ADR within the MAP - Alternative or Supplement to Arbitration?

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

2. Dr. Arno Gildemeister Dr. Arno Gildemeister • Types of ADR • … in which a neutralperson, institution or commission participates and helps the parties resolvetheir dispute • Mediation: Mediatorassists 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 • Conciliation: … and makesrecommendationswhich the parties are required to seriouslyconsider • Expert evaluation: Expert gives an opinion about discrete (factual) issues; e.g. arm’slengthprice

3. Dr. Arno Gildemeister 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 • Makingprocess-relatedproposals (e.g. commissioning of an expert; agreeing on objective criteria; meeting withtaxpayer; …) • Recommending solutions • « Authenticating » agreements

4. Dr. Arno Gildemeister Dr. Arno Gildemeister Dr. Arno Gildemeister Added Value of ADR?

5. Dr. Arno Gildemeister 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 bothwilltake place shouldbeclarifiedbefore 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 closedwithin, e.g., 15 months?

6. Dr. Arno Gildemeister Dr. Arno Gildemeister • Scenario 1: « Alternative to Arbitration » • Pro: • - Acceptable to a larger group of States • - Better chances for multilateralization or commondenominators • Contra: • - No guaranteedoutcome (« tiebreaker ») • - Lessstringent application of legalprinciples? • - Lessconsistency?

7. Dr. Arno Gildemeister Dr. Arno Gildemeister • Scenario 2: « Precursor to Arbitration » • Pro: • - Arbitration as a tiebreakerincreases the efficiency of ADR • - Expert evaluationcanincrease the efficiency of an arbitration (fact-finding) • - Mediation as a precursor to baseball arbitration • Contra: • - Lack of impartiality of arbitratorswho have previouslyacted as mediators or conciliators? • - Can proposals made withoutprejudiceduring the mediationhurtduring an arbitration? • - ADR shall not delay the proceedings!

8. Dr. Arno Gildemeister Dr. Arno Gildemeister • Multilateral Setting • Scenarios 1 and 2 canbecombined in a multilateralinstitutionalapproach « at two speeds »: • Some States maywant to agree to MAP with ADR only; somemay 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 playingfield: • administrative support • cost • training • researchtools and databases • roaster of qualifiedmediators, experts and arbitrators • …

9. Dr. Arno Gildemeister 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