Vodafone Plc's arbitration win: Should India challenge the decision?

The verdict given by the arbitration panel says Vodafone was entitled to fair and equitable treatment in respect of its investment in mobile telecommunication in India in line with BIT.

While India can challenge at the Singapore High Court the order given by the Permanent Court of Arbitration (PCA) at the Hague in favour of Vodafone, experts have varied views whether New Delhi should exercise that option in the context of its impact on investor sentiment.

Anuradha Dutt, founder and senior partner at DMD Advocates, who represented Vodafone in arbitration, said: “The arbitration of any court is legally binding but can be challenged ... they (the government) can approach the Singapore High Court.”

Anjali Anchayil, senior associate at J Sagar Associates, does not think investors will be spooked by the challenge any more than what the retrospective amendments to the Income Tax Act have done.

“The retrospective amendments were something that hurt investor sentiment. I don’t think if the government tries to challenge it, investors would be more scared,” she said.

Pradeep Kumar Jain, managing partner at Singhania & Co, LLP, said generally an award given by the Permanent Court of Arbitration (PCA) was treated as final and no scope of appeal was given to parties.

The only ray of hope for the government is the judgement given by the Supreme Court of Singapore in the matter of Swissbourgh Diamond Mines Ltd and others vs the Kingdom of Lesotho, he said.

“In this matter, the Supreme Court of Singapore had set aside the PCA award on the grounds that the PCA Tribunal lacked the jurisdiction to hear the investment treaty claim,” he said.

“The government can take the same plea if it had challenged the jurisdiction of the PCA. Further, it can also appeal (for setting aside the award) under the International Arbitration Act of Singapore, but I honestly feel that it would be a very tough task to get success,” he said.

Abhishek Rastogi, partner at Khaitan & Co, said India would have to analyse whether the relevant clauses in the India-Netherlands Bilateral Investment Treaty (BIT) were legally open-ended or the foreign investor was required to adhere to the tax provisions.

The verdict given by the arbitration panel says Vodafone was entitled to fair and equitable treatment in respect of its investment in mobile telecommunication in India in line with the bilateral investment treaty (BIT). Vodafone challenged the tax demand at international arbitration under the India-Netherlands BIT in 2014. Later, India changed the model BIT by taking tax disputes out of it, which has found few takers.

Sukham S Ahluwalia, advocate, Supreme Court, however, said at this stage, India needed to encourage investors. “A rational view should be taken, irrespective of the options available for assailing the international award,” he said.

He said this was high time India was part of the International Centre for Settlement of Investment Disputes (ICSID). The Centre is the world’s leading institution devoted to international investment dispute settlement.

For enforcing the award, Vodafone will have to come to India, probably before the Delhi High Court, said Anchayil.

Jain said after the decision of the Singapore High Court (in case the government chose to challenge the PCA order), the battlefield would shift to India, where this award needs to be recognised and enforced.

“Again, the government can challenge its enforcement under the Indian Arbitration Act, but it will send wrong signals to international investors and jurists,” he said.