this article addresses the issue of resolving international tax disputes through arbitration.1 The first part discusses current methods of resolving international tax disputes with particular emphasis on the operation of the mutual agreement procedure. The second part focuses on cases where arbitration has been used in settling international tax disputes, and examines the advantages and disadvantages of arbitration as an alternative or complement to the mutual agreement procedure. Given an increasingly transnational world economy, and an unprecedented high level of exchange of goods, services and capital among countries, international tax problems have multiplied and become all the more significant. The growing number of international tax disputes made it urgent to find efficient and speedy means of dispute settlement. The fact that, in most international tax conflicts, at least one of the parties is a sovereign nation adds unique and highly complex features to the dispute settlement process in the taxation field. Among other means of settling disputes, the mutual agreement procedure clause, a standard clause in most tax treaties, has played an important role in resolving international tax disputes and in implementing and interpreting tax treaty provisions. By permitting the so-called ‘Competent Authorities,’ in the name of their respective jurisdictions, to communicate directly without going through complex diplomatic channels, the mutual agreement procedure provision has proved instrumental in establishing a basis for flexible means of communication between and among tax jurisdictions. Recently, a series of difficulties has arisen in the operation of the mutual agreement procedure. This has led to suggestions on ways to improve the procedure. In 1986, the International Tax Institute celebrated its anniversary by organising a seminar on an unusual topic. The Institute conveyed to New York City representatives of the Competent Authorities of Canada, France, West Germany, Japan, the United Kingdom and the United States …