Arbitration and the MLI John Avery Jones

Arbitration: assessment of the MLI proposals There is a huge problem 2,509 new MAP cases for OECD countries in 2015 and the 6,176 cases outstanding at the end of 2015, taking an average of 20.47 months (OECD 5 December 2016: later ones not yet available) Arbitration (including prior steps like mediation) is the only way to solve it Italy and the UK have opted for arbitration in the MLI What is the problem for the others? Need to set an example and show that arbitration works; others may then follow How do we start? Will states be making reservations about the type of eligible cases (art 28(2))?

Assessment of the MLI proposals (2) Will states be able to administer arbitrations? Possibility for the Permanent Court of Arbitration, the Hague, to take on the administration, see http://tribute-arbitration.org/ Is there an over-emphasis on confidentiality, such as the option for either party to prevent any disclosure by the taxpayer and advisers (art 23(5) [Italy has chosen to apply this], (6), (7)—with the possibility of no arbitration if one party opts and the other party does not)? Can the taxpayer disclose the outcome? Italian reservation: no arbitration possible if in either state there is a judicial decision (or the arbitration terminates on a decision being made before the arbitration decision); not a problem in the UK because by statute a specific case mutual agreement can override the law

Type of arbitration Baseball (final offer) arbitration as the default is good But possibility of disagreement over baseball (final offer) (with no reasons) or Independent opinion (with reasons) which parties must “endeavour to agree” “Italy reserves the right for Article 23(1) [baseball arbitration] and (2) [independent opinion] not to apply with respect to its Covered Tax Agreements with Parties that have made the reservation described in Article 23(2)”. Result: Treaty with the UK [after Brexit: EU arbitration convention currently overrides the MLI] which has made no reservations on arbitration: baseball arbitration apples Treaty with a state that has made a reservation under art 23(2) [not to have baseball] eg Japan: the parties have to agree on the type of arbitration for all cases and until they do no arbitration is possible Why are the arbitrators forbidden to give reasons in a baseball arbitration?

Arbitration procedure Provision for position papers and reply are good Details to be agreed in the competent authority agreement: probably inevitable, but could there not have been a default? Follows the successful US-Canada (and others) model: https://www.irs.gov/businesses/international-businesses/mandatory- arbitration-with-germany-belgium-and-canada Extremely quick and cheap eg from appointment of Chair 60 days for position papers (maximum 30 pages) and another 60 days for reply (maximum 10 pages); no meetings (conference call between the arbitrators)

Assessment of the EU proposals Is a Directive (rather than an amendment to the Convention) necessary? Could it result in the CJEU becoming involved? Extending the Convention beyond transfer pricing is good in theory but how many other potential cases are there? The proposal for an ADR Commission is good Publication of the decision is good Are more rules really necessary? Is it necessary to have a provision for the taxpayer to apply to court to appoint arbitrators? If Member States are prepared to sign the MLI it proves that the presence of the Competent Authorities on the EU arbitration panel is out of date