Government, Vodafone in talks to appoint third arbitrator

Government, Vodafone in talks to appoint third arbitrator

NEW DELHI: The Indian government and Vodafone are in talks again, not to reach a compromise solution to settle a Rs 20,000-crore tax dispute over the British telecommunications firm’s 2007 acquisition of Hutchison Essar, but to decide on the third arbitrator.

Vodafone had sent a notice to the Indian government for arbitration under the India-Netherlands bilateral investment promotion and protection agreement (BIPA).

The two arbitrators selected by both sides now want the government and the company to engage and finalise the mechanism for selection of the third arbitrator, two finance ministry officials familiar with the matter said. Once the mechanism is settled between the parties, which includes exchange of a shortlist of arbitrators, the two arbitrators will take a call on the name, another official said.

Both sides will also decide on the place of arbitration that will be in a neutral international location.
Vodafone has dragged India government to international arbitration after New Delhi decided to withdraw its conciliation when the company sought to club another tax dispute with the case.
The government had amended Section 9 of the Income-Tax Act, 1961 in the 2012-13 budget retrospectively, from the day of the commencement of the Act. This nullified a Supreme Court decision in the case that went in favour of Vodafone.

Indian tax authorities had sought to impose tax on Vodafone for failing to deduct tax on its $11-billion payment to Hutchison Telecommunications International for the acquisition of Hutchison Essar.

Vodafone moved court, saying that the deal was done overseas and couldn’t be taxed and eventually got a favorable verdict from the Supreme Court.

The new government did not roll back the Section 9 amendment, but created a mechanism for resolution of fresh cases pertaining to a period prior to 2012.

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