Delhi HC refuses to stop Vodafone’s UK arbitration
The Delhi High Court on Monday dismissed the Centre’s plea challenging Vodafone’s move to initiate two international arbitrations against the Centre over a retrospective tax liability imposed on the telecom company for its $11-billion acquisition of Hutchison Telecom.
The Delhi HC, however, noted that the Centre could approach the UK arbitration tribunal under the BIPA for its grievances
The Delhi High Court on Monday dismissed the Centre’s plea challenging Vodafone’s move of initiating international arbitration against India under the India-UK Bilateral Investment Protection Agreement (BIPA) in connection with a tax demand of ~110 billion under a retrospective law of 2012.
The high court, however, granted liberty to the government to raise the issue of “abuse of process” before the India-United Kingdom BIPA tribunal. “However, keeping in view the findings, vis-a-vis the abuse of process, kompetenz-kompetenz issues, the present suit and application are dismissed with liberty to the plaintiff Union of India to raise the issue of abuse of process before India-United Kingdom BIPA, that now stands constituted,” Justice Manmohan said in an 81-page judgement.
Kompetenz-kompetenz, or competence-competence, is a jurisprudential doctrine whereby a legal body like a court or tribunal, may have competence or jurisdiction, to rule to the extent of its own competence. The judge said the UK tribunal, while deciding the issue, will take into account the undertaking given by Vodafone Group Plc (VG) and Vodafone Consolidated Holdings (VCHL) to the court that if the Centre gives its consent, it would agree to the consolidation of the two BIPA arbitration proceedings before the India-UK BIPA tribunal.
The court also vacated its August 22 last year’s ex-parte interim order by which it had restrained the company from taking any further action under the Notice of Arbitration of January 24, 2017 under India-UK BIPA.
Vodafone had initiated the arbitration proceedings under the India-UK and India-Netherlands BIPA in connection with the tax demand raised against it in relation to its $11-billion deal to acquire the stake of Hutchison Telecom.
While proceedings under the India-Netherlands BIPA were pending, the telecom major initiated a second arbitration under India-UK BIPA as well on January 24, 2017.
The Centre, represented through senior advocate Sanjay Jain, had earlier contended before the high court that the Vodafone Group had abused the process of law by initiating two international arbitrations.
Challenging the second arbitration, the Centre had said the two claims were based on the same cause of action and sought identical reliefs, but from two different tribunals constituted under two different investment treaties against the same host state.
Senior advocate Harish Salve, appearing for Vodafone, had earlier raised the issue of jurisdiction saying the national courts of India inherently lacked the jurisdiction to entertain any dispute arising out of a treaty between two sovereign countries. He had said the Centre was a party to the BIPA, a treaty between two sovereign governments (of the United Kingdom and India), and the obligations under such treaties were not subject to domestic laws and disputes arising out of such treaties were not subject to the jurisdiction of the national courts.
On Monday, the high court said if the argument of lack of jurisdiction was accepted, the court would be powerless to execute a BIPA award against the State, even if the foreign investor were to approach the court for its enforcement and execution.
“In the present BIPA arbitration, a contractual obligation and a contractual right is involved and therefore, there is no bar as to the subject matter of the dispute or as to the jurisdiction of the court to hear the present case,” the judgement said.