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The London Court of International Arbitration




When fiscal measures intertwine arbitration, undue mystification sometimes follows. To enhance analytic clarity, tax-related arbitration might be divided into three parts. The first derives from ordinary commercial disputes that become laced with incidental tax questions. A corporate acquisition, for example, might carry tax consequences which in turn implicate contract claims or defences presented to an arbitral tribunal for resolution. The second genre of tax-related arbitration arises in respect of cross-border investment disputes. Rightly or wrongly, foreign investors often perceive host-country fiscal enactments as discriminatory, unfair, or tantamount to expropriation, thus violating international commitments. Finally, arbitration comes into play under income tax treaties when two countries assert rival demands to tax the same pot of income. Within a single multinational corporate group, potential economic double taxation might arise through a mismatch of income and deductions from one country to the other. Such economic double taxation puts the corporate group in the role of fiscal stakeholder, ready to pay tax to one country or the other, but not both. In such a scenario, state-to-state arbitration can promote symmetry in allocating fiscal jurisdiction, as elaborated most recently pursuant to the OECD Base Erosion and Profit Shifting initiative. The modest aim of this essay lies in decorticating some of the themes, both practical and doctrinal, that challenge arbitrators tasked with deciding questions of a fiscal nature.

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