Interstate arbitration in international tax disputes

The proliferation of interstate alternative dispute resolution (ADR) mechanisms, such as joint tax vetoes and mutual agreement procedures, as well as investor-state taxrelated arbitration, are the chief reasons for the decline of interstate arbitration (or other forms of adjudication) in tax matters. The article argues that interstate arbitration is envisaged, apart from energy pipeline agreements, as a residual dispute settlement mechanism, but the relative success of ADR has limited interstate arbitration to a limited set of contexts and cases. The following instruments typically serve as submission agreements, namely: bilateral investment treaties, bilateral tax treaties, multilateral regional economic cooperation (or free trade) agreements and pipeline treaties. Ultimately, as the article concludes, a hybrid system that combines: (i) the direct involvement of the taxpayer; (ii) the efficiency of institutional arbitration; and (iii) the transparency guarantees of interstate arbitration is perhaps the way forward.