New Delhi: Vodafone Group Plc. on Wednesday told the Delhi high court that it would not make the constitutional validity of the 2012 amendment to the Income Tax Act, 1961 a subject matter of arbitration before the international arbitration tribunal(s).
The 2012 amendment forces Vodafone to pay tax and penalty on its 2007 acquisition of a 67% stake in Hutch-Essar in India.
Appearing for Vodafone, Harish Salve said the arbitration clause was invoked by Vodafone Group Plc. for breach of its expectations of ‘fair and equitable’ treatment from the Centre under the two bilateral investment treaties, namely, India-UK bilateral investment protection agreement (BIPA) and India-Netherlands BIPA.
“You may breach the treaty without breaching the Constitution.. No State can take defense of national law to avoid international obligations under public international law," Salve said.
The high court was hearing Indian government’s plea against Vodafone’s move to invoke the arbitration clause under the India-UK BIPA after it had already initiated proceedings under the India-Netherlands BIPA.
Salve further argued that issues of breach of a bi-lateral investment treaty (BIT) have to be determined and judged on the principles of international law by an international court.
“International claims should be decided on merits.. This court (Delhi high court) is not an international court.. it is only concerned with municipal law. When it comes to breach of a BIT or any international treaty, Indian courts are equivalent to the Republic of India by the ‘rule of attribution’ under public international law", Salve said.
Vodafone 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, after the introduction of the retrospective amendment to the Income Tax Act which imposed a Rs11,000 crore tax liability on Vodafone in relation to its $11 billion deal acquisition of the entire 67% holding of CK Hutchison Holdings Ltd in Hutchison Essar Ltd in 2012.
The second arbitration under the India-UK BIPA was invoked on 24 January, 2017. This second arbitration was stayed by the Delhi high court in August 2017 on the grounds that both arbitral proceedings were on the same issue.
The Supreme Court on 15 December, 2017, had allowed Vodafone to appoint an arbitrator in the second arbitration but added that the proceedings would not start until completion of hearings in the case before the Delhi high court.
Vodafone Group Plc. has concluded its arguments in the matter. Centre is set to begin arguments from 18 January.