Vodafone Group Plc won an international arbitration case against the Indian government involving US$2 billion tax claim dispute.
The international arbitration tribunal in The Hague ruled that India’s imposition of a tax liability on Vodafone, as well as interest and penalties, were in a breach of an investment treaty agreement between India and the Netherlands, Reuters reported.
India claims a total of US$ 3.79 billion including about $2 billion in tax, as well as interest and penalties.
The ruling said the government’s demand is in breach of “fair and equitable treatment” and it must cease seeking the dues from Vodafone. It also directed India to pay US$ 5.47 million to the company as compensation for its legal costs, Reuters 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.
“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.