Thursday, January 21, 2021

Maybe sovereign at home but will it be immune from US courts?

"US-based electric vehicle maker Tesla has registered with the Registrar of Companies in India as Tesla Indian Motors and Energy Private Ltd." However, before we start getting excited, "It incorporated itself in Bengaluru on January 8 with an authorised capital of Rs 15 lakh (Rs 1.5 million) and a paid-up capital of Rs 1 lakh (Rs 100,000)." Just for show, so far. "For all the hype, Tesla's foray into India is far from a done deal." Because, the cheapest Tesla car, at Rs 5 million, will be beyond the reach of most Indians. At present, electric cars cost almost double their petrol engine-driven counterparts even though the government has reduced GST on electric vehicles from 12% to 5%. There is also a dearth of charging stations. CEO of Tesla Elon Musk has strong views which may not conform with those of our government which does not tolerate any difference of opinion. Musk transferred both Tesla and SpaceX from California to Texas because he disagreed with the government of California. He said that government is a "monopoly that cannot go bankrupt", that "regulations are immortal", and that the government should "just get out of the way". Already, Tesla will route its investment into India through the Netherlands which will give it "tax benefits related to capital gains and dividend payments, say experts". The Indian government does not respect laws of, or agreements signed with, other countries. "Earlier this week, it authorized Antrix Corp to ask the National Company Law Tribunal (NCLT) for the winding up of Devas, a private firm to which the commercial arm of state-run Indian Space Research Organisation (ISRO) owes $1.2 billion, awarded by an international arbitration court in 2015 for a broken contract and confirmed by a US federal court last October," wrote an editorial in the Mint. In December 2020, "The Permanent Court of Arbitration at the Hague... not only invalidated India's $2.74-billion 2015 tax claim on Cairn Energy, but also ordered it to return up to $1.4 billion in funds withheld, interest and costs to the firm." In September, the court in Hague ruled that $2 billion tax claim on Vodafone "as well as interest and penalties, were in breach of an investment treaty agreement between India and the Netherlands". "A three-member tribunal at the Permanent Court of Arbitration in The Hague cited statements by the Prime Minister Narendra Modi and other ministers pledging not to use retrospective taxation to overturn a Rs 10,247 crore tax demand on British oil and gas company Cairn Energy Plc." Promises are meant to be broken. "India has challenged in Singapore an international arbitration court's verdict against it over a $2 billion tax claim involving Vodafone Group Plc, a senior government official told Reuters." India is steadfast in its demand for taxes, fair or unfair, but it is reluctant to pay its dues. "Multinational telecom gear vendors have again urged state-run telco BSNL to clear dues and said that it is becoming challenging for them to continue supporting the telco's pan India wireless network." BSNL owes nearly Rs 10 billion to Nokia, over Rs 10 billion to ZTE and Rs 4.80 billion to Ericsson. An international arbitration tribunal's ruling cannot override laws of a sovereign government, said solicitor general Tushar Mehta. Maybe, but US courts have the power to enforce judgement by attaching property. Does the government want to take on the US courts?           

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