VCLT and the Peaceful Coexistence of Tax and Investment Treaties: A Case Study of Limited MFN Clauses and the FET Standard

Abstract

The general purpose of this article is to demonstrate that customary international law (CIL) has a significant role to play in connecting international tax law and international investment law. Bridging a gap between those sources of international law is not only an important endeavour in the theory of law but also in practice. This article purports to achieve the abovementioned general purpose by focusing on the application of the rule and principles of interpretation under the Vienna Convention on the Law of Treaties (VCLT), which represent a codification of CIL, to limited most favoured nation (MFN) clauses in tax treaties. The hypothesis of the authors is that a serious failure in a proper application of the VCLT to interpret the MFN clauses in tax treaties may lead to a violation of international investment agreements (IIAs), in particular the fair and equitable treatment (FET) standard. The analysis and conclusions are relevant to all tax treaties and IIAs containing the MFN clause and FET standard, respectively. They are also of relevance for the interpretation of all provisions of tax treaties, not only the limited MFN clauses, in accordance with the VCLT. Examining tax treaties through the lens of the FET standard allows the FET standard to be seen as a gateway for the systemic integration of tax treaties in accordance with the principle enshrined in article 31(3) (c) of the VCLT, because some of core elements of that standard are deeply rooted in sources of international law (general principles of law and custom).