Tax and Investment Treaties: A Few Observations

We met in the early nineties of the previous century; David, a well-known scholar, teacher, practitioner, and I, a young lawyer practising in New York and conducting PhD research on improper use of tax treaties in my spare time. How could I not come across David Rosenbloom? I read his often-mentioned article on tax treaty abuse, written in 1983 (relevant at the time of my research and today) and took the liberty to call Mr Rosenbloom to discuss the theme. That was the start of a treasured friendship.

Where is the link with bilateral investment treaties (BITs)? Well, about a decade after I had completed my PhD, I received a call from an arbitration lawyer in Paris who asked whether I could act as expert witness in an arbitration under the 1994 Energy Charter Treaty (ECT), in which the claimants, former Yukos shareholders, claimed a not insignificant amount from Russia. I embarked on the project, about which more later in this contribution, but after conclusion of the jurisdictional phase, in which I rendered my report, I had to withdraw from the case because I joined a professional services firm whose prior involvement with Yukos prevented me from continuing my role. Of course, I suggested that the arbitration lawyers contact David Rosenbloom, which I am certain they would have done in any event, and David ended up as expert in the ensuing phase of the arbitration. I believe that for both of us Yukos was the entry point to the wonderland of BIT arbitration.

This contribution will lightly explore where tax and BITs meet and where there are differences. That is not to say that there are no other publications about the theme, a certain body of literature is developing, but it is striking how little cross-disciplinary research has been done. The BIT world has a window facing the tax world whenever tax is in scope and vice versa does the tax world peek into the BIT world effectively when tax expertise is called in. It is fascinating to see how both worlds interact, and deal with bilateral treaties, their interpretation and with dispute resolution.