KATHMANDU: The government has decided to legally defend itself in the arbitration case filed by Ncell regarding the capital gains tax issue at the International Centre for Settlement of Investment Disputes (ICSID).
Ncell had filed a case against the government last year alleging that the Nepalese government, in the name of collecting capital gains tax (CGT) from the company, had violated the norms of international investment conventions.
Ncell had registered a case against the government of Nepal at the ICSID on May 20, 2019. However, the government had not shown any interest on the issue from the beginning itself. As Nepal took a stand not to appoint any mediator in the case, ICSID on September 24, 2019, had unilaterally appointed a mediator in accordance with the international conventions.
American national Paul Friedland was appointed as the mediator for the case by ICSID. Friedland has a long experience in legal issues related to investment disputes and settlements. He has represented both investors and the state and has settled various business disputes.
Though Nepal did not participate in the case, the mediation proceedings proceeded in accordance with the ICSID Convention. Nepal was still not in favor of defending the case. However, the government has decided to defend itself in this arbitration case now after seeing the risk of having to refund all the CGT taxes that Ncell had paid if the telecom firm wins the case.
Minister for Foreign Affairs, Pradeep Gyawali, informed that the Cabinet has decided to form a team to defend the government at the ICSID.
Experts had long been arguing that Nepal’s failure to appoint a mediator could weaken Nepal’s defense and affect the decision-making process of ICSID in the case.
However, the Inland Revenue Department had been saying that investment related disputes were not under its jurisdiction. Similarly, the Ministry of Finance was also not in a mood to enter into a legal battle.