The future of tax disputes and investment treaties

A report on a session at the IBA’s 26th Annual US and Europe Tax Practice Trends Conference held in Rome on 17 April 2026

Session Co-Chairs

Nikolaj Bjørnholm, Bjørnholm Law, Copenhagen
Starling Marshall, Crowell & Moring, New York

Speakers

Olga Beloded, Pryor Cashman, New York
Paul Kraan, Van Campen Liem, Amsterdam
Aurelio Massimiano, Maisto e Associati, Milan
Maximilien De Ridder, Lenz & Staehelin, Geneva
Jonathan S Schwarz, Temple Tax Chambers, London

Reporter

Anamaria Rotariu
bpv Grigorescu Stefanica, Bucharest
anamaria.rotariu@bpv-grigrorescu.com

Introduction

The panel examined the developing intersection between investment treaties (BITs) and tax disputes, the relationship between tax treaties and the General Agreement on Trade in Services (GATS) dispute resolution, and recent developments in Mutual Agreement Procedure (MAP), including the 2026 Manual on Effective Mutual Agreement Procedures (MEMAP), domestic case law on the interplay between MAP and national court proceedings, as well as the evolving role of alternative dispute resolution (ADR) in cross-border tax cases.

Panel discussion

Investment treaties and tax disputes

Olga Beloded opened the discussion with an overview of BITs and their relationship to tax treaties. Unlike tax treaties, BITs afford investors the right to bring direct claims against host states in international arbitration. Most BITs provide three categories of substantive protection: (1) non-discrimination, encompassing national treatment and most favoured nation (MFN) treatment; (2) fair and equitable treatment; and (3) protection against expropriation. Investment treaties are far less standardised than tax treaties. Some BITs protect only investments, others both investors and investments, and some apply only to direct investments while others extend to indirect ones. That variation is important in tax disputes, because some treaties fully exclude tax measures from arbitral jurisdiction, while others preserve claims for expropriation or carve out only certain categories of taxes.

Further on, Olga presented the Vodafone case as the principal illustration. Vodafone acquired in 2007 Hutchison’s Indian assets indirectly through a Dutch entity holding a Cayman Islands structure. The Indian tax authorities argued that the transaction was an indirect transfer of Indian assets and, therefore, subject to taxation under Indian legislation. Vodafone contended that the transaction occurred between two non-resident entities and therefore lay outside the scope of India’s taxing rights. Vodafone prevailed before the Indian Supreme Court, explaining that the tax laws then in force (ie, the Income Tax Act 1961) did not apply to profits derived from the indirect transfer of shares in an Indian company. The Indian government responded with retrospective legislation reaching back to 1962, thereby enabling the authorities to tax such indirect transfers retroactively. Vodafone brought a claim under the India-Netherlands BIT, asserting a breach of the fair and equitable treatment, and the tribunal ultimately found in Vodafone’s favour, holding that the retrospective tax claim breached the BIT.

In this context, Beloded also noted that the investment treaty arbitration is extremely expensive, but can lead to very large awards, which, in her view, is one reason why many states, especially developing countries, have become more cautious about maintaining broad BIT networks.

Jonathan Schwarz added that investment treaty arbitration can be a powerful remedy, but in practice it is usually suitable only for very large disputes. He also commented on the retroactivity issue in Vodafone, namely that retroactive legislation is allowed only in certain circumstances, for example where a prior announcement precedes formal enactment, but in Vodafone’s case the affected transactions pre-dated any such indication by many years.

Paul Kraan added that MAP under the Netherlands-India Double Tax Treaty (DTT) had been considered before investment treaty proceedings were launched, but that once a government had both overturned the practical effect of its own Supreme Court judgment and enacted legislation with decades of retroactive effect, the prospects of meaningful MAP relief were considered very limited.

Maximilien De Ridder then discussed the Nestlé case to show how domestic courts can significantly affect treaty-based protection. Under the 1994 India-Switzerland DTT and its 2010 MFN protocol, Switzerland communicated in 2021 that the MFN clause had been triggered by India’s lower-rate DTTs with Lithuania and Colombia, reducing the withholding tax on dividends from ten per cent to five per cent. The Indian Supreme Court ruled in 2023 that the MFN clause was not self-executing and required a separate notification under the Income Tax Act to become operational. Following the 2023 judgment, Switzerland reinstated the ten per cent rate from 1 January 2025, citing lack of reciprocity. De Ridder used this as an example of how domestic adjudication can narrow the practical reach of treaty protections.

Intersection between tax treaty and GATS dispute resolution

Following the discussion on investment treaties and tax disputes, co-chair Nikolaj Bjørnholm introduced the next topic of the session and invited Schwarz to examine recent changes to the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention and their implications for dispute resolution.

Schwarz discussed the 2025 update to the OECD Model, particularly in relation to tax treaty non-discrimination and GATS. He pointed out that, where discrimination claims fall within the scope of a tax treaty, the revised approach seeks to exclude parallel GATS dispute settlement and channel the matter into MAP instead. He also highlighted the proposal that competent authorities, rather than courts, should determine whether a matter falls within the relevant treaty non-discrimination provision. In his view, this reflected a broader movement towards preserving fiscal autonomy and limiting exposure to compulsory external dispute mechanisms.

Recent MAP developments

That discussion led into Base Erosion and Profit Shifting (BEPS) Action 14 and the Oracle case in Australia. Jonathan Schwarz argued that, for jurisdictions participating in the Inclusive Framework, the minimum standards and best practices under Action 14 should not be treated as mere rhetoric, but rather, they may create legitimate expectations that competent authorities will conduct MAP in line with Article 25 of the OECD Tax Treaty. In the Oracle case, this reasoning was used successfully to resist an attempt by the Australian tax administration to move a case out of MAP and into domestic court proceedings. Schwarz referred to similar developments in Israel, the UK and Kenya, suggesting that domestic courts may in some circumstances protect the integrity of MAP and, where relevant, preserve access to arbitration under the multilateral instrument (MLI).

Olga Beloded raised concerns about the limited pool of arbitrators in tax-related investment treaty cases and the perception among developing countries that such arbitrators may be overly investor-friendly. Jonathan Schwarz responded that the same argument was raised by the Australian tax office in the Oracle case, noting that arbitration mechanisms generally allow for the appointment of suitably qualified decision-makers, including judges with relevant domestic expertise where appropriate.

Aurelio Massimiano built on this by referring to the updated OECD MEMAP, published in 2026. He noted that Best Practice 19 envisages that taxpayers should be informed of MAP progress, even though they are not parties to the state-to-state negotiations. Jonathan Schwarz described MEMAP as an excellent practical document, while acknowledging that it is not intended to be legally binding.

The discussion of transparency showed that practice still varies widely. Jonathan Schwarz noted that taxpayer access to position papers and other materials exchanged between competent authorities remains unsettled. Maximilien De Ridder explained that Swiss law still offers limited formal access despite broader principles of access to information. Paul Kraan, by contrast, described the Dutch competent authority as comparatively cooperative in practice, including in a transfer pricing case where the intervention of the Dutch competent authority helped by initiating a MAP, therefore preventing a dispute from falling out of arbitration.

The panel also discussed possible systemic reform. Jonathan Schwarz highlighted two themes in ongoing United Nations work. First, future dispute resolution mechanisms might be developed for non-treaty situations, which could be particularly relevant in developing countries with less developed treaty networks. Second, mediation and conciliation may play a greater role alongside MAP.

Going further on MAP implementation, Aurelio Massimiano observed that too much attention is paid to how long MAP takes, and too little to how long implementation takes once an agreement has been reached. Referring again to MEMAP, he noted that Best Practice 49 envisages implementation within four months or less. In Italy, however, implementation may still take one or even two years because of fragmented domestic procedures and the involvement of multiple offices.

Maximilien De Ridder described similar Swiss difficulties in implementing MAP outcomes, particularly in cases involving withholding tax. He explained that, because different authorities are involved, uncertainty long remained as to whether payments made pursuant to a MAP agreement could still trigger Swiss withholding tax consequences. Although the practice became more pragmatic after 2001, it was only in 2022 that the position was clearly reflected in federal legislation, providing greater certainty that repatriation payments made in accordance with a MAP agreement would not be subject to Swiss withholding tax.

The final part of the session focused on ADR, arbitration and capacity constraints. Paul Kraan mentioned that mediation is becoming more common in domestic disputes in the Netherlands. Co-Chair Nikolaj Bjørnholm added that Denmark had seen some success with ADR inspired by the UK model. Jonathan Schwarz suggested that mediation could be particularly beneficial in developing countries.

At the same time, the panel made clear that important limits remain. Co-Chair Nikolaj Bjørnholm and Aurelio Massimiano both mentioned situations in which competent authorities appeared reluctant to admit cases into arbitration-capable procedures, preferring routes with fewer hard deadlines or taxpayer enforcement rights.

Co-Chair Starling Marshall then asked about recent experience with competent authorities, including reported difficulties in dealing with the US.

The discussion indicated that capacity constraints are affecting competent authorities across jurisdictions. Jonathan Schwarz observed that this has become a jurisdiction-by-jurisdiction issue rather than a problem confined to a few states. Aurelio Massimiano and Paul Kraan added that competent authorities are increasingly focused on transfer pricing cases, even though non-transfer-pricing treaty disputes remain equally important and often require different expertise.