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SICC Grants Stay on Proceedings in Vodafone Retrospective Tax Case

The Singapore International Commercial Court (SICC) has granted a stay on proceedings under the Netherlands-India Bilateral Investment Treaty (Dutch BIT) between Vodafone Group Plc and the Indian government in the Rs. 22,000 crores retrospective tax dispute. It will next hear the case after January 1, 2022, the UK telecom major has said.

“The SICC granted a stay in the Dutch BIT proceeding and agreed not to set a date for the hearing until after 1 January 2022.

VIHBV and Vodafone Group Plc will continue to defend vigorously any allegation that VIHBV or Vodafone India is liable to pay tax in connection with the transaction with HTIL,” Vodafone Group said in its half yearly earnings report on Tuesday.

VIHBV stands for Vodafone International Holdings BV while HTIL is Hutchison Telecommunication International Ltd group. Back in 2012, Indian had passes a law which facilitated claiming withholding tax retrospectively from Vodafone on its acquisition of HTIL in 2007. The law had overturned a Supreme Court verdict, which had earlier that year ruled in Favour of the telco, saying it owed no withholding taxes to India on the deal. In 2013, VIHBV initiated arbitration proceedings under the Netherlands-India Bilateral Investment Treaty, which, in September 2020, ruled in the operator’s favour.

India had challenged the verdict issued by the Permanent Court of Arbitration at The Hague, which had said Vodafone was entitled to protection of its investments under an India-Netherlands treaty and asked India to cease such breaches of the international treaty. The tribunal directed India to reimburse Rs.43 crores along with Rs. 3,000 as legal costs. The Indian government’s liability totaled Rs. 85 crores, including Rs.45 crores of tax levy that was asked to be refunded.

The statement from Vodafone Group comes with the telco yet to accept the Indian government’s proposal to settle the tax dispute.

New Delhi in mid-October had notified fresh rules to facilitate settlement of the retrospective tax dispute with Vodafone. The company had 45 days from then to file its application to settle its tax dispute.

“In August 2021, the Indian Parliament passed new tax legislation, which affects the retrospective effect of the Finance Act 2012. The impact of this legislation on the Dutch and UK BIT proceedings, in particular whether the Indian government will withdraw its challenge to the arbitration award in the Dutch BIT, is unknown as of the date of this report,” the UK-based telco said.     

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