In an investment treaty arbitration (ITA) dispute against India, initiated under the India-Netherlands Bilateral Investment Treaty (BIT), the Permanent Court of Arbitration in the Hague has finally ruled in favour of the telecom giant Vodafone. This decision marks the end of the nearly ten-year-long bitter tax dispute between India and the Vodafone Company. Although the arbitral award has not yet been made public, it is worth taking a look at the history of the case and the consequences for India of the decision.

The Vodafone Group's Dutch subsidiary, Vodafone International Holdings B.V. (VIH) acquired a 67 percent stake for $11 billion in the Indian telecom firm Hutchison Essar Limited (HEL). The transaction took place in 2007 through an agreement between VIH and Hutchison Telecommunications International Limited (HTIL) involving CGP Investments Limited (CGP), a Cayman Island-based firm, which in turn held a 67% stake, directly and indirectly, in Hutchison Essar Limited (HEL), the Indian company. Soon after, a notice was released by the Indian income tax authorities seeking payment of $2.2 billion in capital gains tax, which Vodafone argued was not liable to pay because the transaction between HTIL and VIH did not require the transfer of any capital assets located in India.

The matter went to the High Court of Bombay, which ruled that Vodafone was liable to pay the taxes as charged by the tax authorities in respect of income. In 2012, the Supreme Court reversed the Bombay HC judgement on Vodafone's appeal and ruled that the corporation was not liable to pay any levy.

Rs 85 crore-that would be the responsibility of the Centre if it chose not to appeal the Permanent Court of Arbitration's decision on Friday in the Rs 22,100-crore tax dispute with Vodafone Group Plc. The arbitration tribunal ruled in Vodafone Group's favour against India's retrospective capital gains tax demand. Of the outgoing Rs 85 crore, Rs 45 crore will be against the tax collected so far from Vodafone and Rs 40 crore, or 4.3 million sterling pounds, against the administrative costs paid by the tribunal. According to sources from the Finance Ministry, because Vodafone had not paid Rs 7,900 crore for the initial tax demand and interest and penalty on it, there was no question of India paying Rs 22,100 crore back. In addition, the tribunal did not consider Vodafone's claim for the payment of damages, sources added.

In response to the news, the Ministry of Finance announced that, in consultation with its councils, the government would carefully review the award and all its aspects. The Government will consider all options after consultations and take a decision on the further course of action, read the statement by the Ministry of Finance.