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(Adds Indian government statement in paragraph 7)
By Aditi Shah
NEW DELHI, Sept 25 (Reuters) - Vodafone Group Plc
said on Friday it had won an international arbitration case
against the Indian government, ending one of the most
high-profile disputes in the country involving a $2 billion tax
claim.
An international arbitration tribunal in The Hague ruled
that India's imposition of a tax liability on Vodafone, as well
as interest and penalties, were in a breach of an investment
treaty agreement between India and the Netherlands, two sources
with direct knowledge of the matter said.
India had claimed a total of 279 billion rupees ($3.79
billion) including about $2 billion in tax, as well as interest
and penalties, one of the sources said.
The tribunal, in its ruling, said the government's demand is
in breach of "fair and equitable treatment" and it must cease
seeking the dues from Vodafone. It also directed India to pay
4.3 million pounds ($5.47 million) to the company as
compensation for its legal costs, one of the sources added.
Vodafone said in a statement the amount of the award was
confidential. Shares in the company's India unit, Vodafone Idea
, ended 13% higher on Friday.
"The tribunal held that any attempt by India to enforce the
tax demand would be a violation of India's international law
obligations," Vodafone said in its statement.
India's finance ministry said it will carefully study the
award, together with its lawyers. "After such consultations, the
government will consider all options and take a decision on
further course of action including legal remedies," the ministry
said in a statement.
"Vodafone has finally got justice first from the Indian
Supreme Court and now from an international arbitral tribunal,"
said Anuradha Dutt, senior partner at DMD Advocates, an Indian
law firm representing the company.
The ruling brings an end to one of the most controversial
disputes in India under international treaty agreements that it
enters into with countries to protect foreign investments.
India is entangled in more than a dozen such cases against
companies, including Cairn Energy, over retrospective
tax claims and cancellation of contracts. The exchequer could
end up paying billions of dollars in damages if it loses.
To reduce future arbitration claims, India has ended such
agreements with over 50 countries and is working on a new law to
protect foreign investors by offering relief from possible
policy changes even as it upholds the right to tax them, Reuters
reported.
Vodafone's tax dispute stems from its $11 billion deal to
buy the Indian mobile assets from Hutchison Whampoa in 2007. The
government said Vodafone was liable to pay taxes on the
acquisition, which the company contested.
In 2012, India's top court ruled in favour of the telecom
provider but the government changed the rules to enable it to
tax deals that had already been concluded.
In 2014, Vodafone initiated arbitration proceedings against
India.
(Reporting by Aditi Shah
Editing by Euan Rocha, Robert Birsel and David Evans)
