HC rejects plea to stay Vodafone’s UK arbitration in tax dispute case
New Delhi: The Delhi high court on Monday dismissed a petition filed by the central government seeking an injunction against a second arbitration invoked by Vodafone Group Plc against it, while another arbitration on the same case is under way.
Stating that no compelling reasons existed to interfere in the present case, the court asked the centre to approach the UK arbitration tribunal if it wanted to make any objections. The court also stated that if the centre agrees, the two parties may submit a petition to the tribunal asking for both arbitration cases to be consolidated, as Vodafone had earlier suggested.
The firm had invoked the first arbitration under the India-Netherlands Bilateral Investment Protection Agreement through a notice of dispute on 17 April 2012 and notice of arbitration on 17 April 2014.
Subsequently, Vodafone invoked a second arbitration under the India-UK Bilateral Investment Protection Agreement on 24 January 2017.
The arbitration pertains to a retrospective tax—which has since grown to over Rs22,000 crore—imposed on the telco in 2012 for its $11 billion acquisition of Hutchinson Telecom.
The second arbitration was stayed by the Delhi high court in August 2017 after the central government said that both arbitrations dealt with the same issue—that is, whether the amendment to the Income Tax Act which imposed a retrospective liability on Vodafone was in consonance with the bilateral investment treaties with the Netherlands and the UK.
This stay was revoked by the Supreme Court on 15 December 2017, allowing Vodafone to appoint an arbitrator in the second arbitration, but the apex court added that the proceedings would not start until the completion of hearings in the case before the Delhi high court.
During the course of proceedings, the centre had argued that the invocation of simultaneous arbitration under different bilateral agreements was a textbook example of “treaty-shopping” by Vodafone, which was antithetical to intention of signatory parties to such investment protection treaties.
Vodafone, on the other hand, had argued that it was entitled to protection against “unfair measures against investors” under the two bilateral investment treaties and no domestic court could restrain an aggrieved party from seeking such remedy.
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