The Hague-based International Court of Justice will appoint a presiding judge of a three-member arbitration panel on the Rs 22,100-crore tax demand by India on the Vodafone group using retrospective tax legislation, the British telecom giant said today.
Vodafone had in March moved ICJ after arbitrators appointed by it and the government of India failed to reach a consensus on selection of a neutral/presiding judge of the three-member panel.
“On April 17, 2014, Vodafone International Holdings BV served its notice of arbitration under the Dutch Bilateral Investment Treaty, formally commencing the Dutch BIT arbitration proceedings,” Vodafone said while announcing financial earnings for the year ended March 2016.
Both sides appointed their arbitrators. “The two party- appointed arbitrators failed to appoint a chairman.
Consequently, the president of the International Court of Justice will now appoint the third arbitrator who will act as the presiding arbitrator,” Vodafone said.
Vodafone had invoked the India-Netherlands bilateral investment treaty seeking resolution to the tax demand imposed by India through a tax law with retrospective effect to sidestep a Supreme Court judgement that went in the company’s favour.
Conciliatory proceedings were initiated to resolve the dispute, but differences led to a breakdown following which arbitration was initiated.
The government had in June 2014 appointed former chief justice of India R C Lahoti as arbitrator while Vodafone named Canadian trial lawyer Yves Fortier as its choice.
The two had zeroed in on Abdulqawi Ahmed Yusuf of ICJ as the presiding arbitrator.
However, Lahoti recused himself from the case in May 2015 and a month later Yusuf too declined to be part of the panel.
Thereafter, India in July last year named Costa Rica-based lawyer Rodrigo Oreamuno to arbitrate on its behalf.
But Oreamuno and Fortier have not been able to decide on a presiding arbitrator forcing Vodafone to move ICJ.
The government had initially gone for a tax demand of Rs 7,990 crore on Vodafone for failing to deduct tax on capital gains made over its USD 11-billion acquisition of 67 per cent stake in the mobile-phone business owned by Hutchison Whampoa in 2007.
Vodafone said it received a reminder of an outstanding tax demand of Rs 22,100 crore on February 4 this year. “The latest reminder threatens enforcement action if the demand is not satisfied,” it added.
The tax demand included interest and penalty.
“Should a further demand for taxation be received by VIHBV or any member of the Group as a result of the retrospective legislation, we believe it is probable that we will be able to make a successful claim under the Dutch BIT and/or UK BIT,” it said.
Vodafone said it had on June 15, 2015 served a trigger notice on the Indian government under the United Kingdom-India Bilateral Investment Treaty (UK-BIT) in respect of retrospective tax claims under the Finance Act, 2012.