By Néstor Armando Pineda González [1]
On 2 June 2026, the book ‘Tax Matters in International Investment Arbitration: General Questions, Jurisdiction, Merits and Remedies’, edited by Prof. Robert J. Danon (Professor of International Tax Law at the University of Lausanne and Partner at Danon in Lausanne), Sebastian Wuschka (Of Counsel at Luther in Hamburg) and Prof. Andreas R. Ziegler (Professor of International Law at the University of Lausanne), was officially launched at a conference held at the University of Lausanne.
This blog post provides an overview of the key takeaways that emerged from the discussions at the book launch.
What is this book about and why is it timely?
Tax matters arise in international investment arbitration in different forms. For investors, taxation is a key consideration from the planning stage, as it helps mitigate risks arising from changes to the host state’s fiscal policy framework. For states, freedom to determine and implement tax policy is a core attribute of sovereignty and should remain within their control.
In the context of investment dispute settlement, investors increasingly bring claims alleging that fiscal measures have breached the substantive protections afforded under investment treaties, such as protection against expropriation, Most-Favoured-Nation treatment and National Treatment (NT). However, many of these treaties include tax carve-outs that exclude or limit the jurisdiction of arbitral tribunals over such claims (see, e.g., Article 21 of the ECT). In addition, some provide filter mechanisms requiring certain issues to be referred to the competent tax authorities before they may proceed to arbitration.
From a tax policy perspective, there is a growing trend towards excluding taxation disputes altogether from the jurisdiction of investment tribunals or otherwise limiting that jurisdiction, as reflected in recent amendments to Article 25 of the UN Model Tax Convention. The book questions these approaches, arguing that, where a dispute reaches the merits stage, an arbitral tribunal is capable of reconciling the protections afforded under investment treaties with the principles of the international tax system. The book also reiterates that the task of arbitral tribunals is not to adjudicate a tax dispute as such but rather to deal with a tax-related investment dispute. This distinction is significant as a matter of policy and practice.
Whether or not a dispute has progressed beyond the jurisdiction and liability phases, tax matters may also arise in the calculation of damages, for instance where the final award is subject to taxation.
Despite the growing prominence of the topic, tax matters in investment arbitration have received relatively little attention in the academic literature. This book is therefore a timely contribution for academics and practitioners alike, as it provides in-depth analysis, practical insights, and policy-oriented perspectives on the role of taxation in investment arbitration.
Against this background, the following key takeaways emerged from the book launch discussions.
Key Takeaways from the Book Launch
The full-day conference brought together academics, arbitrators, government lawyers and practitioners from both the investment law and international tax law communities. The discussions demonstrated that tax questions may arise throughout every stage of an investment arbitration, from jurisdiction and applicable law to the merits of the claim and the calculation of damages.
Although each speaker approached the topic from a different perspective, a common view was that investment law and international tax law should not be viewed as isolated legal regimes but as systems that increasingly interact with one another.
The conference opened with presentations by Prof. Danon (University of Lausanne) and Prof. Dr. Ursula Kriebaum (University of Vienna), who explained how both the international tax system and the investment treaty regime have evolved over the past decades, as further illustrated in chapters 1 and 2 respectively.
Dr. Kriebaum traced the development of investment treaties from their original objective of protecting foreign investment against political risk to today’s more balanced approach, where states increasingly seek to preserve their regulatory autonomy. One consequence of this evolution has been the growing use of tax carve-outs and procedural limitations in recent investment agreements.
Prof. Danon then addressed the notion and evolution of the international tax system. In this regard, an important distinction must be drawn between the procedural and substantive dimensions of the international tax system. From a procedural point of view, dispute settlement under tax treaties – through the Mutual Agreement Procedure (MAP) – is a state-to-state procedure: taxpayers may initiate such a procedure, but they do not have standing comparable to that of investors under investment treaties. On the other hand, substantively, today’s international tax system consists of a coherent body of rules that includes not only tax treaties based on the OECD and UN Model Conventions, but also, increasingly, domestic tax legislation based on common approaches and standards, such as those adopted by the Inclusive Framework on OECD Base Erosion and Profit Shifting (BEPS) which includes more than 140 countries. Given the homogeneity of tax norms, Prof. Danon thus concluded that comparative law is becoming increasingly relevant for benchmarking proper state conduct in tax matters.
The discussion then moved to jurisdictional questions, which remain among the most contentious aspects of tax-related investment disputes.
Prof. Danon proposed a structured methodology for analysing tax-related disputes in investment arbitration, drawing on chapter 3 of the volume. He highlighted that tribunals should distinguish between jurisdiction and applicable law. The scope of consent to arbitration must also be considered where, for example, the jurisdictional clause extends beyond the standards of protection to cover any dispute relating to an investment. Several recent cases were also discussed, including Cairn v India, Lone Star v Korea and Vincent J. Ryan and Others v Poland. These decisions illustrate that tax measures may still fall within the jurisdiction of investment tribunals even where tax treaties exist between the home and host states of the investment.
The discussion also focused on tax carve-outs and filter mechanisms as well as on the examination of arbitral practice relating to them. While some investment treaties require the involvement of competent tax authorities before arbitration can proceed, the speakers questioned whether these mechanisms, which are rooted in state-to-state diplomatic protection, are justified either in practice or as a matter of policy. The argument that tax disputes should automatically be excluded because they are already addressed through double taxation treaties received particular criticism, given that the latter govern different subject matters.
Additional presentations explored how different treaty models approach taxation. Samantha Rowe (Debevoise & Plimpton LLP) analysed the tax carve-out contained in the Energy Charter Treaty (chapter 9 of the volume), while Mark A. Luz (General Counsel, Global Affairs Canada) examined the evolution of Canada’s practice from NAFTA to CETA and CUSMA (chapter 8 of the volume). Finally, Prof. Danon and Prof. Adolfo Martín Jiménez (University of Cádiz) critically assessed the recent proposal in the UN Model Tax Convention intended to override investor-state arbitration through tax treaties, questioning both its legal justification and its broader policy implications. Their arguments drew on their contribution to chapter 6 of the volume.
The afternoon sessions turned to substantive issues and remedies.
Introducing chapter 4 of the volume, which proposes a methodology for the merits phase, Prof. Danon emphasised that a distinction should be drawn between jurisdiction and applicable law. In a tax-related dispute, tribunals may therefore be required to consider multiple sources of law (in particular domestic tax laws and tax treaty obligations) and to determine whether these are to be treated as applicable law or facts. For example, questions concerning tax exemptions, refunds or the legality of taxation measures frequently require tribunals to interpret domestic tax legislation. When interpreting investment treaty standards, general principles of law, decisions of other international courts and tribunals in tax matters (such as the CJEU or the ECtHR), and OECD tax standards may then assist tribunals.
Much of the discussion centred on the Fair and Equitable Treatment (FET) standard. Matthias Scherer (Partner, LALIVE) reviewed arbitral awards dealing with tax measures, including the Micula award, and highlighted the continuing uncertainty surrounding the precise content of FET in taxation disputes, as further discussed in chapter 11 of the volume. While legitimate expectations remain an important element, tribunals have increasingly recognised that tax regulation is an area in which states enjoy a particularly broad regulatory discretion.
Drawing on the principle of systemic integration (Article 31(3)(c) of the VCLT) and global tax standards, Prof. Danon then discussed how tribunals could interpret FET clauses consistently with the principles of the international tax system (see further chapter 12 of the volume). Building on Cairn v India, Prof. Danon showed that, in addition to retroactive taxation, other possible treaty breaches may come into play (arbitrary changes in administrative practice, excessive penalties, or misapplication of the burden of proof, etc.).
The discussions also covered the NT standard. Prof. Adolfo Martín Jiménez explained that the non-discrimination provisions contained in tax treaties differ significantly from NT obligations found in investment treaties. Although both seek to prevent discriminatory treatment, they pursue different objectives and operate under different legal frameworks (see further chapter 14 of the volume).
Throughout these discussions, different arbitral awards, including Yukos, Cairn and Lone Star, were referred to as examples of how tribunals have relied on domestic tax law and different sources of international tax law when resolving investment disputes.
The final session addressed two topics that frequently arise in practice. Philippe Cavalieros (Partner, Simmons & Simmons LLP) examined tax-related disputes arising from investment contracts rather than investment treaties (chapter 16 of the volume). As investors increasingly negotiate detailed contractual tax protection, disputes often concern stabilisation clauses, economic equilibrium clauses, tax indemnities or other contractual mechanisms allocating tax risk between the parties. These disputes differ from treaty claims because they are based on direct contractual obligations instead of treaty standards.
Robin Rylander (Partner, Mannheimer Swartling) concluded the conference by discussing tax gross-up claims in the calculation of damages (chapter 18 of the volume). He explained that tribunals have generally been reluctant to increase compensation to account for future tax liabilities, largely because claimants often fail to demonstrate that taxation will actually occur or because such losses are considered too remote. Nevertheless, tribunals have occasionally adopted more flexible solutions, particularly where taxation by the respondent state would undermine the principle of full compensation.
Prof. Christoph Schreuer (Of Counsel, Zeiler Rechtsanwälte), who had guided the audience through the day by providing brief comments at the end of each session, closed the conference by returning to first principles. He emphasised that investment tribunals frequently apply both domestic and international law simultaneously, particularly under Article 42 of the ICSID Convention. He also observed that, despite growing criticism of ISDS, domestic courts cannot always provide an effective substitute due to issues of delay, enforceability and institutional independence. The conference therefore concluded with a broader reflection that – rather than excluding taxation from investment arbitration altogether – future discussions should focus on developing ways of reconciling investment protection with the legitimate exercise of states’ regulatory and taxation powers.
[1] Néstor Armando Pineda González is an LL.M. graduate from MIDS, Geneva.