OECD Arbitration in Tax Treaty Law

1. S. 403Introduction

In 2010, Japan concluded a new income tax treaty (tax treaty) with the Netherlands which is the first Japanese treaty to provide for arbitration. Before that, some countries had concluded treaties with an arbitration mechanism, meaning at that time arbitration had already been regarded as a feasible approach to resolving disputes; nevertheless, Japan had not decided to implement arbitration until 2010. Finally, as Japan opted to introduce arbitration provisions in its tax treaties, there was significant background to those circumstances. Since then, the number of treaties including arbitration has gradually increased, and is expected to increase in the future.

This chapter analyses why and what types of arbitration Japan has introduced in its tax treaties. First, Section 2. analyses the underlying reasons why Japan decided to implement an arbitration system. At that time, the environment facing Japan was changing markedly, and how these changes affected the decision of the state to implement an arbitration system. This section also considers the constitutional controversy surrounding the introduction of arbitration clauses. Section 3. classifies, examines and compares thr...