The settlement of tax disputes by the International Court of Justice

Abstract

This article analyses the ICJ, one of the most eminent actors of the international legal regime, as an actor of the international tax regime. So far, the ICJ’s role in tax dispute resolution has been a blind spot in the literature. The descriptive part of this article first discusses the case law of the PCIJ and ICJ that considers – albeit incidentally – questions of taxation. These tax-related cases are categorized as (i) ‘wrongful taxation’ constituting the subject matter of the dispute; (ii) taxation as evidence for a ‘genuine link’ between the state and a national; or (iii) taxation as an ‘effectivité’ to prove the de facto exercise of state authority over a given territory. The second half of the descriptive analysis assesses the Court’s jurisdiction over tax disputes. Tax treaties usually lack compromissory clauses. Yet, there are a number of jurisdictional bases that vest the Court with the competence to sit over hypothetical tax treaty disputes, although certain reservations may render the Court’s jurisdiction residual to other means of tax dispute settlement. Further, Article 344 TFEU possibly precludes EU member states from initiating ICJ proceedings concerning tax treaty disputes with other EU states. The second, normative part of this article contemplates the Court as a future ‘World Tax Court’. It briefly addresses (i) possible effects of the ICJ’s hypothetical involvement in tax disputes; (ii) whether the ICJ might have a future role in tax dispute settlement in light of recent developments; and (iii) whether it is even desirable to involve the Court in tax disputes.