Vodafone on Tuesday threatened to take India to international arbitration over proposed retroactive tax legislation that could cost the British mobile phone giant over $2 billion. Vodafone, stepping up its battle against the tax plan which it called a violation of foreign investors\' rights, said it had served the Indian government with a \"notice of dispute\" in a first step toward international arbitration. It said the Indian legislation was a bid to bypass a ruling by the country\'s Supreme Court dismissing a $2.2-billion tax bill imposed on the firm over its 2007 takeover of Hong Kong-based Hutchison Whampoa\'s Indian mobile unit. The legislation to retroactively tax overseas mergers would \"countermand\" the court verdict and \"violates international legal protections granted to Vodafone and other international investors in India\", Vodafone said in a statement. Vodafone, India\'s biggest foreign corporate investor, said the notice was the first move before international arbitration under an investment treaty between India and the Netherlands. The notice was served by Vodafone\'s Dutch subsidiary as the takeover deal was struck between it and a Cayman Islands-based company that held Hutchison Whampoa\'s India assets. India\'s finance ministry declined to comment on the move. The cash-strapped Indian government had been widely expected to plug merger tax loopholes. But the retrospective nature of the legislation has stirred an international outcry at a time when India urgently needs big-ticket foreign investments to upgrade its dilapidated infrastructure and spur slowing economic growth. New Delhi\'s legislation, announced last month, would allow India to tax the sale of Indian assets, even if seller and buyer are foreign, back to 1962. This month, seven global business groups warned the proposal was \"prompting a widespread reconsideration of the costs and benefits of investing in India\". Gross foreign direct investment in India already fell by a quarter to $20.3 billion in the most recent fiscal year from a year earlier. Vodafone said it wanted an \"amicable solution\" and had asked India to abandon the retrospective aspects of the proposed legislation. Otherwise \"Vodafone will take whatever steps are necessary to protect its shareholders\' interests, including commencing investment treaty arbitration proceedings\", the company said. India contends Vodafone should have withheld the amount the seller, Hutchison, would have owed in capital gains tax when it sold the Indian unit for $10.7 billion. Vodafone successfully argued in the Supreme Court the deal was exempt from any tax because the sale took place abroad and both buyer and seller were from beyond India\'s borders. It also noted it was the purchaser and made no gain. Aside from Vodafone, the retroactive legislation could have implications for SAB Miller, GE, Cadbury and Sanofi, which are among companies embroiled in tax cases in India.