The Delhi High Court (Court) pronounced its judgment in Union of India v. Vodafone Group PLC United Kingdom & Anr. dismissing Union of India’s (Plaintiff) prayer. The Plaintiff had sought a declaration that the Notice of Arbitration filed by Vodafone Group PLC under the India-UK BIPA, and the proceedings initiated thereunder, were an abuse of process of law and consequently null and void.
The Court however granted liberty to the Plaintiff to raise the issue of abuse of process before the tribunal constituted under the India-UK BIPA. It has been clarified that the duly constituted tribunal will decide this issue on its own merit, without being influenced by any observation made by this Court.
The judgement is one of the first to exhaustively deal with Bilateral Investment Treaty (BIT) disputes, primarily, the system of law governing arbitration disputes arising out of such treaties. Further, the Court also had occasion to examine whether, and in what circumstances, the Indian courts could put a restraint on BIT arbitration.
Vodafone Group PLC, UK (the Defendant) is the parent company of several subsidiaries. In April 2014, Vodafone International Holdings BV (VIHBV), a subsidiary of the Defendant, initiated arbitration proceedings against the Plaintiff under the India-Netherlands BIPA, challenging the retrospective amendment of the Indian Income Tax Act (IT Act) by the Indian government, to bring VIHBV under the tax-liability net for acquisition of stake in an Indian company. It is relevant to note that the Plaintiff, i.e., the Indian Government raised a jurisdictional objection in these proceedings, contending that the India-Netherlands BIPA excluded issues relating to taxation from its scope.
During the pendency of arbitration proceedings under the India-Netherlands BIPA, the Defendants initiated arbitration against the Plaintiff on 24 January 2017 under the India-UK BIPA, challenging the aforesaid retrospective amendment of the IT Act (stating that the latter of the two BIT proceedings were initiated in light of the aforesaid jurisdictional challenge raised by the Plaintiff). In response, the Plaintiff wrote to the appointing authority i.e. the President of the ICC, stating that the dispute under the India-UK BIPA was identical to the dispute already raised under the India-Netherlands BIPA, and that initiating proceedings under the India-UK BIPA amounted to an abuse of process. Thereafter, the Plaintiff also filed a civil suit before the Court seeking a declaration that the India-UK BIPA proceedings were null and void.
The Court dismissed the Plaintiff’s plea, while granting liberty to the Plaintiff to approach the tribunal constituted under the India-UK BIPA for its grievances. The pertinent findings of the Court are as follows:
This judgement bodes well for investment arbitration in India and is in line with the recent trend of Indian courts of honouring the jurisdiction of international tribunals.
It is also now clear that Indian courts would not lose their inherent jurisdiction over BIT disputes, as long as the investment has taken place in India, and the disputes are in the realm of public international law and administrative law which the Indian courts are bound to enforce and apply. The Court has also paved the way for enforcement of BIT awards in India by holding that Indian courts would have jurisdiction to enforce and execute BIT awards, if approached by a foreign investor. Lastly, while the judgement holds the consolidation of BIPA arbitrations permissible, it remains to be seen whether such consolidation of two arbitration proceedings will be seamless.