Govt, Vodafone yet to agree on third arbitrator

Officials say telco still keen on process

The seven-year-old tax dispute between India and Vodafone is unlikely to be resolved anytime soon as another deadline for appointing a third arbitrator in the international arbitration case has been missed and the two sides have not fixed a new date to decide on the name.

According to finance ministry officials, Vodafone seems to be keen on going ahead with the arbitration and it has been decided to continue the talks for finding an arbitrator without putting any deadline to it.

"Vodafone seems to be keen on arbitration. They have not made an offer to settle. So, it is still under discussion. Parameters are being set to identify the third arbitrator," an official, who did not wish to be identified because of the sensitivity of the matter, told Business Standard.

An e-mail query sent to Vodafone remained unanswered till the time of going to press.

Vodafone had on April 17 issued an international arbitration notice to the Indian government to resolve the dispute arising from its 2007 purchase of Hutch Essar for $11 billion, on which India demands capital gains tax. It decided to go for arbitration under India-Netherlands Bilateral Investment Promotion and Protection Agreement (Bipa) after its conciliation talks with Indian authorities under the United Progressive Alliance government failed to make much headway.

Following this, both the Indian government and Vodafone appointed their arbitrators - former Chief Justice of India R C Lahoti and Canadian lawyer Yves Fortier, respectively. By August 17, they were to decide on a third arbitrator who would be the chairman of the international tribunal. However, the two sides missed this deadline and two subsequent deadlines of September 17 and October 17.

In its response to Vodafone's move to invoke the dispute settlement clause in Bipa, India had said tax issues were not covered under the India-Netherlands pact.

TAX ISSUE

• April 17: Vodafone issued an international arbitration notice to the Indian govt
   
• The issue: The 2007 purchase of Hutch Essar for $11 bn, on which India demands capital gains tax