Vodafone has served a notice of dispute against the Indian government and is considering arbitration proceedings over new retrospective tax proposals that could reverse a key $2.2 billion legal victory it won in January.

Vodafone, the largest overseas corporate investor in India, finally claimed victory in its five-year legal battle when India's Supreme Court dismissed a tax demand from authorities linked to a 2007 acquisition of Indian mobile assets.

The case had come to symbolise the perils foreign firms face doing business in the country and the ruling was hailed by business groups as a sign of the improving climate.

The proposed amendment to 50-year-old tax laws would however allow India to open a new front against the company.

International arbitration proceedings take years to resolve, analyst Nick Brown at Espirito Santo said on Tuesday. I doubt there'll be any resolution in the near term.

We've actually recently decided it was prudent to re-introduce the potential tax liability into our sum of the parts valuation. It's starting to look as though India won't be denied a second time around.

Vodafone shares, which had fallen when the Indian government proposed the retrospective tax legislation, rose 1.2 percent to 172 pence by 1013 GMT, slightly outperforming London's blue-chip FTSE index <.FTSE>.

The tax case stemmed from Vodafone's 2007 acquisition of Hutchison Whampoa's <0013.HK> Indian mobile assets for $10.7 billion. The Indian authorities had argued that the transaction was liable to be taxed in India.

Vodafone said in a statement on Tuesday that the 2012 finance bill proposals violated international legal protections granted to Vodafone and other foreign investors in India.

Vodafone has asked the Indian government to abandon or suitably to amend the retrospective aspects of the proposed legislation as Vodafone would prefer to reach an amicable solution to this matter, the company said.

However, if the government would not do so, Vodafone said it would take whatever steps were necessary to protect shareholder interests, including beginning treaty arbitration proceedings.

Vodafone said the notice had been served by the group's Dutch subsidiary and was the first step prior to the launch of international arbitration under the Bilateral Investment Treaty, an agreement between India and the Netherlands.

Under the treaty, the Indian government is obliged to provide fair and equitable treatment to investors and to not breach the legitimate expectations of investors.

(Reporting by Rosalba O'Brien and Kate Holton and Georgina Prodhan)