Vodafone threatens govt with arbitration proceedings
New Delhi: Terming the move to amend tax laws with retrospective effect as "denial of justice", telecom giant Vodafone Tuesday threatened to drag the government to international arbitration if it was made liable to pay Rs 11,000 crore in taxes over a 2007 acquisition.
The company's Dutch unit, Vodafone International Holdings BV, today served a notice of dispute to the Indian government, invoking an investment treaty between India and the Netherlands.
A proposal contained in the Finance Bill 2012 aims to amend law to retrospectively tax cross-border transactions dating back to April 1, 1962. The move follows the Supreme Court ruling that Vodafone wasn't liable for taxes stemming from its 2007 acquisition of Hutchison's stake in Hutchison-Essar.
The company sent the notice to Prime Minister's Office, with copies marked to Finance Minister Pranab Mukherjee, Law Minister Salman Khurshid and Telecom Minister Kapil Sibal, claiming the proposed law violated the international legal protections granted to Vodafone and other international investors in India.
While Telecom Secretary R Chandrasekhar stated that the issue will be dealt by Ministry of Finance as it was a tax related matter, Economic Affairs Secretary R Gopalan said the government has not received any notice from Vodafone yet.
"The retrospective tax proposals amount to a denial of justice and a breach of the Indian government's obligations," Vodafone said in a statement.
The company has asked the Indian government to abandon or suitably amend the retrospective aspects of the proposed legislation as Vodafone would prefer to reach an amicable solution to this matter.
"However, if the Indian government is not willing to do so, Vodafone will take whatever steps are necessary to protect its shareholders' interest, including investment treaty arbitration proceedings under the bilateral investment treaty against the Indian government," it said.
Vodafone said the dispute arose from the retrospective tax legislation proposal which, if enacted, would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone.
It said the proposed legislation would also "countermand" the verdict of the Supreme Court in January 2012.
UK-based Vodafone had, in 2007, bought Hong Kong-based Hutchison's telecom business that included India assets for USD 10.7 billion.
When contacted, Department of Telecom Secretary R Chandrasekhar said, "It is an income tax matter and so the Finance Ministry will deal with it. We have nothing to say on the matter."
Under the BIT (bilateral investment treaty), Vodafone said the Indian government is obliged to accord fair and equitable treatment to investors, provide full protection and security, not breach the legitimate expectations of investors in making investments, not deny justice or breach previously provided assurances and not take steps to indirectly expropriate the investment, among other things.
The statement said Vodafone believes that the retrospective tax proposal amounts to a denial of justice and a breach of the Indian government's obligation under the BIT to accord fair and equitable treatment to investors.
It said the Indian government's retrospective tax proposals have also raised significant and widespread concern within India and internationally, and have been criticised by businesses and industry bodies representing more than 2.5 lakh companies across the US, Europe and Asia.
Vodafone also added that questions raised by Indian Ministries cannot be unilaterally decided by India.
"They would have to be addressed to, and decided by, the arbitral tribunal if it came to that. As noted in our statement this morning, Vodafone would like an amicable outcome to this issue, if achievable," Vodafone said in a statement.
"It is their (Vodafone) prerogative and we will examine the notice," Finance Minister Pranab Mukherjee said.
More from India
More from World
More from Sports
More from Entertaiment
- Cortana for Android available for public beta in US
- Xiaomi Redmi 2 Vs Redmi 2 Prime: Specification comparisons
- Middle class woes to continue, wholesale onion price shoots up to Rs 57 per kg
- Alleged land encroachment in Greater Noida: HC asks DM to decide representation in 3 months
- Watch: Review of Mahindra TUV300