New Delhi: Delhi high court is set to pronounce its verdict on 7 May on the centre-Vodafone Group Plc arbitration row over a retrospective tax liability imposed on the telco for its $11 billion acquisition of Hutchinson Telecom.

The court had reserved its judgement on 8 March after hearing the arguments put forth by the centre, Vodafone Group Plc and an amicus curie

The verdict would be the first of its kind as it is likely to settle issues about the legitimacy of bilateral investment treaties in so far as it seeks to protect a foreign investor from allegedly unfair treatment by the country it is investing in.

After the tax liability of over Rs22,000 crore was imposed in 2012, Vodafone had invoked arbitration under the India-Netherlands Bilateral Investment Protection Agreement (BIPA) through a notice of dispute of 17 April 2012 and notice of arbitration of 17 April 2014.

It also invoked arbitration under the India-UK BIPA on 24 January 2017.

The second arbitration was stayed by the Delhi high court in August 2017, after centre moved the court seeking an anti-arbitration injunction on the ground that both arbitrations—under India-Netherlands BIPA as well as India-UK BIPA—dealt with the same issue i.e. whether the amendment to the Income Tax Act which imposed a retrospective multi-crore liability on Vodafone in relation to its $11 billion deal in 2007 acquiring the stake in Hutchinson Telecom was in consonance with the BIPAs.

This stay was revoked by the Supreme Court on 15 December 2017 when it allowed Vodafone to appoint an arbitrator in the second arbitration but added that the proceedings would not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.

During the course of proceedings, the centre had argued that the invocation of simultaneous arbitration under different BIPAs as was a textbook example of ‘treaty-shopping’ by Vodafone, which was antithetical to the 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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