2016] INTERPRETING TAX TREATIES 1389
The international law of treaty interpretation, as codified in the Vienna
Convention on the Law of Treaties (“Vienna Convention”), prescribes
general rules of interpretation, based on a plain meaning approach, that
apply uniformly to all treaties.1 Yet courts, states, and scholars seem to agree
that some treaties warrant special interpretive rules.2 Theorizing this
differentiated approach to treaty interpretation, however, remains elusive.
Explanations based on treaty subject matter or purpose fail to satisfy.3 Instead,
examination of the objective features shared within a treaty category provides
a more promising avenue for justifying specialized interpretive methods. One
such characteristic is the treaty’s degree of completeness, or its degree of
specificity and operationality. Specifically, all else being equal, standalone
instruments call for less reliance upon extrinsic materials; interstitial
instruments demand more.
Applying this insight to the income tax treaty context,4 such instruments
should not be viewed as complete; accordingly, reference to plain meaning or
even the treaty makers’ mutual intent is often incoherent. Specifically,
because tax treaties function to limit the taxing reach of treaty countries
rather than prescribe substantive rules, they are closely intertwined with
domestic law. Indeed, tax treaties explicitly state that domestic law provides
the meaning of any undefined term. Gaps are intentionally left open by treaty
drafters due to the complexity of the tax system and the close connection
between fiscal policy and sovereignty.5
1. Vienna Convention on the Law of Treaties art. 31, May 23, 1969, 1155 U.N.T.S. 331
(entered into force Jan. 27, 1980) [hereinafter Vienna Convention].
2. See Julian Arato, Accounting for Difference in Treaty Interpretation over Time, in
INTERPRETATION IN INTERNATIONAL LAW 205, 205–12 (Andrea Bianchi et al. eds., 2015).
4. Note that my analysis is limited to double income tax treaties rather than other types of
tax treaties and agreements, such as estate and gift tax treaties or tax information exchange
agreements. My analysis also does not apply to treaties that have ancillary tax effects or contain
isolated tax provisions. I limit my thesis to the jurisdictional elements of double tax treaties
relating to income, which comprise the backbone of the treaty, rather than those aspects that
have substantive, operative effects—specifically, nondiscrimination, exchange of information,
and mutual agreement provisions. Although I focus on American sources and case law, my
general conclusion—that liberal use of extrinsic sources is appropriate in the interpret ation of
tax treaties—is applicable to other legal cultures.
5. Treaty-based gap-filling mechanisms exist; however, these are incomplete. For instance,
article 3(2) of the Model Treaty prescribes that domestic law steps in to provides definitions for
undefined terms “unless the context otherwise requires.” U.S. MODEL INCOME TAX CONVENTION
OF NOVEMBER 15, 2006 art. 3(2) (U.S. DEP’T OF TREASURY 2006), https://www.irs.gov/pub/irs-
trty/model006.pdf. Gap-filling may nonetheless be necessary when the domestic definitions
themselves contain vague terms, as is often the case, or to determine if “the context otherwise
requires.” Id. Article 21 attempts to close jurisdictional gaps by providing that types of income
not dealt with by specific treaty provisions be taxed only by the country of the taxpayer’s
residence. Id. art. 21(1). Nonetheless, extrinsic resources may still need to be consulted to
determine how to categorize the income at issue.