Even as Cairn Energy and Vodafone are set to get a settlement on their tax dispute, the government has not shown interest in settling dispute with Devas Multimedia.
In an exclusive interaction, Matthew D McGill, partner at Gibson, Dunn and Crutcher, and lead counsel for several of Devas’s shareholders, told BusinessLine: “While it is true that the Indian government has entertained settlement discussions with Devas in the past. India recently has taken a very different course and has threatened to criminalise Devas. India, to this point, has not shown any interest in settling.”
According to McGill, if the Indian government has turned the page on the retrospective tax issue, it should also look towards settling the dispute regarding the cancellation of S-band satellite lease deal and the consequent $1.3-billion arbitration award which Devas won.
‘A long way to go’
In a move to settle retrospective tax disputes with companies such as Cairn Energy and Vodafone, the Indian goverment proposed a Bill last week to repeal retrospective taxation on capital gains on sales of assets based in India by entities based abroad if the transaction occurred before May 28, 2012.
The Bill was approved by Rajya Sabha on Monday. The Government of India is also undertaking informal discussions with Vodafone and Cairn Energy to settle any pending tax disputes, which will be the first step towards for the companies to become eligible for exemption from the tax rule. While lauded by many that this will restore India’s image in honouring international arbitration rulings and restore foreign investor confidence, McGill insists that India has a long way to go.
“What India has done in recent months has made fair resolution of this dispute a difficult proposition. Unlike in the case of Cairn, where India was refusing to pay the award, India has essentially criminalised Devas and its shareholders and weaponised its legal enforcement apparatus to avoid payment,” said McGill.
He was referring to the National Company Law Tribunal order for the liquidation of Devas Multimedia that declared the company was incorporated in a fraudulent manner to carry out unlawful purposes.
Therefore, while McGill concurs that junking of retrospective tax is a good sign, he insists that Devas and its shareholders will use whatever legal channels necessary to enforce their award.
“We will, in due course, seek recognition in other countries where we might wish to enforce the award,” McGill warns. “We will be trying to enforce this award around the world, wherever it is advantageous to do so,” he added.