The arbitration request notice was lodged on 17 April. In a statement, the company said: ‘Since Vodafone and the Indian government have been unable to find an amicable means of resolving the dispute, Vodafone has commenced an international investment arbitration as a way to achieve resolution.’ The multinational said that one of its holding companies had begun arbitration under a bilateral investment treaty between India and the Netherlands. India’s government has not commented on receiving the demand.

The disagreement centres on the mobile phone operator’s capital gains tax (CGT) liability following its $10.9bn (£6.4bn) purchase of Hutchison Essar in 2007. Conciliation talks between the two parties planned for earlier this year failed after Vodafone asked the Indian authorities to include a separate transfer pricing tax issue in the discussions.

The CGT claim has been disputed by Vodafone, which won a case on the issue in India’s Supreme Court in 2012. Vodafone's Dutch subsidiary acquired a 67% stake in CGP Investments Ltd, a Cayman Islands registered company which held the Indian telecom assets of Hutchison in May 2007. Vodafone argued that this deal was not subject to any taxes in India as the assets were held by a firm based in the Cayman Islands.

However, India’s tax laws were changed in mid 2012, introducing a ‘retrospective amendment’ allowing revenue authorities to reopen previously closed cases. This resulted in the tax authorities making a claim against Vodafone for the CGT allegedly owed, plus possible penalties.

The case has become a focus for criticism from investor groups, which claim that international companies face unfair and changeable regulations in India, especially on tax issues.

A number of multinationals, including IBM, Royal Dutch Shell, Nokia and Cairn Energy, are also disputing Indian tax bills.