Tax Carve-Out under the ECT for Purposes of Jurisdictional Competence

This article explores the tax carve-out provision within the Energy Charter Treaty (ECT) at Article 21 and its implications for the jurisdiction of tribunals constituted pursuant to the Treaty. Taxation is inherent to investment. Unsurprisingly, there has been a notable increase in tax-related disputes under International Investment Agreements (IIAs), many of which under the ECT. This trend underscores the need to distinguish between tax disputes and tax-related investment disputes, with the latter falling under the purview of Investor-State Dispute Settlement (ISDS) mechanisms. To address this, many states have introduced "tax carve-out" clauses in IIAs that are similar to Article 21 of the ECT, seeking to exclude tax matters from ISDS jurisdiction. By examining legal precedents, state practices, and recent developments, this article aims to provide insights into the nuanced interplay between tax and investment law within the context of the ECT. It seeks to enhance a deeper understanding of the jurisdictional challenges faced in international investment arbitration arising from taxation. The article argues that a case-by-case interpretation of Article 21 is the best option to maintain a balance between investor rights and state prerogatives.