ADR within the MAP - Alternative or Supplement to Arbitration? Dr. Arno Gildemeister

Types of ADR … in which a neutral person, institution or commission participates and helps the parties resolve their dispute 1.Mediation: Mediator assists the parties by clarifying the issues in dispute, requesting documents and data, asking and listening « actively » to the parties’ arguments and exploring options for an agreement on mutually acceptable terms 2.Conciliation: … and makes recommendations which the parties are required to seriously consider 3.Expert evaluation: Expert gives an opinion about discrete (factual) issues; e.g. arm’s length price Dr. Arno Gildemeister

Variable Degrees of Activity  Monitoring the process  Administrating  Guiding the discussions, requesting information, focussing on key issues  Helping the parties evaluate the strengths and weaknesses of their arguments  Making process-related proposals (e.g. commissioning of an expert; agreeing on objective criteria; meeting with taxpayer; …)  Recommending solutions  « Authenticating » agreements Dr. Arno Gildemeister

Compared to classical MAP -Neutral third increases efficiency of the process -Helps MAP negotiators justify their « concessions » -More principled decisions, less « horse-trading » -Potentially more transparency for TP, if included in the procedure -More predictability in the long run, if outcomes are published (at least guiding principles) Compared to MAP-Arbitration -Amicable solutions can avoid waste of resources -Less sovereignty concerns (-> developing countries) -Easier to include TP -> wider range of options -More level playing field? -Less costly than arbitration Added Value of ADR? Dr. Arno Gildemeister

Two Possible Approaches 1. ADR as an alternative to MAP Arbitration 2. ADR as a supplement / precursor to MAP Arbitration Whether or not ADR or Arbitration or both will take place should be clarified before the dispute arises (e.g in the treaty), because -voluntary arbitration has proven inefficient -voluntary ADR has rarely been used Mandatory ADR (at the request of one of the CA’s or the TP) if MAP has not been closed within, e.g., 15 months? Dr. Arno Gildemeister

Scenario 1: « Alternative to Arbitration » Pro: - Acceptable to a larger group of States - Better chances for multilateralization or common denominators Contra: - No guaranteed outcome (« tiebreaker ») - Less stringent application of legal principles? - Less consistency? Dr. Arno Gildemeister

Scenario 2: « Precursor to Arbitration » Pro: - Arbitration as a tiebreaker increases the efficiency of ADR - Expert evaluation can increase the efficiency of an arbitration (fact-finding) - Mediation as a precursor to baseball arbitration Contra: - Lack of impartiality of arbitrators who have previously acted as mediators or conciliators? - Can proposals made without prejudice during the mediation hurt during an arbitration? - ADR shall not delay the proceedings! Dr. Arno Gildemeister

Multilateral Setting Scenarios 1 and 2 can be combined in a multilateral institutional approach « at two speeds »: -Some States may want to agree to MAP with ADR only; some may go further and agree to ADR and Arbitration -Example of the ICSID system: Conciliation Rules and Arbitration Rules -Institutional support in order to level the playing field: administrative support cost training research tools and databases roaster of qualified mediators, experts and arbitrators … Dr. Arno Gildemeister

Elements of a Multilateral Agreement - Procedural mechanics - Timelines (e.g. mandatory ADR after 15 months of MAP; Arbitration after 2 years of MAP + ADR) - Default options for ADR (e.g. expert evaluation for transfer pricing disputes; mediation for all other) -Default options for arbitration (baseball or not) -Confidentiality and transparency issues -Qualification and appointment of mediators and arbitrators (competence profiles to fit the dispute) -Impartiality requirements -Enforceability of the outcomes Dr. Arno Gildemeister