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Vodafone moves to International Court of Justice over tax row with India
March, 30th 2016

Vodafone Group Plc has moved the International Court of Justice (ICJ) seeking appointment of a third arbitrator in its Rs 20,000-crore tax dispute with India, signaling the British telecom major's intentions of carrying on with the arbitration proceedings despite a settlement offer by New Delhi.

A person familiar with the matter said Vodafone had moved the Hague-based ICJ earlier this month, after the arbitrators appointed by it and India failed to agree on the presiding judge of the three member panel.

Responding to ET's request for comment, the parent of India's No. 2 telco said: "Vodafone does not comment on the arbitration process." The telco had named Canadian trial lawyer Yves Fortier as its choice as an arbitrator to resolve the tax dispute arising out of the telecom operator's $11 billion purchase of Hutchison Whampoa's Indian assets in 2007. The government's initial appointee — former Chief Justice of India RC Lahoti — had recused himself in 2015, following which India last July named Costa Rica-based lawyer Rodrigo Oreamuno to arbitrate on its behalf.

The two arbitrators haven't been able to name a third one, prompting the telco's move, which comes despite finance minister Arun Jaitley offering an olive branch to Vodafone in his budget to end India's most high-profile tax dispute.

The government has offered to waive off interest and penalty if Vodafone pays the original tax demand of nearly Rs 8,000 crore. The amount has ballooned after adding interest and penalties. If Vodafone accepts the offer, it will end the Rs 20,000-crore row that started in 2008.

Vodafone was non-committal to the offer and its latest move reflects its stand. Then, Vodafone had said while it would study the offer, it would continue to pursue arbitration proceedings. It had further said: "Vodafone has always maintained that there was no tax to pay at the time it completed its acquisition of Hutchison's business in 2007. This view was upheld unanimously by the Supreme Court of India in January 2012."

As the acquirer, the company had made no capital gains, it said. "Given the clarity of the Indian law in force in 2007, there was no legal basis to withhold tax," it said.

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