[This guest blog by Micah Burch, Senior Lecturer at Sydney Law School, draws on our joint research for the project, “Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific“, supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. We have subsequently co-authored a related paper entitled “Novel Treaty-Based Approaches to Resolving International Investment and Tax Disputes in the Asia-Pacific Region” (October 4, 2011) Sydney Law School Research Paper No. 11/66, available here.]
Much was made (in tax treaty circles, at least) three years ago when, after decades of mounting discussion, the Organisation for Economic Co-operation and Development (OECD) included in its model tax treaty a provision requiring arbitration. The controversial provision (Article 25(5) of the OECD Model Tax Convention on Income and on Capital (2003)) takes the substantial step of requiring states to arbitrate tax disputes arising under the treaty if they remain unresolved after two years of negotiation between the two competent authorities. While arbitration is a generally accepted facet of international commercial dispute resolution worldwide, including now throughout Asia, dispute resolution under bilateral tax treaties has been relatively undeveloped. But there are now signs of change.
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