India Denies Vodafone Can Seek Arbitration in Tax Dispute
Published on: 3rd Mar 2014
By: Ian Mansfield
India's government has warned Vodafone that it may not be possible to seek International Arbitration in its USD2.2 billion tax dispute despite warnings from the mobile network that it might seek that if a negotiated settlement is not agreed.
The government says that tax issues are not covered by the bilateral investment protection agreement (BIPA) between India and the Netherlands, where Vodafone's holding company for its Indian investment is based.
"The ministry has written that tax disputes are not covered under the treaty invoked by them," a finance ministry official told the Economic Times newspaper.
Vodafone still has three months to decide on whether it will attempt to seek Arbitration, even if the government disputes the legitimacy of such action. However, the government has put the dispute on hold at its end, pending the outcome of an unrelated transfer pricing tax dispute.
The Indian government is known to have been rattled by international reaction to how it handled the tax dispute, particularly the retrospective changing of tax laws, and is said to be keen to seek a face-saving compromise with Vodafone over the issue.
Vodafone is also said to be keen on a settlement, if only to avoid the risk of the dispute overshadowing any attempts to acquire smaller networks in the country in the expected consolidation wave.
On the web: Economic Times