Vodafone moves ICJ over tax arbitration with India

March 29, 2016 11:07 pm | Updated October 18, 2016 01:07 pm IST - NEW DELHI:

A man casts silhouette onto an electronic screen displaying logo of Vodafone India after a news conference to announce the half year results in Mumbai, India, November 10, 2015. Britain's Vodafone said on Tuesday it had started preparations to float its Indian unit as it reported a return to earnings growth for the group as a whole in the first half. REUTERS/Shailesh Andrade

A man casts silhouette onto an electronic screen displaying logo of Vodafone India after a news conference to announce the half year results in Mumbai, India, November 10, 2015. Britain's Vodafone said on Tuesday it had started preparations to float its Indian unit as it reported a return to earnings growth for the group as a whole in the first half. REUTERS/Shailesh Andrade

British telecom giant Vodafone is believed to have moved the Hague-based International Court of Justice (ICJ) seeking appointment of a judge to preside over an arbitration over its Rs.14,200-crore tax case.

Vodafone this month 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.

Vodafone in 2013 had invoked India-Netherlands bilateral investment treaty seeking resolution to the tax demand imposed on it by enacting 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 the ICJ as the presiding arbitrator.

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, sources said.

The government had initially slapped a tax demand of Rs.7,990 crore on Vodafone for failing to deduct tax on capital gains made over its $11-billion acquisition of 67 per cent stake in the mobile phone business owned by Hutchison Whampoa in 2007.

Last month the IT department sent a reminder notice to Vodafone seeking Rs.14,200 crore in tax and interest.

Cairn Energy of UK, which faces a total tax liability of over Rs 29,000 crore owing to the same retrospective legislation, had resorted to ICJ to force the government to join the arbitration.

In March last year, Cairn filed an arbitration notice and named former Bulgarian minister and lawyer Stanimir A Alexandrov as its arbitrator for resolution of the tax demand linked to 2006 reorganisation of Cairn India, its one-time Indian subsidiary with oilfields in Rajasthan.

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