Termination of BITs: Impact in light of the Vodafone Award

On September 25, 2020, the international arbitral tribunal in Vodafone International Holdings BV v. The Republic of India (Vodafone case) held that India had violated the ‘fair and equitable treatment’ (Vodafone award) guaranteed to Vodafone under the Bilateral Investment Promotion and Protection Agreement (BIPA) between the Republic of India and Netherlands (India – Netherlands BIT).

The initiation of the Vodafone case was a consequence of a large tax claim on Vodafone.

To provide a brief background, Indian revenue authorities had initiated high profile litigation against Vodafone on the basis that Vodafone had failed to withhold Indian taxes on payments made to the selling Hutch entity on a transfer of 1 share of a Cayman entity (which directly/ indirectly through subsidiaries held shares of an Indian entity) to Vodafone. The Supreme Court of India held in favour of Vodafone that no Indian tax was required to be withheld on a transfer of offshore assets between two non-residents.

Shortly thereafter, the Finance Act, 2012 introduced retroactive amendments to undo the impact of the Supreme Court ruling and tax indirect transfer of offshore assets on a retrospective basis. Thereafter, Vodafone invoked arbitration under the India – Netherlands BIT and eventually received a favourable award.

A similar claim has also been made by Cairn under the India-UK BIT.

It is yet to be seen how the Indian Government will approach the Vodafone award – whether it will be accepted by India or it will be challenged.  

Interestingly, since 2016, India has terminated 64 out of 84 BITs, including the treaty with Netherlands and UK. While the right to initiate disputes under terminated BITs may be a possibility depending upon the language of the BIT, this step of termination begs a larger question for discussion – impact on foreign investor sentiment. 

With rapid growth in startups and new-age entrepreneurs in India inviting greater foreign investment, it is quintessential that interests of the startups, entrepreneurs and foreign investors are protected and avenues for dispute settlement are readily available.

In this webinar, we shall cover the following aspects

• The Vodafone Award
• When does a claim arise under a BIT; what kind of claims are covered
• “Fair and Equitable Treatment” under a BIT
• Tax claims under a BIT
• Implications on rights of startups, entrepreneurs and foreign investors to claim under BITs.
• Putting in place safeguards for startups, entrepreneurs and foreign investors as a result of termination of investment treaties. 
• Impact of treaty termination on entrepreneurship and the Indian economy

 

Speakers:

Nishith Desai
Founder, Nishith Desai Associates

Nishith Desai is the founder of the research & strategy driven international law firm, Nishith Desai Associates (www.nishithdesai.com) ranked amongst the Asia-Pacific’s Most
Innovative Law Firms by Financial Times. Nishith’s interest span a wide spectrum of law, society and ethics. He is a renowned International lawyer, author, lecturer, researcher and a thought leader. Nishith himself is regarded as the ‘Father of International Tax’ in India and is a ‘true pioneer’ in the field of International Tax Law. He was also a director on the board of Singapore International Arbitration Centre (2011-2019). Soon after India opened its economy to the outside world in 1991, Nishith pioneered the roots of asset management industry in India. He has assisted the Governments of Mauritius and India in launching their offshore financial centers.

Nishith is also passionate about supporting social good, and under  his guidance NDA has remained at the forefront of social sector in  India. NDA has won ASIAN Law firm of the year (Pro-bono) from IFLR  in 2001. NDA is one of the founding members of Impact Investment  Council in India. He has worked closely with Nobel Laureate Prof Yunus on social  issues and personally received the Prof. Mohd. Yunus 'Social  Business Pioneer of India' in 2010. 

 

Kshama A. Loya
Leader, International Dispute Resolution Practice
Nishith Desai Associates

Kshama A. Loya is a Leader in the International Dispute Resolution practice at Nishith Desai Associates. She focusses on International Commercial and Investor-State Arbitration. Kshama advises and represents clients in complex cross-border commercial disputes, public and private international law disputes, civil and criminal litigation, commercial litigation and litigation arising out of international and domestic arbitration in Indian courts. She has advised on issues arising in a range of industries including Energy, Mining, Infrastructure, Construction, Manufacturing, Pharmaceuticals and Life-sciences, Funds, Finance, Travel and Transportation, Automotive, Media and Entertainment, Aviation, Advertising etc.

Kshama regularly appears in courts and tribunals in India, and acts as counsel in domestic and international arbitration proceedings. Kshama began her practice as a counsel in the Chambers of (present) Justice S.V. Gangapurwala, High Court of Bombay. She has previously worked in London on international commercial and investor-State arbitrations. Kshama frequently speaks at national and international conferences, and writes for reputed international publications. She actively engages in training and development of students in international arbitration and advocacy through various activities.

Shipra Padhi
Leader, International Tax Advisory 
Nishith Desai Associates

Shipra Padhi is a leader in the International Tax and Private Client  practice. She specializes in providing tax advice in complex cross border  transactions. She is extensively involved in the structuring of  private equity investments and advising on tax aspects of mergers  & acquisitions for MNCs.  

Shipra is also widely published and has written for leading  publications like Tax Notes International, IBFD and Bloomberg BNA.  She speaks regularly in conferences on international tax and  private client issues. She also served as Visiting Faculty for the  Corporate Taxation Course at the Narsee Monji Institute. She recently represented Aberdeen Standard before the Bombay  High Court on issues in relating to intersection of private  international law and tax.