UK-based Vodafone is understood to have moved the International Court of Justice in The Hague, urging it to intervene in its retrospective taxation case with the Indian government and appoint a third arbitrator, reports
fe Bureau in New Delhi. Sources said that Vodafone has written to the ICJ president in this regard.
Though Vodafone invoked international arbitration in the matter more than two years ago under the India-Netherlands bilateral treaty agreement, it has not progressed so far because the two sides have been unable to appoint a third, neutral arbitrator. Without this, the arbitration process cannot begin.
However, what is significant in Vodafone moving the ICJ is a clear indication that it has rejected the government’s offer of a one-time settlement in such disputed tax matters where the concerned companies can pay the principal tax demand while the government would waive the interest and penalty component.
The offer, which was made in the Budget, opens from June 1. Though the closing date has not been finalised, in all probability it will be open for three to four months. The scheme entails that whichever company settles under it will have to pay the tax demand within a month of signing the agreement.
In response to an email query on the subject, a Vodafone spokesperson said, “Vodafone does not comment on the arbitration process and so I will not be able to respond to your questions.” However, sources said that it still has time to finalise its stand.
Vodafone has named Yves Fortier of Canada as its nominee on the arbitration panel, while the Indian government has appointed international lawyer Rodrigo Oreamuno to arbitrate on its behalf. The Indian government had first named former CJI RC Lahoti as its representative but he recused himself.
In fact, the government and Vodafone had last year decided on the third arbitrator in Abdulqawi Ahmed Yusuf of the ICJ but he declined to be part of the three-member panel. Since then there’s been no agreement on the two sides on the third, neutral arbitrator. Vodafone is facing a total tax demand of Rs 14,300 crore (including interest and penalty), of which, basic demand is that of Rs 7,990 crore.
The government had initiated a conciliation process with the company in 2013 but dropped it once the latter invoked arbitration under the BIT. The government’s stand has been that tax matters are not under the purview of BIT.
Finance minister Arun Jaitley had said on Sunday that the one-time offer is optional and nobody will be coerced to accept it.
In 2012 the government lost the Vodafone tax case related to its $11-billion acquisition of 67% stake in the Indian mobile-phone business owned by Hutchison Whampoa in 2007 in the Supreme Court.
It subsequently brought in the controversial retrospective amendment which overturned the SC judgment.