Assuming that the
implementation of Pillar Two Rules into the domestic legislation of several
jurisdictions potentially violates international investment agreements (IIAs),
the question remains as to how damages should be calculated. While it seems
logical to equate them with the tax burden that is imposed, the principle of
compensatio lucri cum damno provides that, if the wrongdoer’s actions result in
both losses and gains for the victim, these benefits must be offset against his
obligation to indemnify. Doing so warrants that reparation will not put the
aggrieved party in a more advantageous position because it suffered the damage.
This article explores the interplay between the Pillar Two charging provisions and
the principle of equalization of benefits, emphasizing the necessity of
considering such interactions when assessing damages in investor-state
arbitration. It concludes that the OECD guidance on the QDMTT payable generates
two possible undesirable outcomes over the quantum of damages. If the guidance
is followed, the damages that are awarded may, at a maximum, reimburse the
qualified domestic minimum top-up tax (QDMTT) collected whichwould likely not
nullify the overall Pillar Two impact on an multinational enterprise (MNE)
group; if not followed, benefits arising to the investor would need to be
considered in the assessment of damages and reduce the compensation to an
insignificant amount.