Article: The Impact of Pillar Two Rules on International Investment Treaties: An Assessment of Tax Carve-Out Provisions

Pillar Two, proposed by the Organization for Economic Cooperation and Development (OECD), represents a paradigm shift in international taxation. However, its implementation could result in disputes under existing international investment treaties (IIAs). The investor-state dispute settlement mechanisms (ISDS) may become a relevant procedure for resolving those issues with tax carve-out provisions in IIAs being a key factor. This raises a few relevant questions: What is the purpose of tax carve-out clauses in the context of IIAs? What role do they have in tax-related disputes under investment arbitration? This article explores their crucial relevance in the context of implementing the OECD’s Pillar Two and emphasizes their potential influence on tax-related disputes under IIAs and their significance in preserving states’ sovereignty over their tax policies.