© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
C2. Aides to interpretation
ROLE OF AIDES
- Relevance of subsequent agreements and practice
"(3) There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties." (VCLT 1969, Article 32)
- Recourse to supplementary means
"Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable." (VCLT 1969, Article 32)
- Where ordinary meaning can be ascertained from wording + context, no reliance on supplementary means to change that
"[76] Article 32 allows for recourse to supplementary material for limited purposes only, emphasising that the court's task is to interpret the treaty rather than the supplementary material. Where the ordinary meaning of treaty terms can be ascertained by applying the primary rule in article 31 of the Vienna Convention on the Law of Treaties, recourse to supplementary means of interpretation under article 32 is permitted only "in order to confirm" that ordinary meaning. Such confirmation can be drawn from the travaux préparatoires. However, the supplementary means of interpretation in article 32 cannot be used to change or contradict the meaning resulting from the application of article 31." (Spain v. Infrastructure Services Luxembourg Sarl [2026] UKSC 9)
- Wider use of supplementary means in "rare" cases where meaning ambiguous or produces unreasonable result
"[77] Where, however, the application of the rule in article 31 produces a meaning that is ambiguous or obscure or leads to a manifestly absurd or unreasonable result, the rule in article 32 permits supplementary means to be used to determine the meaning of treaty terms. But such cases "should be rare, and only where two conditions are fulfilled, first, that the material involved is public and accessible, and secondly, that the travaux préparatoires clearly and indisputably point to a definite legislative intention" (Fothergill v Monarch Airlines [1981] AC 251, 278B-C per Lord Wilberforce; and also Effort Shipping Co Ltd v Linden Management S.A. and others [1998] AC 605, 623E per Lord Steyn)." (Spain v. Infrastructure Services Luxembourg Sarl [2026] UKSC 9)
PRACTICE AND OTHER AGREEMENTS
- An aide to determining the context
(2) The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
(a) Any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;
(b) Any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
(3) There shall be taken into account, together with the context:
(a) Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) Any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) Any relevant rules of international law applicable in the relations between the parties." (Vienna Convention on the Law of Treaties, Article 31(2) - (3))
- Subsequent practice and aid to interpretation, but not the effect in domestic law
"[124] In any event, subsequent practice can only be an aid to interpretation, ie to establish the meaning of the treaty provisions. The essential question here is not one of interpretation but one of the effect of the relevant provision, ie whether it has direct effect. Article 4 of the Withdrawal Agreement and section 7A of the 2018 Act make clear that the question of direct effect is governed by EU law. In particular, article 4 of the Withdrawal Agreement provides that persons shall be able to rely directly on its provisions "which meet the conditions for direct effect under Union law". It is therefore only if it satisfies the requirements for direct effect in EU law that a provision of the Windsor Framework can be relied upon before a domestic court. That cannot be changed by practice establishing the agreement of the parties as to its interpretation." (Re Dillon [2026] UKSC 15)
- Unilateral practice of contracting state inadmissible
"First, the unilateral opinion or practice of a tax authority is not a relevant aid to interpretation: see Irish Bank Resolution Corporation Ltd v HMRC [2020] EWCA Civ 1128, [2020] STC 1946 ("Irish Bank") at [18]-[23]." (HMRC v. GE Financial Investments [2024] EWCA Civ 797, Falk, Arnold, Whipple LJJ)
"[22] The UT took the view that the practice of the Inland Revenue in relation to the assessment of the profits attributable to the UK branch of a bank was inadmissible as an aid to the construction of Article 8(2) of the 1976 Convention. At [29]-[31] they said:
"29. There is also a further – and in our judgment altogether more fundamental reason, which we put to the parties in argument – why this material is inadmissible. That is because this material is irrelevant to the question of construction that we have to answer. The unilateral practice of a taxing authority – no matter how well-advised – is not material that can support or contradict a particular interpretation of a treaty.
30. It is permissible to look to the subsequent conduct of the parties to a treaty to see if there is a subsequent agreement or practice that goes to the meaning of the treaty. Such agreement or practice would have to be evidenced, and would have to demonstrate a bilateral agreement or practice involving both parties to the treaty. No such agreement or practice was alleged here; and we consider the point to be a factual one, that could only properly be raised before the FTT.
31. We do not consider that the unilateral practice of a contracting party – even if that practice shows a careful attempt by that party to abide by a treaty – can affect the meaning of that treaty or constitute material going to its construction."
[23] This seems to me to be clearly right. Mr Baker submitted that Article 31 of the Vienna Convention should not be treated as an exhaustive and immutable code and I think that may be correct. As with any other set of legal principles, the norms of international law are capable of development and change. But what the UT said in [30] of its decision (which is derived from Article 31(3)(b) of the Vienna Convention) is an established norm of international law. By contrast with that, the Appellants have been unable to identify any established principle of international law which recognises the unilateral practice of a contracting state as an aid to the construction of a treaty. In that respect, there is no divergence between international law and the English private law system which has never received evidence of what a party to a contract believed that the language of the agreement meant except in relation to a claim for rectification. The legal meaning of the words used is an abstract question of law to be determined on an objective basis." (Irish Bank Resolution Corporation Ltd v. HMRC [2020] EWCA Civ 1128, Patten LJ)
- How contracting states have approached the issue in other treaties may be relevant
"[90] In my view there is a difference between the practice of an individual taxing authority, which I agree with Patten LJ is irrelevant, and how the relevant Contracting States have approached the issue in other treaties that are based on the MTC. It seems to me that it is not irrelevant to consider examples of how other treaties entered into by the UK or Canada, being treaties that are similarly based on the MTC, modify the MTC definition of immovable property or otherwise make specific provision for income related to natural resources. Those other treaties are of course not determinative in interpreting Article 6(2) of the Treaty, and I accept that they do not fall within the list of sources in Article 31 of the Vienna Convention. However, particularly given the common source of the MTC I consider that they may form a legitimate supplementary reference point because they demonstrate that, where it has been considered appropriate to do so, each party has agreed to include specific wording.
[91] In this case, however, I am not convinced that the UK/US or Canada/US treaty adds much to what can be derived from the terms of the Treaty with which we are concerned. The approach in Article 13 of the UK/US treaty is similar in substance to Article 13(4) of the Treaty. The Canada/US Treaty extends the reach of Article VI to amounts "computed by reference to" production, but that is part of wording that replaces the entirety of the fifth limb in the MTC version of the definition." (Royal Bank of Canada v. HMRC [2023] EWCA Civ 695, Falk, Asplin, Nugee LJJJ)
- Unilateral view of third party not relevant
"[143] The aim of interpretation of a treaty is to establish, by objective and rational means, the common intention which can be ascribed to the parties. The unilateral view of a government department of the United States of America (a third party) in relation to the interpretation of a different instrument (the USA / UK treaty) is of no assistance in establishing a common intention which existed as between the UK and Canada in relation to the Treaty at the time that it was concluded (cf Irish Bank Resolution Corp v HMRC [2020] EWCA Civ 1128, [2020] STC 1946 at [22]-[23] in relation to unilateral practice on the part of one of the contracting states to the same instrument – the present case is a fortiori)." (Royal Bank of Canada v. HMRC [2022] UKUT 45 (TCC), Edwin Johnson J and Judge Rupert Jones)
FOREIGN JUDGMENTS AND ACADEMIC COMMENTARIES
- Academic commentaries and foreign judgments persuasive at most
"[39] Secondly, academic commentaries and judgments from foreign courts are at most of persuasive value. In Fothergill v Monarch Airlines Ltd [1981] AC 251 Lord Diplock said this at pp.283-284 about academic commentaries published after a treaty had been concluded and decisions of foreign courts:
"To a court interpreting the Convention subsequent commentaries can have persuasive value only ... The persuasive effect of learned commentaries, like the arguments of counsel in an English court, will depend upon the cogency of their reasoning…
As respects decisions of foreign courts, the persuasive value of a particular court's decision must depend upon its reputation and its status, the extent to which its decisions are binding upon courts of co-ordinate and inferior jurisdiction in its own country and the coverage of the national law reporting system…"
[40] Lord Scarman made similar comments at pp.294-295. After referring to the legislative history, travaux préparatoires, international case law and the writings of jurists as aids to construction of a convention which are not a substitute for its terms and the use of which is in the court's discretion, Lord Scarman compared the usefulness of an agreed conference minute of the meaning of draft text with other documents such as working papers of delegates which would "seldom be helpful", and then said at p.295:
"The same considerations apply to the international case law and the writings of jurists. The decision of a supreme court, or the opinion of a court of cassation, will carry great weight: the decision of an inferior court will not ordinarily do so. The eminence, the experience and the reputation of a jurist will be of importance in determining whether, and, if so, to what extent, the court should rely on his opinion.
Nevertheless the decision whether to resort to these aids, and the weight to be attached to them, is for the court. However, the court's discretion has an unusual feature. It is applied not to a factual situation but to a choice of sources for help in interpreting an enactment. It operates in a purely legal field. An appellate court is not, therefore, bound by the lower court's selection of aids, but must make its own choice, if it thinks recourse to aids is necessary. This legal process is not unlike the use made by our courts of antecedent case law, though it lacks the inhibitions of any doctrine of precedent."
- Follow uniform interpretation adopted in Courts of other States
[84]We have referred above to the principle of consistent interpretation of international instruments and the intention that the text of international treaties should be interpreted by the courts of all the states parties as having the same meaning. As Lord Hope said in this context in Islam v Secretary of State for the Home Department, "if it could be said that a uniform interpretation was to be found in the authorities, I would regard it as appropriate that we should follow it" (657B). (See also Basfar v Wong [2022] UKSC 20, [2023] AC 33, para 16 per Lords Briggs and Leggatt. Consistency as to how the courts of different states party to a treaty interpret that treaty also motivated Lord Goff's position in Pinochet (No 3) at 217D, when he referred to the international chaos that would ensue if the courts of different state parties to a treaty reach different conclusions about its meaning.)
[85] In fact, as the Court of Appeal observed at para 62, there is broad international consensus as to the meaning and effect of article 54(1) of the ICSID Convention. The courts of Australia, New Zealand, Malaysia, and the United States have all interpreted article 54(1) as a waiver of adjudicative immunity by each contracting state and, where domestically relevant, a submission to jurisdiction. There is one outlier but as we explain below, little weight can properly be attached to that decision." (Spain v. Infrastructure Services Luxembourg Sarl [2026] UKSC 9)
OECD COMMENTARY
- Nature of the commentaries
"[31] The Commentaries on the Model Tax Convention are drafted and agreed upon by experts appointed to the Committee on Fiscal Affairs by the Governments of member countries. The Commentaries say at para 29.1 that they can be of great assistance "both in deciding day-to-day questions of detail and in resolving larger issues involving the policies and purposes behind various provisions". They are relied on by tax officials and by taxpayers in conducting their businesses and planning their business transactions and investments." (HMRC v. Royal Bank of Canada [2025] UKSC 2, Lady Rose)
- Query whether OECD commentary is equivalent to academic commentary
"[43] Fourthly, there was some discussion at the hearing about how reference to OECD Commentaries (and indeed to the MTC itself) fits in with the terms of Articles 31 and 32 of the Vienna Convention. Given Lord Briggs' guidance in Fowler and the fact that there is no controversy that reference is permitted, it is not necessary to determine the extent to which the power to refer to such material is derived from Article 31 or 32, or (at least for versions of the OECD Commentary that post-date the relevant treaty) is akin to academic commentaries. However, I note that in relation to later versions of the OECD Commentary Lord Briggs referred in Fowler at [18] to the cogency of their reasoning in a similar way to Lord Diplock's reference to the use of academic commentaries in Fothergill v Monarch Airlines, and that the authority that Lord Briggs cited was Smallwood at [26], where Lord Diplock's comment is referred to in a citation from Commerzbank, p.298 at para. (5). In other words, those later versions were treated in a similar way to academic commentaries." (HMRC v. GE Financial Investments [2024] EWCA Civ 797, Falk, Arnold, Whipple LJJ)
- OECD Commentary may be relied on even if one party to treaty not a member of OECD
"[24] The RSA is not a member of the OECD but the parties are agreed that both the RSA and the UK were aware of the Commentary on the Model Tax Convention on Income and Capital Gains (“MTC”) and:
(1) Article 4 is the same as that in the MTC.
(2) The Commentary on the MTC adopts the Commentary.
(3) The RSA has not commented on the Commentary as other non OECD members have done." (Oppenheimer v. HMRC [2022] UKFTT 112 (TC), Judge Anne Scott)
Which version
- OECD commentary subsequent to treaty admissible as long as not in conflict with previous commentary
"[32] In Fowler v Revenue and Customs Comrs [2020] UKSC 22, [2020] 1 WLR 2227, Lord Briggs explained that guidance as to how a double taxation treaty is to be interpreted can be found in OECD Commentaries even where they post-date the treaty in question. The Commentaries should be "given such persuasive force as aids to interpretation as the cogency of their reasoning deserves" (see paras 16 and 18 of Lord Briggs' judgment).
[33] Both parties were content to rely on the Commentaries that accompanied the 2005 version of the Model Tax Convention, which had been selected by RBC as the one closest to the tax years with which this appeal is concerned. Unless otherwise indicated, references below to the "Commentaries" are to that version, rather than to the latest version which was published in 2017." (HMRC v. Royal Bank of Canada [2025] UKSC 2)
[31] Although [43]-[47] of the 2008 Commentary are new, it is clear from [7] of the Commentary that they were considered appropriate for inclusion by the OECD because they were not in conflict with earlier versions of the Commentary. As explained in [3] and [7], the format of Articles 7 and 9 of the model convention has never been prescriptive as to how profits should be attributed to a PE in accordance with the model described in Article 7(2) and the way in which the application of those criteria has been implemented has varied from state to state. But to succeed on this appeal Mr Baker's clients must establish that any attribution of capital which results in the disallowance of interest paid by the PE on the money it has borrowed is simply impermissible under Article 8(2) of the 1976 Convention. This is, of course, ultimately a question of construction but HMRC place considerable reliance on the 2008 Commentary as confirmation that Article 7(2) has always permitted a considerable degree of flexibility in the methods for attributing profits to a PE and that these can include various forms of capital attribution. On that basis, the 2008 Commentary, although new, would be admissible as an aid to the construction of Article 8(2) of the 1976 Convention which, as I have explained, adopted the wording of Article 7(2). It would only be inadmissible if the new material made substantive changes which are inconsistent with the commentaries in existence at the time of the 1976 Convention." (Irish Bank Resolution Corporation Ltd v. HMRC [2020] EWCA Civ 1128, Patten LJ)
"[78] The 2017 Commentary is an updated version of the 1977 edition of the OECD Commentary, which was the version of the commentary published at the time that the DTC was negotiated. In Fowler v HMRC [2020] UKSC 22, §18, a case which considered the UK/South Africa Double Taxation Treaty, Lord Briggs noted that the OECD commentaries "are updated from time to time, so that they may (and do in the present case) post-date a particular double taxation treaty. Nonetheless they are to be given such persuasive force as aids to interpretation as the cogency of their reasoning deserves …" We agree with the FTT's comment at §228 that the same should apply where the current version of the Commentary post-dates the Relevant Period in a particular case. We refer, therefore, in this judgment to the 2017 version of the Commentary, as did both parties in their submissions." (McCabe v. HMRC [2024] UKUT 280 (TCC), Bacon J and Judge Tilakapala)
"[226] [The taxpayer] submitted that I should not rely on the 2017 Commentary as the amendments were made after the Relevant Period; and that in any event the changes did not assist HMRC on the facts.
[227] In Fowler v HMRC [2020] UKSC 22 the Supreme Court set out the following at [18]:
“The OECD Commentaries are updated from time to time, so that they may (and do in the present case) post-date a particular double taxation treaty. Nonetheless they are to be given such persuasive force as aids to interpretation as the cogency of their reasoning deserves…”
[228] I consider that this principle is capable of applying equally to the amendments or updates made to the OECD commentary after the Relevant Period. I do, however, note that in the context of the meaning of a permanent home the only difference is the addition of an example which illustrates what was meant by the principle already set out in the 1977 Commentary." (McCabe v. HMRC [2022] UKFTT 356 (TC), Judge Zaman)
"[28] Technically, resort should be had to the commentary as in force at the date that the DTC was agreed and then more recent versions only to the extent that they are cogent and assist the determination by the Tribunal. The most relevant change is in paragraph 19, which was only introduced in 2017, but both parties were agreed that the Commentary is helpful in understanding the tiebreaker tests. We agree." (Oppenheimer v. HMRC [2022] UKFTT 112 (TC), Judge Anne Scott)
- Later commentaries can only draw persuasive power from the validity of their arguments
"[9.5]...Conversely, it is not clear why the authorities and courts applying the law should be completely prohibited from consulting later commentaries as an aid to interpretation. In contrast to the version of the OECD-MC at the time of the conclusion of a DTA, however, later commentaries can only draw persuasive power from the validity of their arguments (cf similarly also judgment of the UK Supreme Court of 20 May 2020 Fowler v Revenue and Customs Comrs (2020) 22 ITLR 679, [2020] STC 1476, margin no 18, with reference to judgment of the UK Court of Appeal of 8 July 2010 Smallwood v Revenue and Customs Comrs [2010] EWCA Civ 778, (2010) 12 ITLR 1002, [2010] STC 2045, margin no 26.5; cf also judgment of the French Conseil d'État No 420174 of 11 December 2020, margin no 4 with reference to the Opinion of the Rapporteur public Laurent Cytermann in the same case, p 15 et seq). The significance of later commentaries for the process of interpretation is therefore comparable to that of other literature or court judgements (cf art 38 para 1 lit. d of the Statute of the International Court of Justice of 26 June 1945 [SR 0.193.501]; Ammann, loc cit, pp 153ff; Charles C Jalloh, 'Les moyens auxiliaires de détermination des règles de droit international' in: Report of the UN International Law Commission, 72nd Session (26 April – 4 June and 5 July – 6 August 2021), UN Doc A/76/10, margin no 29 et seq; Aldo Zammit Borda, 'A Formal Approach to art 38(1)(d) of the ICJ Statute from the Perspective of the International Criminal Courts and Tribunals' (2013) 24 The European Journal of International Law 654f). The previous case law on the consideration of changes to the OECD-MC after the conclusion of a DTA is to be clarified in this sense." (AA v. BA (2023) 26 ITLR 146 at 212, Swiss Federal Supreme Court)
- Later commentaries relevant insofar as they expand or clarify existing notions rather than extend the scope of provisions
"[40] While revisions to the Commentaries are relevant to tax treaty interpretation, the key issue is the weight that they should receive. Although some scholars submit that the OECD has a tendency of revising the Commentaries too often and too dramatically, thereby sometimes diverging from the original intentions of the parties, I am not prepared to reject all subsequent Commentaries as interpretative aids (see Li and Cockfield, at p 57; P Malherbe, Elements of International Income Taxation (2015), at pp 49–50). I instead prefer the nuanced approach adopted by the Federal Court of Appeal in Prévost Car Inc v R 2009 FCA 57, (2009) 11 ITLR 757, [2010] 2 FCR 65.
[41] Indeed, in Prévost Car, the Federal Court of Appeal held that subsequent Commentaries expanding or clarifying notions already captured by the OECD Model Treaty are relevant, but not those that extend the scope of provisions in a manner that could not have been considered by the drafters (paras [10]–[12]; see also Li and Cockfield, at p 57). Thus, while later amendments to the Commentaries are not part of the context as defined in art 31(2) of the Vienna Convention, given that such amendments were not made 'in connection with the conclusion of the treaty', they may play a role under art 31(3), which refers to '[a]ny subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions' and '[a]ny subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation'.
[42] In this case, I am of the view that the 2003 and 2017 Commentaries do not reflect the intentions of the drafters of the Treaty. The extensive revisions made to the Commentaries in 2003 purported to clarify the relationship between tax treaties and domestic anti-avoidance rules, and, in particular, one of the revisions was made to include the prevention of tax avoidance as a purpose of such treaties. The changes were not mere clarifications and have been described as being 'created out of thin air by the OECD in 2003' and as 'a significant change in the stated attitude of the OECD to the relationship between tax treaties and tax avoidance' (BJ Arnold, 'Tax Treaties and Tax Avoidance: The 2003 Revisions to the Commentary to the OECD Model' (2004), 58 IBFD Bulletin 244, at pp 249 and 260)." (Alta Energy Luxembourg SARL v. R (2021) 24 ITLR 346, Supreme Court of Canada)
Secondary to text
- Starting with commentaries increases risk of error
"[126] It also follows that the UT made an error of law in reaching the conclusion that GEFI was US resident for Convention purposes. I will not comment further on its detailed reasoning, other than to note that using the MTC and OECD Commentary as its starting point, rather than the words of the Convention itself in the light of its object and purpose, may have increased the risk of error. I should also observe, however, that although it makes no difference in light of the decision of this court, I have some concern that the UT exceeded its jurisdiction in purporting to take a different view of some aspects of the expert evidence to that of the FTT (see [54] above). The UT (and this court) is fixed with the lower tribunal's findings on the evidence unless its decision is set aside due to an error of law. It is only at that point that the UT or this court has power to make its own findings on the evidence: ss.12 and 14 Tribunals, Courts and Enforcement Act 2007." (HMRC v. GE Financial Investments [2024] EWCA Civ 797, Falk, Arnold, Whipple LJJ)