OECD Arbitration in Tax Treaty Law

1. S. 690Introduction

Double taxation constitutes a major impediment to a significant goal of the European Union (EU), namely, the accomplishment of the internal market. The roots of the problem are found in the limited competence of the EU in the harmonisation of direct taxation.

The competence regarding direct taxation still remains with the Member States. The compartmentalisation of the internal market and the absence of harmonising measures have had an adverse impact on entrepreneurship and competitiveness within the EU.

In an attempt to foster an investment-friendly framework comprising fair taxation and legal certainty, the EU Commission conducted a proposal for an Arbitration Directive in 1976. Albeit of limited scope, that directive was considered a huge step and did not enter into force by virtue of the unwillingness of the Member States to restrict their fiscal autonomy. It was only in 1990 that consensus for the creation of a common dispute resolution mechanism was reached. Having decided to deprive the CJEU of any jurisdiction, though, the Member States signed an instrument of International Law, the EU Arbitration Convention (‘the Convention’).

However, there was an urgent need f...