State C and State D are both signatories of the Washington Convention that created the International Center for the Settlement of Investment Disputes (ICSID). Both have notified ICSID that they consider all types of investment disputes as arbitrable.

Cee Co. is a multinational firm incorporated in State C. State D asked Cee Co. to set up a subsidiary in its territory and promised Cee Co. that it would give it a tax holiday (i.e., not charge it any local taxes) for 20 years. Cee Co. agreed, but it required State D to sign an ICSID arbitration agreement.

The government of State D has changed, and the new government has cancelled all tax holidays granted to foreign firms, including Cee Co. In anticipation of Cee Co. seeking ICSID arbitration, State D has informed ICSID that it no longer considers disputes relating to taxes as being arbitrable. Cee Co. does ask ICSID to convene an arbitration tribunal. Does the tribunal have jurisdiction to proceed? Explain.

Foreign Sovereign Immunities>jlj