Enough of Vodafone tax dispute

One of the most important indicators of the maturity of business environment in any country is the time taken to resolve business disputes and going by this indicator, India, unfortunately, ranks very low despite taking pride in having one of the finest, independent, fearless and effective judiciaries in the world. This is most unfortunate, particularly as evidenced by the Vodafone tax dispute, which seems to be going on and on, senselessly. The most intriguing aspect in this entire issue is that the Supreme Court decided the matter two years ago and yet the matter has not reached its logical conclusion.

Without going into the merits of the case, and without commenting on the decision of the Supreme Court of India, we need to understand that a high degree of finality is reached when the Supreme Court of any country pronounces its decision and it is for the legislature and executive of that country to honour the decision of the court, which surely is a sign of mutual respect in a democracy practising separation of powers. Changing the law and applying it retrospectively just to nullify the effect of the highest court’s pronouncement is making a mockery of the system, which very well recognises the power of judicial review of legislative and executive actions, with which the Supreme Court is armed, and these powers can be exercised even in the case of retrospective application of the law.

As is quite obvious, Vodafone did not opt for this available option and tried its best to somehow negotiate and settle it with the powers to be; however, of late, uncertainty about the political future of the ruling coalition, and along with that, the high level of uncertainty of honouring any out-of-court settlement with the individual political masters acting for and on behalf of the people of India, is a big risk as no one knows who will be making the decisions and running the government in a couple of months’ time. Vodafone clearly wants to play safe, but at the same time also keep its options open and not be blamed for sleeping over the matter.

In this scenario, Vodafone has initiated proceedings for arbitration – an alternative dispute resolution mechanism with appointed arbitrators, who are typically experts in the chosen domain, and whose decision is binding on the parties, with the provision of being challenged in a court of law on very few and narrow grounds – between India and the Netherlands regarding bilateral investment promotion agreement, an agreement between two countries guaranteeing all measures to protect investment mutually and reciprocally.   

Just two years back, India lost face in international business community when an international investment arbitration was decided against it in the matter of White industries, an Australian company, primarily on the ground that even when the Australian company had won the arbitration award, long delay in its execution due to challenge in the courts in India resulted in denial of efficacious and speedy dispute resolution mechanism, ultimately meaning lack of availability of proper measures to protect investment in India.

It is a feeling of déjà vu in the Vodafone case, but this time it’s not the delay in the judicial pronouncement, it’s a lot of confusion and uncertainty on the part of government, which is to be blamed. From whatever perspective one looks at, and whatever may be the final outcome, one feels a bit bored and disappointed as to why the matter is lingering on for such a long time, which undoubtedly is casting a gloomy shadow on a number of prospective investments in India. The time spent by courts, legal experts, bureaucrats and political masters on matters like Vodafone tax issue could have been better utilised for the benefit of a large number of people of India, who deserve the undivided attention, devotion and commitment for finding suitable and prompt solution to their innumerable problems.

It would be most unfortunate that the mess created by the ruling coalition would be handed over to the new government, which, hopefully, would use a little bit more of everyday reasonableness and prudence. Fairness in business dealings is still a virtue, cherished all over the world.