OECD Arbitration in Tax Treaty Law

1. S. 3Introduction

Amid the common concerns about the growing uncertainty exacerbated by the already existing backlog of unresolved tax treaty related disputes, there is an interest in arbitration in tax matters. The idea is not new and, in order to understand the current discussions, it is important to trace back its roots. This thesis undertakes this challenge. It aims to show the milestones in the development of arbitration in international tax law.

The point of departure is understanding the basic need for arbitration in tax treaty law. Arbitration, as a practice, has already proven its merit in several other fields like investment, trade, and commercial arbitration. However, it formally entered the field of international taxation, becoming a heavily debated issue after the Mutual Agreement Procedure (MAP) failed to effectively resolve cross-border taxation disputes. The shortcomings of the MAP coupled with the potential for arbitration in tax treaty law necessitated the need for a formal approach towards arbitration. This is followed by tracing the evolution of the arbitration procedure from the very beginning when it was included in treaties between nations of their own accord. Th...