Edited by Rafael Leal-Arcas
ARTICLE 21: TAXATION
The State’s right to regulate is a right that often needs to be balanced against the investor’s substantive protections. In the context of tax measures, ECT Article 21 safeguards the State’s right to regulate when exercising bone fide tax measures that could have an effect on foreign energy investors. Article 21 is often described as a ‘carve-out’ provision as it protects the State’s regulatory tax measures against possible challenges made by foreign investors. This means that the ECT does not create rights nor imposes obligations in relation to taxation measures, however, there are some conditional limitations. ECT Article 21(5)(b) provides that when there is a question on whether a tax measure constitutes expropriation and discrimination the issue should be referred to competent tax authorities
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