Topics Covered: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
India challenges Vodafone arbitration ruling in Singapore:
Context:
India has challenged the Permanent Court of Arbitration’s verdict in favour of British telecom giant Vodafone Group in a case involving a Rs 20,000 crore demand from the Indian income tax authorities, in Singapore.
PCA at The Hague had ruled that:
- India’s retrospective demand of Rs 22,100 crore as capital gains and withholding tax imposed on Vodafone for a 2007 deal was “in breach of the guarantee of fair and equitable treatment”.
- India should not to pursue the tax demand any more against Vodafone Group.
What happened after India passed the retrospective taxation law?
- The Act was passed by Parliament in 2012 and the onus to pay the taxes fell back on Vodafone.
- Later, Vodafone Group invoked Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and the Netherlands in 1995.
Article 9 of the BIT says that any dispute between “an investor of one contracting party and the other contracting party in connection with an investment in the territory of the other contracting party” shall as far as possible be settled amicably through negotiations.
What is the Bilateral Investment Treaty?
The BIT was signed for promotion and protection of investment by companies of each country in the other’s jurisdiction.
- The two countries would, under the BIT, ensure that companies present in each other’s jurisdictions would be “at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other”.
InstaLinks:
Prelims Link:
- PCA- composition, functions and members.
- Are PCA rulings binding on parties.
- Clause 9 of the Bilateral Investment Treaty (BIT) signed between India and the Netherlands in 1995.
- What is retrospective taxation?
- Overview of UNCITRAL.
Mains Link:
Discuss the functions and significance of PCA.
Sources: the Hindu.
