Dispute resolution: The mutual agreement procedure

Abstract

Article 25 of the United Nations Model Double Taxation Convention between Developed and Developing Countries1 (United Nations Model Convention) is a very important procedural provision for the application and implementation of the bilateral treaties based on the Model Convention. It provides for the establishment of a “mutual agreement procedure” (MAP) which enables the parties to the treaty to better carry out the substantive provisions contained therein, which allocate taxing rights. The MAP is administered by the “competent authorities”, who are generally named in Article 3 (e) of the treaties based on the United Nations Model Convention. It is very important to make clear the persons who will be designated as competent authorities. Typically, they come from the ministry or tax authority (that is to say, the responsible branch of the governments of the contracting States). They are the persons who are normally responsible for administering the treaty and the mutual agreement procedure in Article 25 sets forth the agreed rules and principles for ensuring that the functions of the treaty are properly adhered to. The role of the competent authorities in Article 25 is to “endeavour to resolve” by mutual agreement any difficulties or doubts arising as to the application of the treaty. It applies in connection with all articles of the convention.