Stung by the large number of legal notices from foreign telecom players, the Government is readying a blueprint to change the rules of engagement under bilateral investment treaties.
Under the new plan, the Government wants to ring-fence itself from litigation by making it clear that the foreign investor cannot claim protection under the various Bilateral Investment and Protection Agreements (BIPA) on issues related to taxation, indirect foreign shareholders and minority stakeholders.
An inter-ministerial panel has been constituted to go through all the 82 bilateral treaties signed by India and identify areas which could put India on the back-foot legally. The panel will first review the treaties still in the drafting stage.
Legal notices
Over the past few months, the Government has been issued legal notices by a number of foreign players, including Russia’s Sistema, Norway’s Telenor, Malaysia’s Axiata and Vodafone. While Vodafone has sought protection against the multi-billion-dollar tax imposed, other players have sought protection against the move to cancel their licences post the Supreme Court order.
If taxation issues are taken out of the purview of bilateral treaties, Vodafone’s notice through a Dutch subsidiary could fall flat. “The notice by Vodafone relates to taxation even though the India-Netherlands BIPA specifically excludes this issue. So, the issue of ensuring exclusion of taxation matters from the ambit of BIPA also needs to be examined,” an internal Government note seen by Business Line stated.
At a meeting of the inter-ministerial panel held in July, it was decided to review ongoing bilateral negotiations to ensure that the investment protection clauses safeguard India’s interests.
“It was agreed that countries such as Portugal, where agreements are nearing completion, may be informed by the Ministry of External Affairs that certain provisions may require amendment to bring more clarity,” said a top Government functionary.