Govt wins case against Ncell’s parent company Axiata that has claimed compensation of Rs 66 billion

Published On: June 11, 2023 08:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, June 11: The government has won the case against Axiata Group, the parent company of Ncell, in the dispute over the settlement of the capital gains tax.

The International Centre for Settlement of Investment Disputes (ICSID), an international investment dispute settlement body established by the World Bank, on Friday gave its verdict on the side of the Government of Nepal (GoN). With the decision, Nepal will not be liable to pay Rs 66 billion as demanded by the company.

On May 20, 2019, the Axiata Group filed a case at the ICSID, claiming damages worth $500 million, (around Rs 66 billion). The international group had blamed the GoN to have breached the bilateral agreement, imposing injustice and unjustified taxes levied on the company.

Although the government won the case in general, it will still have to pay some amount of compensatory damages to the telecommunications conglomerate. However, the amount is yet to be fixed, according to the government officials.

Axiata had demanded the GoN return the capital gains tax amount that the state had levied on the company during its acquisition of an 80 percent stake in Ncell. Previously, the GoN-assigned audit firms had fixed Rs 40 billion that the international company needed to pay to the state after the company owned Ncell.  

In response, Axiata moved the Supreme Court (SC), challenging the government on its evaluation of tax amounts. However, the SC ruled in favor of the government in February 2019. Dissatisfied by the SC’s verdict, Axiata in May 2019 took its case to the international dispute settlement body.

Axiata Group acquired Reynold Holdings from Telia Sonera, a Norwegian telecommunications company, on April 11, 2016. Reynolds Holdings, a company registered in the British Virgin Islands, owns around 80 percent stake of Ncell.

The group filed the case claiming that the GoN violated the bilateral investment promotion and protection agreement signed between Nepal and the UK on March 2, 1993.

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