Advertisement

  • News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
  • Editorial Calendar 19-20
BW Businessworld

UPA II Legacy For New Govt: Voda, RIL Arbitration Cases

Photo Credit :

 As the new government takes over later this month, among other things it will need to fend off a couple of arbitration cases that it has acquired from the UPA-II. Both cases — Vodafone and Reliance Industries — relate to retrospective issues.
 
Vodafone International Holdings BV (VIHBV) commenced international investment arbitration against it under the Bilateral Investment Treaty (“BIT”) between India and the Netherlands. That arises from the government’s 2012 enactment of retrospective taxation on VIHBV’s acquisition of indirect interests in Hutchison Essar Ltd in 2007.
 
While Vodafone got a reprieve from the Supreme Court in January 2012, the UPA-II government amended the IT Act, 1961 during the Budget session to impose a retrospective provision to tax deals like Vodafone-Hutchison. It was done during the tenure of then finance minister and now Indian President Pranab Mukherjee. That one move has been perceived globally as truly investor-unfriendly.
 

As a telecom industry analyst states: “The government should have backed off after the SC gave Vodafone a clear verdict.” However, the then government believed that the Rs 20,000 crore from Vodafone would help reduce the country’s fiscal deficit.
 
More Stories By Anup Jayaram

Meanwhile, Reliance Industries (RIL) with its partners, BP and NIKO issued an arbitration notice to the government seeking implementation of the domestic Natural Gas Pricing Guideline 2014 notified on 10 January 2014. While the Rangarajan committee had approved doubling of gas prices to $8.4 from April 1, the Election Commission stopped the government from announcing the new price until the election code of conduct is in force. Now that period is over, RIL is seeking payment at the higher price with retrospective effect.
 
RIL stated that the delay in notifying the price has meant that the parties are unable to go ahead with planned investments of $4 billion this year. The three parties shall endeavour to work with the government to achieve a prompt and efficient resolution of this dispute, RIL said.
 
However, in these arbitration times, the government got some succour from Norway’s Telenor that has decided to withdraw arbitration proceedings. That’s because the UPA-II government allowed it to set-off the Rs 1,658 crore that it had paid for the all-India licence in 2008.
 
All said, the new government will be in for interesting times.