NEW DELHI: The Delhi High Court today dismissed the Centre's plea challenging Vodafone's move of initiating international arbitration against India under the India-UK Bilateral Investment Protection Agreement (BIPA) in connection with a tax demand of Rs 11,000 crore under a retrospective law of 2012.
The high court, however, granted liberty to the government to raise the issue of "abuse of process" before the India-United Kingdom BIPA tribunal.
"However, keeping in view the findings, vis-a-vis the abuse of process, kompetenz-kompetenz issues, the present suit and application are dismissed with liberty to the plaintiff Union of India to raise the issue of abuse of process before India-United Kingdom BIPA, that now stands constituted," Justice Manmohan said in an 81-page judgement.
Kompetenz-kompetenz, or competence-competence, is a jurisprudential doctrine whereby a legal body like a court or tribunal, may have competence or jurisdiction, to rule to the extent of its own competence.
The judge said the UK tribunal, while deciding the issue, will take into account the undertaking given by Vodafone Group Plc (VG) and Vodafone Consolidated Holdings Ltd (VCHL) to the court that if the Centre gives its consent, it would agree to the consolidation of the two BIPA arbitration proceedings before the India-UK BIPA tribunal.
The court also vacated its August 22 last year's ex-parte interim order by which it had restrained the company from taking any further action under the Notice of Arbitration of January 24, 2017 under India-UK BIPA.
Vodafone had initiated the arbitration proceedings under the India-UK and India-Netherlands BIPA in connection with the tax demand raised against it in relation to its USD 11 billion deal to acquire the stake of Hutchison Telecom.
While proceedings under the India-Netherlands BIPA were pending, the telecom major initiated a second arbitration under India-UK BIPA as well on January 24, 2017.
The Centre, represented through senior advocate Sanjay Jain, had earlier contended before the high court that the Vodafone Group had abused the process of law by initiating two international arbitrations.
Challenging the second arbitration, the government had said the two claims were based on the same cause of action and sought identical reliefs, but from two different tribunals constituted under two different investment treaties against the same host state.
Senior advocate Harish Salve, appearing for Vodafone, had earlier raised the issue of jurisdiction saying the national courts of India inherently lacked the jurisdiction to entertain any dispute arising out of a treaty between two sovereign countries.
He had said the Centre was a party to the BIPA, a treaty between two sovereign governments (of the United Kingdom and India), and the obligations under such treaties were not subject to domestic laws and disputes arising out of such treaties were not subject to the jurisdiction of the national courts.
Today, the high court said if the argument of lack of jurisdiction was accepted, the court would be powerless to execute a BIPA award against the State, even if the foreign investor were to approach the court for its enforcement and execution.
"In the present BIPA arbitration, a contractual obligation and a contractual right is involved and therefore, there is no bar as to the subject matter of the dispute or as to the jurisdiction of the court to hear the present case," the judgement said.
The court said it does not agree with the submission that the national court has no jurisdiction or should refrain from exercising its jurisdiction with regard to BIPA arbitrations.
However, it was of the view that recourse to a court, when and if permissible, would be to correct any error rather than to perpetuate or introduce one.
The court also observed that this matter raised important and interesting issues of law with regard to BIPA, as in recent years, there has been a rapid rise in bilateral investment treaty arbitrations but there is limited authority on the jurisdiction and approach of national courts.
In its order, the high court said when it was the Centre's case that the claim under the Netherlands-India BIPA was without jurisdiction, the invocation of another treaty by the parent company cannot be regarded as an abuse per se.
"This court is further of the view that the plaintiff-Union of India after having elected its remedy of agitating the issue of abuse of process before the Netherlands-India BIPA Tribunal, could not have approached the national court on the same ground and, that too, without waiting for the award being rendered by the India-Netherlands BIPA Tribunal.
"After all, the present suit is not and cannot be an appeal against the India-Netherlands BIPA Tribunal," it said.
The court also said it will not grant an injunction because by doing so, it could deprive the defendants (Vodafone) of advantages in the foreign forum and it "would be unjust to deprive the defendants.
" "The fact that it may be inconvenient or expensive for plaintiff-Union of India to litigate before the arbitral tribunal is not an issue that would justify a finding of oppression.
This problem can, in the opinion of the court, be overcome by either accepting appropriate undertakings or by passing a conditional order," it said.