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While disputes in relation to tax have become a prominent feature of

commercial and investment treaty arbitration in recent years, the resolution

through arbitration of state-to-state disputes arising under international tax

treaties is an emerging trend.

Following last year's 'resource nationalism' trend,

we continue to see more and more disputes between

foreign investors and host states arising in relation

to taxation, as states around the world seek to

maximise fiscal returns through individual tax

measures or general changes to their fiscal regime.

Such disputes are particularly prevalent in the

extractive sectors (oil and gas, and mining), but fiscal

measures are also being challenged in numerous

other contexts. These cases concern matters as

wide-ranging as retroactive profits taxes, corporation

tax, VAT, capital gains tax, transfer pricing, tax

stabilisation mechanisms, taxation of income trusts,

tax procedures, tax audits and investigations or the

removal of tax incentives. They may give rise both to

commercial arbitrations in respect of disputed

contractual tax obligations and to investor-state

arbitrations, as may arise under bilateral or

multilateral investment treaties (BITs and MITs).

As well as potentially constituting unfair or

discriminatory treatment in violation of a relevant

investment treaty, some taxation measures have

been held by tribunals to amount to an

expropriation of the investment. Importantly, the

recent prevalence of investment arbitration to

resolve such international tax disputes can be

explained by the ability for qualifying investors

under investment treaties directly to access

international arbitration against a host state.

By contrast to international investment treaties,

international tax treaties have historically offered

relatively limited opportunity to investors, as

taxpayers, to vindicate claims or concerns about

states' tax decisions. Disputes under international

tax treaties typically concern the allocation between

states of taxation rights over a particular source of

income or profit, and the avoidance thereby of

double taxation on multinational companies.

Will Thomas


T +44 20 7832 7073


Gisele Stephens-Chu

Senior Associate

T +33 1 44 56 54 18


Arbitrating international

tax disputes: what next?



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