Arbitration Tribunal Rejects Axiata’s Claims Against Nepal, But ‘Indicates’ No Further Tax Demands Over Ncell Acquisition
The International Centre for Settlement of Investment Disputes (ICSID) has issued an arbitration decision in a capital gains tax (CGT) dispute related to Malaysia-based telecoms group Axiata’s takeover of Nepalese mobile operator Ncell back in 2016.
The international tribunal on 9 June 2023 dismissed claims made by Axiata UK and Ncell against the Federal Democratic Republic of Nepal, but also indicated that Nepal should refrain from demanding any further tax, fees, penalties, or interests in relation to the 2016 acquisition. Additionally, arising from Nepal’s non-adherence to ICSID orders during the early stage of the process, Nepal was ordered to pay approximately USD1.4 million to Axiata and to reimburse Ncell for the cost of a loan taken out by the latter. No sums are payable by Axiata or Ncell under the decision.
As previously reported by TeleGeography’s CommsUpdate in April 2020 Ncell settled in full a CGT bill worth US$182 million but declared the payment was made ‘under protest’ and without prejudice to Axiata’s arbitration claim with ICSID, arguing that Nepal’s imposition of the CGT contravened international legal obligations under the bilateral investment treaty (BIT). Having now had this claim rejected, Axiata said in a statement on 12 June 2023 it is ‘consulting its legal advisors’ while ‘further announcements will be made upon material developments arising from the matter.’
The Kathmandu Post notes that Axiata and Ncell had attempted to claim damages of up to US$420 million, and quotes Chief of International Law and Treaty Agreement Division of Nepal’s Ministry of Law, Justice and Parliamentary Affairs, Phanindra Gautam saying: ‘Had we lost the case, the Nepal government would have had to pay as much as US$500 million including interest and arbitration expenses … With this verdict, the government has been saved from huge monetary losses, but the narrative of Nepal not being a good place for foreign investment has also been dismissed.’
The Post’s report also cites Nepalese officials observing that despite ICSID’s indication against imposing further taxes, the tribunal ‘has not said so in clear words’, whilst noting that a case over the same issues remains pending at the Supreme Court.
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