Tax Matters in International Investment Arbitration

As tax disputes continue to increase globally, foreign investors are placing greater reliance on investment treaty protection. From a dispute prevention perspective, treaty guarantees are for example increasingly assessed when entering new markets. Moreover, investors have, in a growing number of cases, turned to Investor-State Dispute Settlement (ISDS) to challenge taxation measures adopted by host states that affect their investments.

Tax-related investment disputes raise a wide range of issues, including alleged breaches of legitimate expectations and legal certainty, arbitrary or discriminatory treatment, violations of due process, indirect expropriation, and claims arising out of investment contracts. Over the past decade, a number of landmark arbitral awards have contributed to shaping investment treaty practice in taxation matters. At the same time, new questions continue to emerge, in particular as arbitral tribunals interpret tax carve-outs and apply substantive standards of protection in tax-related contexts. The interaction between these standards, the principles of the international tax system and global tax standards—increasingly shaping state conduct in cross-border taxation —has also begun to feature more prominently in arbitral awards.

At the policy level, developments have been equally significant. On the one hand, increasingly sophisticated tax carve-outs and filter mechanisms—sometimes incorporating references to the principles of international tax law—are being included in investment agreements. On the other hand, the relationship between investment arbitration and taxation has recently been the subject of focused work by the UN Committee of Experts on International Cooperation in Tax Matters. In addition, tax issues may arise incidentally in investment disputes that are not primarily tax-driven, for instance in relation to the taxation of arbitral awards.

Tax Matters in International Investment: General Questions, Jurisdiction, Merits and Remedies (Kluwer), comprising 18 chapters authored by leading experts from both the international tax and investment law communities, provides a comprehensive analysis of these developments. The volume offers in-depth research, practical insights, and policyoriented perspectives on the role of taxation in investment arbitration.

During this half-day Book Launch conference contributing authors and prominent invited speakers will engage with its subject matter.

Info: With a view to set the scene for the rest of the conference, this opening session will explore how and to what extent state conduct in taxation matters is increasingly influenced by the principles of the international tax system and how the emergence of global benchmarks may be relevant in tax-related investment disputes. Finally, the specificities of dispute resolution under bilateral tax treaties, which remains rooted in State-to-State diplomatic protection, will be highlighted.

Info: This session will focus on tax-related disputes under the current investment treaty regime. The discussion will begin by examining foundational questions concerning both the jurisdictional and merits phases of an investment treaty arbitration involving a tax related dispute and the interaction with the principles of the international tax system. The session will then consider how tribunals interpret jurisdictional tax carve-outs and notification procedures requiring competent tax authorities to make joint-determinations before a claim may proceed to ISDS. Next, the session will move to the role of selected standards of protection – fair and equitable treatment (FET) and national treatment (NT) in modern tax-related disputes and the relation of these standards with the principles of the international tax system. Finally, the session will turn to tax-related disputes arising out of investment contracts.

Info: This session will take a forward-looking perspective on the future of ISDS and taxation measures. The session will first critically review the policy of including tax carve-outs and notification procedures in investment treaties. Is this a sensible and justified policy? Along the same lines, the session will consider the recent policy consisting in including clauses in tax treaties designed to override investment treaties substantively and/or procedurally. A substantive override occurs where the tax treaty standard (for example the narrow non- discrimination clause found in article 24 OECD and UN MC) is meant to override the broader substantive standard of protection (for example FT or NT) provided by investment treaties. On the other hand, a procedural override occurs where a tax treaty clause is used to switch off ISDS. A prominent illustration of this policy are the 2025 additions to the UN Model Tax Convention and, to a lesser extent, to the OECD MC. In light of these developments,

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Host or Publisher Institute of International Economic Law