Advocaten / Avocats / Lawyers

Home>News>Can MLI arbitration finally kick off?

Tuesday, 13 April 2021

Can MLI arbitration finally kick off?

First competent authority agreement regarding MLI arbitration published

The Multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting (‘MLI’) provides the possibility for a simultaneous modification of potentially more than 3.000 existing bilateral tax treaties. It has been negotiated between more than 100 jurisdictions and has entered into force on 1 July 2018. If both treaty partners consider their tax treaty a ‘covered agreement’, the MLI modifies that treaty. The MLI also provides an arbitration procedure, which was, however, negotiated between only 27 jurisdictions. For the part of the MLI regarding arbitration to apply, both states have to opt-in, but depending on the reservations made by the states concerned, the exact form of this arbitration may differ from one MLI covered tax treaty to another.

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 (

Tiberghien Brussels

Tour & Taxis

Havenlaan|Avenue du Port 86C B.419
BE-1000 Brussels

T +32 2 773 40 00

F +32 2 773 40 55

Tiberghien Antwerp

Grotesteenweg 214 B.4
BE-2600 Antwerp

T +32 3 443 20 00

F +32 3 443 20 20

Tiberghien Ghent

Esplanade Oscar Van de Voorde 1
BE-9000 Gent

T +32 9 216 18 00

Tiberghien Hasselt

Torenplein 7 B13.1
BE-3500 Hasselt

T +32 11 57 00 13

Tiberghien Luxembourg

23, Boulevard Joseph II
LU-1840 Luxembourg

T +352 27 47 51 11

F +352 28 66 96 58