The Indian government has named Rodrigo Oreamuno from Costa Rica, an international arbitration expert, as its nominee to resolve the Rs 200 billion tax dispute with Vodafone Group Plc which is currently under arbitration.
Oreamuno served as the vice-president of Costa Rica from 1994 to 1998 and has also led the country?s bar association as president. Oreamuno’s appointment comes after the government?s earlier representative, former Chief Justice of India RC Lahoti, resigned in May 2015, giving a major setback to the progress of the arbitration process.
Meanwhile, Vodafone has reached out to Canadian trial lawyer Yves Fortier to represent the company in the arbitration process.
Both Fortier and Oreamuno will have to now decide on a third arbitrator because Abdulqawi Ahmed Yusuf, vice-president of the International Court of Justice, whose name was earlier suggested for the role of the third arbitrator has declined to take up the position. The arbitration process is likely to take place outside India and the United Kingdom as Vodafone had invoked an India-UK treaty.
The tax dispute dates back to 2007 when Vodafone bought Hutchison’s Indian telecom operations in an $11 billion deal, marking its entry into India. The government held Vodafone responsible for not withholding tax from Hutchison on grounds that even though the transaction was conducted overseas, the underlying asset was in India and tax was therefore due to the Indian government. Later, India’s Supreme Court overturned the demand, leading the government to amend the income tax law in 2012 to tax such indirect transfers with retrospective effect. As a result of this move, Vodafone faces a demand of over Rs 200 billion, out of which Rs 80 billion is the tax due and the remaining amount is to be paid as interest and penalty.
