Singapore court puts a stay on retrospective tax dispute between Vodafone Group and the Indian government under Dutch BIT

The Singapore International Commercial Court (SICC) has granted a stay on proceedings of Rs 220 billion retrospective tax dispute between Vodafone Group Plc and the Indian government under the Netherlands-India Bilateral Investment Treaty (Dutch BIT).

SICC will next hear the case post January 1, 2022.

Earlier in 2012, India had passed a law which facilitated claiming withholding tax retrospectively from Vodafone on its acquisition of Hutchison Telecommunications International Limited (HTIL) in 2007. The law had overturned a Supreme Court verdict which had earlier ruled in favour of the telco, saying it owed no withholding taxes to India on the deal.

In 2013, Vodafone International Holdings BV (VIHBV) initiated arbitration proceedings under the Dutch BIT, which, in September 2020, ruled in the favour of the operator.

India had challenged the verdict issued by the Permanent Court of Arbitration at The Hague according to which Vodafone was entitled to protection of its investment under an India-Netherlands treaty and asked India to cease such breaches of the international treaty. Thereafter, the tribunal directed India to reimburse Rs 4.3 million along with Rs 3000 as legal costs. The Indian government’s liability stood at Rs 850 million, including Rs 450 million of tax levy that was asked to be refunded.

In August 2021, the Indian Parliament passed new tax legislation which affects the retrospective effect of the Finance Act 2012. This legislation law axed the retrospective tax amendment introduced in 2012. Under the settlement terms, India has promised to refund taxes already collected and withdraw all litigation and arbitration. In return, companies have to give an undertaking that they will withdraw litigation in all forums, and will forgo any damages, interest or other costs.

The telco is yet to accept the Indian government’s proposal to settle the tax dispute. The government 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.