The arbitration pertains to a retrospective tax, which has since grown to over Rs22,000 crore, imposed on Vodafone in 2012 for its $11 billion acquisition of Hutchinson Telecom. Photo: Mint
The arbitration pertains to a retrospective tax, which has since grown to over Rs22,000 crore, imposed on Vodafone in 2012 for its $11 billion acquisition of Hutchinson Telecom. Photo: Mint

Vodafone tax row: Delhi HC admits govt’s plea against order refusing to halt second arbitration

Vodafone counsels gave an oral assurance to the high court that the company will 'not push the matter' before the UK arbitral tribunal till the matter comes up before the division bench for hearing in July

New Delhi: A two-judge bench of Delhi high court on Thursday admitted the Centre’s appeal against an order of a single-judge bench refusing to halt the second arbitration in the second arbitration invoked by Vodafone Group Plc against it, while another arbitration on the same case is under way.

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 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.

Counsels appearing for Vodafone Group Plc, Abhishek Manu Singhvi and Anuradha Dutt gave an oral assurance to the court that they would “not push the matter" before the UK arbitral tribunal till the matter comes up before the division bench for hearing in July.

It is the Centre’s case that the invocation of simultaneous arbitration under different bilateral agreements was a textbook example of “treaty-shopping" by Vodafone and an abuse of process of law, which was antithetical to intention of signatory parties to such investment protection treaties.

Vodafone, on the other hand, has 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 available under the BIPAs.

The single-judge bench had refused to interfere in the second arbitration initiated under the UK BIPA as there were “no compelling reasons" to do so. 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 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 Delhi high court.

The matter would be next heard on 5 July.

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