This case is a part of our Annual Arbitration Review 2018.
Judgment Name: Union of India v. Vodafone Group Plc United Kingdom & Anr
Citation: CS (OS) 383/2017
Coram: Justice Manmohan
Date: 7th May, 2018
With respect to arbitration proceedings, this case was with regards to anti-arbitration injunctions and whether they should be allowed. The Court held that in this instance two separate claims could not be made by the parties under two different Bilateral Investment Protection Agreements as this would be unjust and would lead to an abuse of legal rights by the entity. This was also held because the parties were identified to be a single entity by relaying on the group of companies doctrine.
Vodafone Group PLC is the parent company of several subsidiaries of which Vodafone International Holdings BV (‘VIHBV’) is one and this subsidiary initiated arbitration proceedings against the Republic of India under the India-Netherlands Bilateral Investment Protection Agreement (BIPA). The claim essentially challenged retrospective amendment of Section 195 of the Indian Income Tax Act by the Indian government, to bring the subsidiary under the ambit of tax-liability for the acquisition of stake in an Indian company. Vodafone Group initiated arbitration against India under the India-United Kingdom BIPA for the same proceedings aforementioned.
Based on this, India filed a suit before the Delhi High Court seeking an anti-arbitration injunction against the Defendants for the initiation of proceedings under the India-UK BIPA.
- Whether the courts in India can restrain Bilateral Investment Treaty Arbitrations, which are oppressive, vexatious, inequitable or an abuse of the legal process?
- Whether filing of multiple claims by entities in the same vertical corporate chain with regard to the same measure is per se an abuse of the legal process or vexatious?
The Court first observed the fact that a vertical chain of entities can exist which is controlled by a single investor and that the investor through multiple treaties has the ability to bring several claims against the host state in case of any violative measures taken by the host state. The Court observed that this is an abuse of legal rights by the investor since this would result in multiple proceedings and lead to a waste of resources. The Court then relied upon the group of companies doctrine to establish the identity of the parties in the claims and held that Vodafone Group PLC and VIHBV would constitute a single entity.
The Court then established the fact that the parallel claims brought by Vodafone Group PLC and VIBHV were of the same nature and that the relief sought was also identical. In this manner, the Court held that both the identity of the parties and the nature of the claims and relief sought were identical.
In the present case, the Court held that anti-injunction suits could be passed by a court of natural jurisdiction which in this case was India, in order to restrain the party from initiating proceedings in a foreign forum. Lastly, the Court held that the initiation of two parallel and independent proceedings by the same entity under two different bilateral agreements would constitute as an abuse of the process of law by the defendants.
The Court held that the defendants i.e. Vodafone could not initiate arbitration proceedings under the India-UK BIPA based on the fact that this would lead to an abuse of the process of law since it was the same entity bringing two separate claims. It was considered to be unjust and unequitable that the defendants would be allowed to pursue the claim against India under the India-UK BIPA when their subsidiary had the identical claim under the India-Netherlands BIPA.