OECD Arbitration in Tax Treaty Law

1. S. 615Introduction

For a long time, foreign direct investment has been instrumental in the promotion and achievement of national social justice through the adoption of legal measures to facilitate the global injection of private capital into a country’s economy in order to strengthen its productive capacity to generate more jobs and income growth among its citizens. This has been a driving force behind the signing of bilateral investment agreements. Since the adoption of the first bilateral investment agreements in 1959, the signing of this kind of instruments has been steadily increasing. The global coverage of bilateral investment agreements is impressive, with approximately 3,000 such treaties in existence worldwide.

Since the beginning, the aim of bilateral investment agreements has been to protect and promote cross-border investment. They achieve this aim by including substantive investor protections and also by including an international arbitration mechanism in case of disagreement regarding whether and how these protections have been safeguarded.

The latter element, the dispute resolution mechanism under bilateral investment agreements, so-called investor-state arbitration, has b...