Telecommunications major Vodafone has won an arbitration case against the government under the India-Netherlands Bilateral Investment Treaty, BloombergQuint reported on Friday. Vodafone has always maintained that there is no liability and that it will "continue to defend vigorously any allegation that VIHBV or Vodafone India Ltd is liable to pay tax in connection with the transaction with Hutchison and will continue to exercise all rights to seek redress". While the arbitral award has yet not been made public, it is worthwhile to take a look at the history of the dispute and the implications of the ruling for India.
Vodafone owns a 45.1% stake in Vodafone Idea, India's third largest mobile operator.
It, therefore, asks the Indian government to "cease the conduct in question, any failure to comply with which will engage its worldwide responsibility".
In an ideal world, the matter should have come to an end. "Hopefully today's judgement will serve as a reminder for current and prospective governments to do away with retrospective laws", he added.
In April 2014, Vodafone International Holdings initiated Arbitration Proceedings under the India - Netherlands Bilateral Investment Treaty.
In 2012, the Supreme Court quashed the demand. However, circumventing the effect of the apex court's judgment by resorting to retrospective legislation, certainly creates an unpredictable and unstable business environment. "If I was an advisor to the Indian government, I would suggest that the government should now bring an amendment to make this prospective and the same will boost investor sentiment which is extremely critical for India today", Dutt told FE. Vodafone succeeded in the highest court of the land on interpretation and that was sought to be negated by making retrospective amendments.
Afterward, a tribunal headed by Sir Franklin Berman was set up in June 2016 after Vodafone challenged India's use of a 2012 legislation giving it powers to retrospectively tax deals like Vodafone's United States dollars 11 billion acquisition of a 67 percent stake in the mobile phone business owned by Hutchison Whampoa in 2007.
PS5 release games: all confirmed titles and release dates
But retailers didn't follow the schedule after Walmart opened up pre-orders nearly immediately. You can also order additional controllers, charging stands, 3D audio headsets, and more.
However, the Centre said it will study the arbitration award and decide on its future course of action.
"This victory of Vodafone was expected considering the widespread condemnation India faced on its decision to retrospectively amend the law to tax Vodafone, overruling a favourable judgment from the Supreme Court against the tax office", said Amit Maheshwari, partner, Ashok Maheshwary & Associates.
It was not immediately known if the Indian government will abide by the arbitration award. "The Government of India has been asked to pay only 4.3 million pounds, i.e., about Rs. 40 crore which is 60 percent of the tribunal's administrative cost while the rest 40 percent of the cost would be borne by the Vodafone", sources said.
Details of the arbitration award were not available at the time of going to press.
"Hopefully, the Indian government will learn from this arbitration that an attractive investment climate requires that they respect the rule of law rather than undermine it", Prof. Certainty and stability form the basic foundation of any fiscal system'. He believes the government should have gone for the settlement long back.
India is now signing BITs either based on the 2016 Model which has a highly restrictive ITA provision, or which do not have ITA provisions at all, such as the India-Brazil BIT. The Vodafone dispute underscores this need more than ever. "Spoiled India's name, need to reverse!" he tweeted. This would also require capacity building and training of the government officials concerning worldwide investment law. That requires all the ministries and departments to coordinate with the Ministry of Finance, which is the nodal ministry for BITs and related matters.