Tax and arbitration (an ISDS update).

The article focuses on the intersection of taxation and investor–State dispute settlement (ISDS) under international investment treaties, examining how tax measures are treated in arbitration. It outlines the tension between a State's sovereign right to tax and its interest in attracting foreign investment, noting that many treaties include carve-outs or joint taxation vetoes to limit claims related to tax measures. Key issues discussed include the definition of taxation measures, jurisdictional challenges, the application of the police powers doctrine, and the standards for unlawful expropriation and fair and equitable treatment (FET), particularly regarding legitimate expectations and retroactive taxes. Recent arbitral decisions, such as Cairn v India, illustrate the complexity of balancing tax sovereignty with investor protections, while ongoing UNCTAD and UN Committee of Experts initiatives seek to guide treaty reform to safeguard States' tax policy space without unduly restricting investment.