NEW DELHI -- U.K.-based Vodafone Group on Friday won a long-standing tax dispute with the Indian government, which had ordered the telecommunications company to pay 200 billion rupees ($2.7 billion) retroactively over its acquisition of a local telecom in 2007.
The ruling was issued by an international arbitration tribunal in the Hague, where Vodafone was represented by Indian law firm DMD Advocates.
"Vodafone confirms that the investment treaty tribunal found in Vodafone's favor," the group said in a statement.
"This was a unanimous decision, including India's appointed arbitrator Mr. Rodrigo Oreamuno," according to the statement. "The tribunal held that any attempt by India to enforce the tax demand would be a violation of India's international law obligations."
Anuradha Dutt, managing partner and one of the founders of DMD Advocates, told the Nikkei Asian Review that the verdict is "a huge victory" for Vodafone.
"This is the second time we got justice," she said, referring to India's Supreme Court ruling in favor of the company in 2012.
On whether the dispute finally ends here, Dutt said Indian authorities have a right to appeal.
"[This] hearing was held in the Peace Palace in The Hague but the seat [of arbitration] is Singapore," where an award can be challenged, but what the Indian side will do cannot be predicted, she added.
India's tax department is part of its Finance Ministry, which said in a brief statement Friday evening that it has "just been informed" of the tribunal's decision.
"The government will be studying the award and all its aspects carefully in consultation with its counsels," the statement said. "After such consultations, the government will consider all options and take a decision on further course of action including legal remedies before appropriate fora."
The retroactive tax bill is separate from another multibillion-dollar burden hanging over Vodafone's Indian venture Vodafone Idea.
India's Supreme Court earlier this month gave telecom companies 10 years to make good on 1.6 trillion rupees ($21.7 billion) in dues owed to the government.
The biggest financial burden falls on Vodafone Idea. The company owes over 504 billion rupees in spectrum usage and other charges to the government, while rival Bharti Airtel has to pay 260 billion rupees.
DMD Advocates' Dutt said the international arbitration was under the bilateral investment treaty of India and the Netherlands. The decision was unanimous, which is "very important because we choose one [arbitrator], they choose one and there is an umpire -- the presiding arbitrator. All three have given a unanimous decision [in favor of Vodafone]."
The tax dispute stems from a 2007 deal under which Vodafone acquired a majority stake in local telecom Hutchison Essar for $11 billion through a Netherlands-based entity. India's government, which was then ruled by the United Progressive Alliance, said the transaction required Vodafone to pay taxes, a demand that the U.K. company contested.
In 2012, the Indian Supreme Court quashed the tax demand of the Indian government, which then amended its income tax law with retrospective effect and again served a tax notice to Vodafone. The company started arbitration proceedings against the Indian tax authorities in 2014.
In 2018, Vodafone India merged with Aditya Birla Group's Idea Cellular to form Vodafone Idea.