Vodafone tax dispute: Govt calls invocation of second arbitration ‘flagrant’ abuse of law
New Delhi: The central government on Thursday told the Delhi high court that Vodafone Group Plc.’s move invoking arbitration under the India-UK Bilateral Investment Protection Agreement (BIPA), while arbitration proceedings were already going on under the India-Netherlands BIPA on the same issue was ‘flagrant’ abuse of the process of law.
Centre began its arguments in the arbitration dispute before the court with the clarification that Centre had ‘moved (the high court) against the company, Vodafone and not against the arbitration tribunal existing under the two BIPAs’.
Additional solicitor general Sanjay Jain, appearing for the Centre, argued that the invocation of second arbitration under India-UK BIPA was ‘vexatious and oppressive’, and that Republic of India should not be stopped from approaching a domestic forum against such an abuse of treaty process.
Initiation of multiple arbitral proceedings under different BIPAs went against the intention of the states that are party to such international agreements, he submitted.
Jain also rejected Vodafone’s plea that the retrospective amendment amounted to breach of its expectations of ‘fair and equitable’ treatment from the Centre, stating that the 2012 amendment was in the nature of a ‘clarification’ and Vodafone Group Plc. was aware of the tax liabilities that would be imposed on them.
Vodafone Group Plc. invoked the first arbitration under the India-Netherlands BIPA through a notice of dispute of 17 April, 2012 and notice of arbitration of 17 April, 2014. The second arbitration under the India-UK BIPA was invoked on 24 January, 2017. Both the arbitrations have the same subject matter, i.e. the application of retrospective amendment to the Income Tax Act which imposed a Rs11,000 crore liability on Vodafone in relation to its $11 billion deal in 2007 acquiring the stake in Hutchinson Telecom, in 2012.
The matter is listed for further arguments on 25 January.
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