Entitled of relief to restrain Vodafone from initiating second international arbitration: Centre to HC

The Centre Tuesday told the Delhi High Court that it was entitled to the relief of restraining telecom major Vodafone from initiating a second international arbitration against India in connection with a tax demand, irrespective of the outcome of arbitration proceedings under the India-Netherlands Bilateral Investment Protection Agreement (BIPA).

The Centre urged the high court to sine die adjourn its appeal against the single judge’s verdict permitting consolidation of two international arbitrations initiated by the company against India under the India-Netherlands and India-UK BIPA.

A bench of Justices Rajiv Sahai Endlaw and Asha Menon said it would pass an order on the appeal and indicated that it will give an option to the Centre to revive the appeal later.

Additional Solicitor General Chetan Sharma submitted, “Let the appeal be deferred sine die. Our suit, according to us, shall be decreed. They cannot put the India-UK BIPA gun on my head and say you have to do this.”

He contended that initiating arbitration under India-UK BIPA was an abuse of process and illegal in law.

Advocate Anuradha Dutt, representing Vodafone, made the statement that the company would not proceed with the second arbitration under the India-UK BIPA unless the award under the India-Netherlands BIPA is set aside.

In September, an international arbitration court ruled that the Indian government seeking Rs 22,100 crore in taxes from Vodafone using retrospective legislation was in "breach of the guarantee of fair and equitable treatment" guaranteed under the bilateral investment protection pact between India and the Netherlands.

The high court had on November 17 granted time to the Centre to respond whether it would challenge the India-Netherland BIPA arbitration award.

However, no statement has yet been made by the government on this.

The ASG said, “In view of the fact that, even according to the respondents (Vodafone), they would be entitled to pursue arbitration proceedings under the India-UK BIPA only if the award in the arbitration proceedings under the India-Netherlands BIPA is set aside, further consideration in the present appeal may be deferred, keeping the respondents bound by their undertaking as stipulated in the order of this court dated February 11, 2020 and granting the parties liberty to have the present appeal listed at the appropriate stage.”

The high court was hearing Centre’ plea against the international arbitration the company has initiated against India under the India-UK BIPA in connection with a tax demand.

The central government has appealed against a single judge order of May 7, 2018 dismissing its plea against the international arbitration initiated by Vodafone.

The division bench had in May 2018 issued notice to Vodafone and sought its reply to the government's appeal.

The Centre has challenged the decision of the single judge permitting consolidation of two international arbitrations initiated by the company against India under the India-Netherlands and India-UK BIPA.

Vodafone had initiated the arbitration proceedings under the India-UK and India-Netherlands BIPA in connection with the tax demand raised against it in relation to its USD 11 billion deal to acquire the stake of Hutchison Telecom.

While proceedings under the India-Netherlands BIPA were pending, the telecom major initiated a second arbitration under India-UK BIPA as well on January 24, 2017.

The Centre had contended before the single judge that the Vodafone Group had abused the process of law by initiating two international arbitrations.

The single judge, while dismissing the Centre's plea, had given it liberty to raise the issue of 'abuse of process' before the consolidated India-UK BIPA tribunal.

He had said the Centre was a party to the BIPA, a treaty between two sovereign governments (of the United Kingdom and India). The obligations under such treaties were not subject to domestic laws and disputes arising out of them were not subject to the jurisdiction of the national courts, the judge had observed.