Document Type


Publication Date



On December 21, 2020, the government of India announced that it will appeal an arbitration award of $5.6 billion issued in favor of Vodafone PLC by the Permanent Court of Arbitration (PCA) in the Hague. The award resulted from the decision of India to impose capital gains tax on Vodafone (as withholding agent) for its acquisition of a Cayman Islands subsidiary from Hutchison, which held the Indian telecommunication assets of the Hong Kong-based Hutchison group. The Indian Supreme Court had decided that no tax was due, but the Indian government passed legislation to overturn that decision retroactively. This, the PCA stated, was a violation of the “fair and equitable treatment” (FET) provision of the India–Netherlands Bilateral Investment Treaty (BIT).

The Vodafone saga, and its companion Cairn Energy (which also resulted in an Indian loss for $1.2 billion on similar facts under the India–UK BIT), illustrate the emergence of a new front for challenging the tax sovereignty of countries. The key point is that unlike tax treaties and trade treaties, investment treaties allow for direct investor-state arbitration. The issue we want to address in this paper is, could this instrument be used against the United States, which currently has 42 BITs?


Reprinted from International Tax Journal, Vol. 48, 2022, 51-55, with permission of Kluwer Law International.