necessary measures to adduce pleadings and evidence from the Vedanta arbitration into the Cairn arbitration. The Respondent, for its part, argued that it could not submit documents from the Vedanta arbitration because the Vedanta tribunal had not ruled on the issue of transparency, and argued that the submission of documents from the Cairn arbitration into the Vedanta arbitration required an amendment of the transparency and confidentiality regime set out in PO2. By contrast, the Claimants contended that no such amendment was necessary to implement document disclosures between both tribunals (an application and consent being sufficient).439
324.

In its letter 2 of 3 November 2016 (AT-36), referring to its reasoning in PO2, the Tribunal agreed with the Claimants that putting in place a regime to allow the flow of documents and information between two arbitrations did not require an amendment to the transparency regime. The Tribunal stated that, in its view, "a less ambitious solution that would be easier to implement would be for all parties (Cairn, the Respondent and Vedanta) to agree to a form of document sharing that is limited to the tribunals and parties in the two arbitrations. That solution should ensure the proper confidentiality of any sensitive documents vis-à-vis the rest of the world. This proposal could then be submitted to both tribunals."440 The Tribunal thus invited the Parties "to consult with Vedanta so that at the minimum, they can seek to agree on a document sharing regime that meets with all Parties' consent or, absent Vedanta's consent, with Cairn and the Respondent's consent."441 The Tribunal indicated that if the Parties failed to reach an agreement, it would rule on this matter.

325.
In the months that followed, the Parties exchanged correspondence regarding the Tribunal's invitation to consult with Vedanta regarding possible enhanced forms of coordination between both arbitrations, including the issue of document sharing.442 For present purposes, it suffices to record that (i) both Parties confirmed that Vedanta had been uncooperative regarding the Tribunal's coordination proposals (CCom-59 and RCom-59),443 and as a result, the Parties' efforts to agree with Vedanta on any enhanced forms of coordination - including a document sharing regime agreed upon with Vedanta - failed, (ii) that said, both the Claimants and the Respondent in the Cairn arbitration confirmed their willingness to share documents with the Vedanta arbitration, even absent Vedanta's consent,444 and (iii) the Parties disagreed however, as to the exact manner in which these documents should be exchanged.445
326.
On 23 May 2017 (AT-79), the Tribunal circulated a draft procedural order which contained a proposed document sharing regime and invited the Parties’ comments. On 21 July 2017 (CCom-129), the Claimants confirmed their agreement with the draft, while on 29 July 2017 (RCom-149), the Respondent stated that it had no objections but reiterated its request for full transparency and "reserve[d] the right to produce documents from the Vedanta arbitration, including but not limited to, where this [was] reasonably necessary to protect the Respondent’s legal rights".446
327.
On 4 September 2017, the Tribunal issued Procedural Order No. 10 ("PO10"), which specifically addressed the manner in which documents from this arbitration may be submitted into the arbitration between Vedanta and the Respondent, as well as the manner in which documents from the Vedanta arbitration may be submitted in this arbitration. In PO10, the Tribunal observed that the Parties had consented and agreed to the production of any pleadings, procedural orders, awards, or other documents447 from the record of this arbitration into the Vedanta arbitration, and to the production of any documents from the Vedanta arbitration into this arbitration, subject to considerations of relevance and the possibility to redact confidential or sensitive information, and subject to the Tribunal’s control, as specified in PO10.

E. Document production

328.
In parallel with the applications discussed in the preceding sections, the Parties exchanged scheduled and unscheduled document production requests. The procedural history of these requests is addressed in the numerous orders and letters issued by the Tribunal in this respect. The Tribunal nonetheless summarises the most important steps below.

1. Unscheduled document production requests

329.
As indicated above, both Parties made certain unscheduled document requests at the beginning of the proceedings.

a. The Claimants’ Document Requests No. 1 and 2

330.
On 27 May 2016 (CCom-20), the Claimants requested the Tribunal to order Respondent to produce two categories of documents:

a. "Documents concerning the Foreign Investment Promotion Board’s ('FIPB’s’) review and approval of CUHL’s application of 10 August 2006 [...]" ("Claimants’ Document Request No. 1").448

b. "Documents relating to the proceedings conducted by the Standing Committee on Finance, 2011-2012 ('Standing Committee’), on the preparation of its 49th report on the Direct Tax Code Bill ('Standing Committee Report’) [...]" ("Claimants’ Document Request No. 2").449

331.
The Respondent commented on these requests on 10 and 20 June 2016 (RCom-19 and RCom-22, respectively).

a. Together with RCom-22, the Respondent produced one document responsive to Document Request No. 1. By letter of 1 July 2016 (RCom-25), it confirmed that further searches at the Department of Revenue had not yielded any other documents responsive to this request. By email of 4 July 2016, the Claimants confirmed that they had no further comments.

b. As for Document Request No. 2, the Respondent objected to this on three grounds: (i) legal impediment or privilege under Article 9(2)(b) of the IBA Rules on the Taking of Evidence (the "IBA Rules"), (ii) special political or institutional sensitivity, including deliberative process privilege, under Article 9(2)(f) of the IBA Rules, and (iii) unreasonable burden under Article 9(2)(c) of the IBA Rules. At that stage, the Respondent did not object to the relevance or materiality of the documents sought.

332.
By letter of 24 June 2016 (AT-17), the Tribunal denied the Respondent’s objection under Article 9(2)(c) of the IBA Rules, but accepted that a rule of privilege analogous to deliberative process privilege could apply under Articles 9(2)(b) or (f) of the IBA Rules, subject to certain specifications in order to adapt it to the needs and specificities of international investment arbitration. The Tribunal concluded that, to determine whether the Respondent could assert privilege, it would undertake a balancing exercise that required weighing the compelling nature of the Respondent’s asserted sensitivities against the Claimants’ need for the disclosure of these documents. The Tribunal further noted that "the burden of establishing the validity of claims to privilege is on the party asserting the privilege, in this case the Respondent", and thus instructed the Respondent to carry out a document-by-document review of the documents responsive to this request, and to submit a privilege log indicating, inter alia, "why the Respondent’s need for confidentiality of the document outweighs the Claimants’ need for disclosure of the document."450
333.
The Respondent submitted its original privilege log on 5 September 2016 (RCom-37).
334.
The Claimants provided their comments on 14 September 2016 (CCom-43), and requested: (i) the production of nine specified documents, (ii) that the Respondent be ordered to amend the remaining entries of its privilege log, in order to provide a meaningful description of the content of the document and a revised explanation as to how the need for confidentiality outweighed the need for disclosure, (iii) that the Respondent be ordered to include in its privilege log any documents missing from it or confirm that they would be produced, and (iv) that the Claimants be granted leave to seek adverse inferences should the Respondent fail to comply with these orders.
335.
By letter of 21 September 2016 (AT-32), the Tribunal deferred its decision on (i) and (iv), invited the Respondent to provide an amended privilege log, and requested the Respondent to clarify who would have access to any documents produced, and if they were to be disclosed to the Tribunal only, whether they could be examined by a confidentiality expert, or relied upon or cited by the Tribunal in its Award.
336.
The Respondent submitted its revised privilege log on 15 November 2016 (RCom-52). In subsequent correspondence,451 the Respondent clarified the disclosure limitations that had been communicated to it by the Speaker of the Lok Sabha. Specifically, it explained that the Speaker had only authorised the documents to be shared with the Tribunal, but not counsel or a confidentiality expert, but confirmed that "the Tribunal may rely on and cite the documents in any orders, decisions, or awards."452
337.
The Claimants submitted their comments to the Respondent's revised privilege log on 21 December 2016 (CCom-62). In particular, the Claimants (i) objected to the Respondent's proposed disclosure limitations, which they submitted were arbitrary and contrary to their due process rights, (ii) confirmed their request for the production of the nine documents that they had identified in the Respondent's original privilege log and requested the Tribunal to ignore the Respondent's revised objections in their respect, and (iii) accepted the Respondent's objections for all remaining documents save two.
338.
By letter of 22 February 2017 (AT-47), the Tribunal informed the Parties that, after undertaking the balancing exercise referred to in AT-17 and AT-32, it had decided that, for certain documents sought, the Claimants' need for disclosure outweighed the Respondent's assertion of privilege, and thus the Tribunal would order their production. The Tribunal added that any such production would be subject to enhanced confidentiality protections in order to protect the Lok Sabha's expectation of confidentiality (including limiting disclosure to a list of authorised persons), and circulated a draft confidentiality order for the Parties' comments.
339.
On 1 March 2017 (CCom-75), the Claimants submitted their comments on the draft confidentiality order and provided their list of authorised persons. They noted that they agreed in principle with the terms proposed, but also suggested certain changes.
340.
After several requests for extensions, the Respondent submitted its comments to the draft confidentiality order on 27 March 2017 (RCom-83). Essentially, the Respondent agreed with the terms proposed by the Tribunal and objected to the Claimants' proposals.
341.
By letter of 27 April 2017 (AT-67), the Tribunal ruled on the disputed issues, and requested the Respondent to provide a list of its authorised persons.
342.
By letter of 8 May 2017 (AT-73), the Tribunal reiterated its request to the Respondent for a list of its authorised persons, noting that if that list was not provided by 15 May 2017, the Tribunal would proceed to issue the confidentiality order and would designate as authorised persons the individuals named in the Respondent’s mailing list.
343.
On 18 May 2017 (RCom-105), the Respondent provided its list of authorised persons.

b. The Respondent’s request for documents from the Vedanta arbitration

344.
On 17 December 2016 (RCom-59), the Respondent requested the Tribunal to order the Claimants to "produce all documents, including but not limited to letters, electronic communications, file notes, memoranda, internal correspondence and any other records, however made, evidencing any and all exchanges between the Cairn Claimants and the Vedanta Claimant [...] relating to the two arbitrations from 31 March 2015 onwards"453 (the Respondent’s "Request for Vedanta documents").
345.
By letter of 9 January 2017 (CCom-64), the Claimants objected to the Respondent’s document request, which they characterised as "unjustified, lacking in any relevance to this case or materiality to its outcome, grossly overbroad and procedurally inappropriate."454
346.
The Respondent replied to the Claimants’ objections on 15 February 2016 (RCom-67), arguing inter alia that the documents requested were material and relevant because Cairn was "seeking to hide behind Vedanta to justify its failure to put in place or agree to coordination measures as encouraged by the Tribunal, and avoid the consequence of that refusal (i.e. a stay of the present proceedings)."455
347.
In their letter of 22 February 2017 (CCom-74), the Claimants reiterated that "there [we]re no documents responsive to the Respondent’s request", asserted that "Cairn and Vedanta ha[d] never strategically coordinated, let alone discussed, their respective arbitration strategies", and that the Claimants had "complied with all applicable procedural rules related to the present arbitration, including those pertaining to confidentiality."456 They nonetheless submitted that, had such coordination existed, it would not have been improper, and the documents sought would have had no relevance or materiality to the outcome of this arbitration.

c. The Tribunal’s decision on the Parties’ unscheduled document requests

348.
On 18 May 2017, the Tribunal issued PO5 which contained the Tribunal’s reasoning and decision on both the Claimants’ Document Request No. 2 and the Respondent’s request for documents from the Vedanta arbitration.
349.
On that same day, the Tribunal issued PO6 setting out the confidentiality protections to be applied to any documents produced in response to the Claimants’ Document Request No. 2 ("Restricted Documents"), including by allowing limited disclosure to a list of specifically authorised persons ("Authorised Persons").
350.
The Parties’ compliance with these orders is addressed in Section III.G.2 below.

2. Scheduled document production requests

351.
On 3 April 2017, the Parties exchanged scheduled document requests.
352.
Pursuant to the procedural calendar, the Parties were due to produce any documents which they voluntarily agreed to produce and/or make reasoned objections to the opposing Party’s document requests within two weeks from the date of the requests, i.e., on 14 April 2017. However, on 14 April 2017, the Respondent informed the Tribunal that that day was "a public holiday on account of Good Friday and it [would] revert after seeking instructions on Monday, 17 April 2017".457
353.
On 18 April 2017 (RCom-93), the Respondent wrote to the Tribunal to request a two-week extension in the first instance to respond to the Claimants’ document requests, while noting that further time could be required given the breadth of the Claimants’ document requests.
354.
On 19 April 2017 (CCom-95), the Claimants objected to the Respondent’s request for an extension. At the same time, the Claimants stated that they saw no reason to delay the submission of their own responses to the Respondent’s document requests. They therefore submitted their responses and objections to the Respondent’s document requests, as well as their voluntary production of documents.
355.
On 20 April 2017 (AT-66), the Tribunal ruled on the Respondent’s request for an extension. It noted that the Respondent had already had two weeks to assess the Claimants’ document production requests and, while it understood that there might be logistical difficulties in locating documents and assessing them for relevance and privilege, this was unlikely to be discovered long after the issuance of the procedural calendar and only shortly before the term for the Parties to state their objections to certain requested documents. It also noted that a two-week extension would seriously jeopardise the procedural calendar. To minimise this, the Tribunal issued a number of directions (AT-66).
356.
On 24 April 2017 (RCom-95), the Respondent informed the Tribunal that "its search for documents responsive to the Claimants’ document requests ha[d] begun", noting that this had "involved notifying relevant offices in a number of government departments which are located throughout India and which are considered likely to be in possession of certain documents."458 It added that once any responsive documents were located, it would "swiftly respond with any objections / its agreement to produce."459 The Respondent argued that "[t]he principal logistical difficulties evidently lie in the process of identifying and locating these documents", and reiterated its complaints with respect to the breadth of the Claimants’ document requests, noting that many documents were archived or were spread out in various government departments across the country.460 As a result, the Respondent requested a further extension of three weeks to respond to the Claimants' document requests.
357.
On 25 April 2017 (CCom-97), the Claimants objected to the Respondent's new request for an extension. The Claimants argued inter alia that the Respondent had by now had over three weeks to assess the Claimants' requests, that the Respondent had ignored the Tribunal's directions of 20 April 2017, that many of the Claimants' requests should be easily accessible or already gathered for the preparation of the Respondent's own case, and as a result there was "simply no reason why the Claimants must be deprived of available documentary evidence in preparing their next submission, due 23 June 2017."461 The Claimants therefore requested the Tribunal to "(i) require the Respondent to state any objections it may have to the Claimants' document requests by this Friday, 28 April 2017, after which any objections the Respondent has failed to raise will be deemed to be waived; and (ii) reiterate that the Respondent must begin producing documents which are accessible and to which it does not object immediately on a rolling basis."462
358.
On 28 April 2017 (AT-68), the Tribunal ruled on the Respondent's new request for an extension. It noted that, as a result of this new request for an extension, the Respondent had de facto obtained the two-week extension that had already been denied, and directed the Respondent to submit its responses to the Claimants' document requests by 1 May 2017 or the next business day.
359.
On 3 May 2017 (RCom-98), the Respondent submitted its Reply to the Claimants' Objections to the Respondent's document requests. Also on 3 May 2017 (RCom-99), the Respondent wrote to request the Tribunal to reconsider its directions of 28 April 2017, and to request a new extension of an additional 4 weeks (i.e., until 30 May 2017) to respond to the Claimants' document requests.
360.
On 4 May 2017, the Claimants objected to the Respondent's new request for an extension. The Claimants noted that all the Respondent needed to do at this point was to provide its objections to the Claimants' document requests, and that the Respondent's search for the documents "need not delay this initial step, since the production of documents to which the Respondent does not object can occur on a rolling basis, as the documents become available."463 They therefore requested that "the Respondent be required to (a) provide its responses and objections to the Claimants' document requests by Monday, 8 May 2017, failing which the Respondent will be deemed to have waived any objections as to the relevance and materiality of the categories of documents requested; and (b) begin producing documents to which it does not object on a rolling basis as they become available thereafter."464