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Stockholm Arbitration Report (SAR) - (Individual Back Volumes)
Stockholm Arbitration Report (SAR) - (Individual Back Issue)
Preview Page SAR 2002 - 1
INTRODUCTION
“Taxes,” said Franklin Roosevelt, “are the dues that we pay for the
privileges of membership in an organized society.” Harsher tongues
describe tax as a form of property seizure. Somewhere between these
competing characterizations of revenue raising—club dues and forced
takings—lies a clue to why the North American Free Trade Agreement
(“NAFTA”) reserves special treatment for investment disputes implicating
fiscal matters.
NAFTA gives foreign investors a right to settle investment disputes by
arbitration, a process more politically and procedurally neutral than either
host state courts or foreign gunboats. Without the option to arbitrate, the
specter of unfair expropriation might chill cross-border economic
cooperation and capital flow.
The dispute resolution process does not apply to all investment
controversies, however. If an expropriation claim implicates “taxation
measures,” the competent fiscal authorities of host and investor countries
may block arbitration. Thus this “tax veto” supplies an initial screening
process to determine when taxation constitutes a form of what has been
called “creeping expropriation”. This power to block arbitration serves as
a springboard to consider the politically sensitive interaction of revenue
raising and national sovereignty.
William W. Park, Professor of Law, Boston University; Vice President, London Court of
International Arbitration.
