Vodafone has filed a legal notice against the Indian government over its ongoing $2 billion tax dispute in the nation, invoking the terms of a bilateral investment treaty (BIT).
The operator, through Dutch subsidiary Vodafone International Holdings, threatened to seek international arbitration under the terms of the treaty between India and the Netherlands. The notice of dispute just filed is the first step in this process.
Vodafone's complaint centers on the government's proposal to retroactively change India's tax law to allow it to collect on the 113 billion rupees ($2.2 billion) the income tax department claims it is owed.
In a statement announcing the filing, Vodafone said the company believes that the planned amendments “amount to a denial of justice and a breach of the Indian government’s obligations under the BIT to accord fair and equitable treatment to investors.”
The company gave the government an ultimatum – abandon or amend the retroactive aspects of the legislation, or “Vodafone will take whatever steps are necessary to protect its shareholders’ interests, including commencing investment treaty arbitration proceedings under the BIT against the Indian government.”
The tax claim relates to Vodafone's $11.2 billion acquisition of Hutchison's stake in what is now Vodafone India in 2007.
Vodafone and the tax department fought a long-running legal battle over the tax claim, with Vodafone ultimately emerging victorious. The court ruled the tax department had no jurisdiction in the transaction, as it occurred overseas.
But the proposed amendment, which would be applied retrospectively from 1962, would expand India's tax law to also cover overseas transactions of domestic assets. India's finance ministry has asserted that Vodafone will have to pay immediately if the amendment takes effect.