Dr Arno Gildemeister ADR within the MAP Alternative

Dr. Arno Gildemeister 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 Added Value of ADR? 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

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