With the most recent ratifications of the MLI by Greece and Hungary, the total amount of jurisdictions having ratified the MLI now amounts to 65. Whereas to date (30 March 2021) 95 jurisdictions have signed the MLI, only 30 of those signatories opted for Part VI regarding arbitration.
Before the MLI arbitration provisions may take effect, the competent authorities of the jurisdictions involved have to mutually settle the way the provisions on arbitration will be applied. After all, a number of options and reservations are available under the MLI arbitration provisions and the competent authorities must agree on a number of things before cases can effectively be dealt with under the new rules. Things to be settled include for example the minimum information requirements for cases to be considered by the competent authorities. In principle, the MLI arbitration provisions will have effect with respect to cases presented to the competent authority of a Contracting State after the MLI has entered into force for each of the Contracting States. However, they could also agree that pending cases are dealt with according to the new MLI arbitration procedure.
The OECD has now published the ‘Arbitration Profiles’ of the 30 signatories that have so far opted into Part VI of the MLI. These provide the public with interesting additional information, in particular when they are faced with a tax issue that may be eligible for arbitration. Such as information regarding a state’s chosen default type of arbitration (‘independent opinion’ or ‘baseball’ approach), with which other jurisdictions it has concluded such competent authority agreements, when Part VI of the MLI has taken effect vis à vis those jurisdictions, and possible reservations the state has made regarding the MLI arbitration provisions.
These arbitration profiles show that so far only one such Memorandum of Understanding between competent authorities has been concluded and deposited with the OECD. The ‘early’ adapters are Belgium and Australia.
What is peculiar, is that the MLI also states that ‘such an agreement shall be concluded before the date on which unresolved issues in a case are first eligible to be submitted to arbitration’.
These memoranda of understanding being required under the MLI, it is striking to see that only two states of the 30 MLI signatories having opted for the arbitration procedure, have taken the initiative to do their homework. If these jurisdictions are serious about arbitration, they should conclude and deposit their competent authority agreements, so that taxpayers can be informed about the option to resolve issues of double taxation in a (MLI covered) tax treaty context.
Tiberghien’s international tax team will continue to monitor these developments. In case you have any further questions or want to discuss this, please do not hesitate to contact the author.
Rik Smet - Associate (rik.smet@tiberghien.com)
