January 9, 2018
Vodafone Group has said it would agree to consolidate its two international arbitrations initiated against India in connection with a tax demand of Rs.11,000 crore, if the country were to agree as well.
Vodafone's lawyer Harish Salve told the Delhi High Court on Monday, that since the Supreme Court had allowed appointment of a presiding arbitrator in the second arbitration under India-UK Bilateral Investment Protection Agreement (BIPA), nothing survives in the central government's suit opposing the proceedings.
Vodafone will tell the second tribunal, under the India-UK BIPA, to consolidate the two proceedings if India were to consent to it, Salve told Justice Manmohan during the proceedings.
Salve said this would be the company's defence against India's argument that the two proceedings under the different BIPAs was an abuse of the process of law. He further argued that government should go after Hutchison since it primarily earned money from the transaction.
Salve went on to add that Indian courts do not have the jurisdiction to stop the arbitration proceedings being conducted under international law. "Domestic courts have no role to play in public international law," Salve said, adding that since the second arbitral tribunal has also been formed, the high court need not hear the matter anymore.
The apex court had on December 14 last year said the chairman or presiding arbitrator can be appointed so that the tribunal is set up but it should not commence hearing till the Delhi High Court decides the pending matter by January 10. The hearing in high court will continue on Tuesday.
Vodafone has initiated two arbitration proceedings against India, one under the India-UK BIPA and another under India-Netherlands BIPA, in connection with the tax demand raised by the government related to its $11-billion deal acquiring the stake of Hutchison Telecom in 2009.
The government feels that the Hutchison-Vodafone deal was liable for tax deduction at source (TDS) under the Income Tax (IT) Act, and since Vodafone had not deducted the tax at source, the government raised the demand of Rs.11,000 crore. With interest and penalties, the demand has risen to around Rs.20,000 crore.
While the Supreme Court subsequently quashed the demand on January 20, 2012, the government amended its IT Act retrospectively, putting the liability back on Vodafone Group.
Vodafone Group, through its Dutch subsidiary — Vodafone International Holdings BV (VIHBV) — in April 2012 invoked arbitration under India-Netherlands BIPA and then issued notice of arbitration of in April, 2014.
While proceedings under India-Netherlands BIPA were pending, it initiated another arbitration under the India-UK BIPA in January 2017, which was challenged by the Indian government on the grounds that two claims were based on the same cause of action and sought identical reliefs but from two different tribunals constituted under two different investment treaties against the same host state.
In the hearings so far, the Centre has argued that disputes encompassing tax demands raised by a host state were beyond the scope of arbitration provided under the BIPA as taxation was a sovereign function and could only be agitated before a constitutional court of the host state.
It had also argued that laws passed by the Parliament could not be adjudicated by an arbitral tribunal. It has added that the laws do not fall within the ambit of BIPA or any other international treaty.
[The Economic Times]