ABSTRACT
Two ISDS claims – Vodafone v India and Cairn Energy v India – arose when India amended the tax laws retroactively, overturning the decision of the Indian Supreme Court in favour of Vodafone. This act of imposing a tax retroactively resulted in Vodafone suing India under the India-Netherlands BIT and Cairn Energy, bringing a separate ISDS claim under the India-UK BIT. Both tribunals ruled against India. The Vodafone award is not in the public domain. The tribunal in Cairn Energy v India held that India could not adequately justify imposing taxes retroactively. The chapter discusses the critical contribution that the Cairn Energy tribunal made. Contrary to the general understanding, a retroactive measure is not per se a breach of investor’s rights. A retroactive measure is permissible, provided it is proportionate to the objective it seeks to accomplish. After losing both cases, India initially tried to brazen it out. However, finally, good sense prevailed, and India amended the Income Tax Act in 2021 to jettison the retroactive application of the law.
