International treaty

UK-Japan MOU on arbitration in the Mutual Agreement Procedure (Article 25) — in force

Updated 13 November 2018

The arbitration provisions added by the 2014 Protocol take effect from 12 December 2014 regardless of the period to which the matter relates

Implementing Arrangement regarding Paragraph 5 of Article 25 of the Convention between Japan and the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains

The competent authorities of Japan and the United Kingdom of Great Britain and Northern Ireland have established this mode of application of the arbitration process provided for in paragraph 5 of Article 25 of the Convention (the “Convention”) between Japan and the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains signed at London on 2 February 2006 as amended by the Protocol signed at London on 17 December 2013.

The competent authorities will follow the procedures in this Arrangement in good faith.

Article 1: request for submission of case to arbitration

1. A request for arbitration pursuant to paragraph 5 of Article 25 of the Convention (hereinafter referred to as a “request for arbitration”) will be made in writing and sent to the competent authority referred to in paragraph 1 of that Article through:
   1. a) (in the case of Japan): Office of Mutual Agreement Procedures, National Tax Agency; or
   2. b) (in the case of the United Kingdom of Great Britain and Northern Ireland) : HMRC, Corporation Tax International, Stamps and Anti-Avoidance, Business International
2. The request will contain sufficient information to identify the case. The request will also be accompanied by a written statement by the person who made the request that no decision on the same issues has already been rendered by a court or administrative tribunal of either Contracting State.
3. Within 10 days after the receipt of the request, the competent authority which received it will send a copy of the request and the accompanying statements to the other competent authority.

Article 2: time for submission of the case to arbitration

1. A request for arbitration may only be made after two years from the date on which a case presented to the competent authority of a Contracting State under paragraph 1 of Article 25 of the Convention has also been presented to the competent authority of the other Contracting State. For this purpose, a case will be considered to have been presented to the competent authority of the other Contracting State only if the following information has been presented:
   1. a) the full name and address of the person who presented the case to the competent authority;
   2. b) the full name and address of any other person directly affected by the case;
   3. c) the taxable years concerned;
   4. d) the nature and date of the actions giving rise to the taxation not in accordance with the provisions of the Convention and the related amounts in the currencies of both Contracting States;
   5. e) the following information provided by the person who presented the case to the competent authority with a copy of any supporting documents:
      1. i) an explanation of why the person considers that there is taxation not in accordance with the provisions of the Convention;
      2. ii) the relationship, situation or structure of the transactions and related parties involved; and
      3. iii) a copy of documents issued by the tax authority with regard to the taxation not in accordance with the Convention;
   6. f) a statement indicating whether the person directly affected by the case has filed a notice of objection, notice of appeal, or comparable documentation in either of the jurisdictions; and
   7. g) any specific additional information requested by the competent authority referred to in paragraph 1 of Article 25 of the Convention within 90 days after the receipt of the request for a mutual agreement procedure under that paragraph.
2. The competent authorities will confirm to each other the date on which all of the information referred to in the preceding paragraph was presented.
3. The competent authority to which a case has been presented under paragraph 1 of Article 25 of the Convention will notify the person who made the request for a mutual agreement procedure of the starting date of the two-year period for the mutual agreement procedure referred to in this section.

Article 3: terms of reference

Within 90 days after the request for arbitration has been received by both competent authorities, the competent authorities will decide on the issues to be resolved by the arbitration panel and communicate them in writing to the person who made the request for arbitration. This will constitute the “Terms of Reference” for the case.

Notwithstanding the following sections of this Arrangement, the competent authorities may also, in the Terms of Reference, provide procedural rules that are additional to, or different from, those included in those sections and deal with such other matters as are deemed appropriate.

Article 4: failure to communicate the terms of reference

If the Terms of Reference have not been communicated to the person who made the request for arbitration within the period referred to in section 3, that person and each competent authority may, within 30 days after the end of that period, communicate in writing to each other a list of issues to be resolved by the arbitration. All the lists so communicated during that period will constitute the tentative Terms of Reference.

Within 30 days after all the arbitrators have been appointed as provided in section 5, the arbitrators will communicate to the competent authorities and the person who made the request for arbitration a revised version of the tentative Terms of Reference based on the lists so communicated.

Within 30 days after the revised version has been received by both competent authorities, they will have the possibility to decide on different Terms of Reference and to communicate them in writing to the arbitrators and the person who made the request for arbitration. If they do so within that period, these different Terms of Reference will constitute the Terms of Reference for the case.

If no different Terms of Reference have been decided on by the competent authorities and communicated in writing within that period, the revised version of the tentative Terms of Reference prepared by the arbitrators will constitute the Terms of Reference for the case.

Article 5: selection of arbitrators

Within 90 days after the Terms of Reference have been received by the person who made the request for arbitration or, where section 4 applies, within 120 days after the request for arbitration has been received by both competent authorities, the competent authority of each Contracting State will appoint one arbitrator who may be a national of that Contracting State.

Within 60 days after the second arbitrator has been appointed, the arbitrators so appointed will appoint a third arbitrator who will function as the chair of the arbitration panel.

If the appointment of the third arbitrator is not made within the required time period, each competent authority will, unless the competent authorities have decided otherwise, propose up to three candidates within 10 days after the end of that period. The arbitrators already appointed will appoint a third arbitrator, who will function as the chair of the arbitration panel, from among the candidates so proposed within 10 days after the receipt of the lists of candidates.

The procedures specified in this section above will apply mutatis mutandis if for any reason it is necessary to replace an arbitrator after the arbitration process has begun.

Each competent authority will determine the remuneration of its appointed arbitrator. The mode of remuneration for the third arbitrator will be decided on by the competent authorities before the appointment of the third arbitrator, taking the remuneration of the two other arbitrators into account.

Article 6: eligibility and appointment of arbitrators

1. In accordance with the provisions of (i) and (iii) of subparagraph (b) of paragraph 5 of the Protocol to the Convention:
   1. a) all arbitrators will have expertise or experience in international tax matters; and
   2. b) no arbitrators will be an employee of the tax authority of either Contracting State, nor have dealt with the case presented pursuant to paragraph 1 of Article 25 of the Convention in any capacity. The third arbitrator will not be a national of either Contracting State, nor have had his usual place of residence in either Contracting State, nor have been employed by either Contracting State.
2. An arbitrator will be considered to have been appointed when a letter confirming that appointment has been signed both by the person or persons who have the power to appoint that arbitrator and by the arbitrator himself.

Article 7: communication of information and confidentiality

In accordance with the provisions of (iv) of subparagraph (b) of paragraph 5 of the Protocol to the Convention, the competent authorities will ensure that all arbitrators and their staff agree, in statements sent to each competent authority, prior to their acting in an arbitration proceeding, to abide by and be subject to the same confidentiality and non-disclosure obligations described in paragraph 2 of Article 26 of the Convention and under the applicable domestic laws of the Contracting States.

Article 8: failure to provide information in a timely manner and suspension of a mutual agreement procedure

Notwithstanding sections 5 and 17, where both competent authorities decide that the failure to resolve an issue within the two-year period referred to in paragraph 5 of Article 25 of the Convention is mainly attributable to the failure of the person directly affected by the case to provide relevant information in a timely manner, the competent authorities may postpone the appointment of the arbitrator for a period of time corresponding to the delay in providing that information.

Notwithstanding sections 5 and 17, if the failure to resolve an issue within the two-year period referred to in paragraph 5 of Article 25 of the Convention is attributable to the fact that the mutual agreement procedure under paragraph 2 of that Article was suspended by a request from the person who presented the case, the competent authorities may postpone the appointment of the arbitrator for a period of time corresponding to the period of such suspension.

The competent authorities will determine the period of time corresponding to the delay and/or the suspension. The competent authority to which a case has been presented under paragraph 1 of Article 25 of the Convention will notify the person who made the request for arbitration of the determined period of time.

Article 9: procedural and evidentiary rules

Subject to this Arrangement and the Terms of Reference, the arbitrators will adopt those procedural and evidentiary rules that they deem necessary to resolve the issues set out in the Terms of Reference.

In accordance with the provisions of subparagraph (c) of paragraph 5 of the Protocol to the Convention, the competent authorities will provide the information, including confidential information, necessary for the arbitration decision to all arbitrators and their staff without undue delay.

Unless the competent authorities decide otherwise, any information (including any information provided by the person who made the request for arbitration or his representatives in writing or orally under sections 10 or 17) that was not available to both competent authorities before the request for arbitration was received by both of them will not be taken into account for purposes of the arbitration decision.

Article 10: participation of the person who requested the arbitration

The person who made the request for arbitration may, either directly or through his representatives, present his position to the arbitrators in writing to the same extent that he can do so during the mutual agreement procedure.

In addition, with the permission of the arbitrators, the person may present his position orally during the arbitration proceedings.

Article 11: logistical arrangements

Unless decided otherwise by the competent authorities, the competent authority to which the case giving rise to the arbitration was initially presented will be responsible for the logistical arrangements for the meetings of the arbitration panel and will provide the administrative personnel necessary for the conduct of the arbitration process. The administrative personnel so provided will report only to the chair of the arbitration panel concerning any matter related to that process.

Article 12: costs

1. In accordance with the provisions of (v) of subparagraph (b) of paragraph 5 of the Protocol to the Convention:
   1. a) each competent authority will bear the costs of its appointed arbitrator and its own expenses; and
   2. b) the costs of the chair of the arbitration panel and other expenses associated with the conduct of the proceedings will be borne by the competent authorities in equal shares. The term “other expenses associated with the conduct of the proceedings” in (v) of subparagraph (b) of paragraph 5 of the Protocol to the Convention does not include indirect costs incurred for logistical arrangements under section 11.
2. The person who made the request for arbitration will bear the costs related to his own participation in the arbitration proceedings (including travel costs and costs related to the preparation and presentation of his views).

Article 13: applicable legal principles

The arbitrators will decide the issues submitted to arbitration in accordance with the applicable provisions of the Convention and, subject to these provisions, of those of the domestic laws of the Contracting States.

Issues of interpretation of the Convention will be decided by the arbitrators in the light of the principles of interpretation incorporated in Articles 31 to 33 of the Vienna Convention on the Law of Treaties, having regard to the Commentaries of the OECD Model Tax Convention as periodically amended, as explained in paragraphs 28 to 36.1 of the Introduction to the OECD Model Tax Convention. Issues related to the application of the arm’s length principle should similarly be decided having regard to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

The arbitrators will also consider any other sources which the competent authorities may expressly identify in the Terms of Reference.

Article 14: arbitration decision

The arbitration decision will be determined by a simple majority of the arbitrators.

The decision of the arbitration panel will be presented in writing and, where the competent authorities so decide, will indicate the sources of law relied upon and the reasoning which led to its result. When requested by either competent authority, the chair of the arbitration panel will present the summary of the discussion in the arbitration panel to the competent authorities.

In accordance with the provisions of (i) of subparagraph (d) of paragraph 5 of the Protocol to the Convention, the decision of the arbitration panel has no formal precedential value. The decision will not be made public unless the person who made the request for arbitration and both competent authorities agree on the form and contents of the publication in writing.

Article 15: time allowed for communicating the arbitration decision

1. The arbitration decision will be communicated to the competent authorities and the person who made the request for arbitration within 180 days after the date on which the chair of the arbitration panel notifies in writing the competent authorities and the person who made the request for arbitration that he has received all the information necessary to begin consideration of the case.
2. Notwithstanding the preceding paragraph, if at any time within 60 days or, where the appointment of the third arbitrator was not made within 60 days after the latter appointment of the first two arbitrators, 40 days after the date on which the last arbitrator was appointed, the chair of the arbitration panel, with the consent of one of the competent authorities, notifies in writing the other competent authority and the person who made the request for arbitration that he has not received all the information necessary to begin consideration of the case, then:
   1. a) if the chair of the arbitration panel receives the necessary information within 60 days after the date on which that notice was sent, the arbitration decision will be communicated to the competent authorities and the person who made the request for arbitration within 180 days after the date on which the information was received by the chair of the arbitration panel; and
   2. b) if the chair of the arbitration panel has not received the necessary information within 60 days after the date on which that notice was sent, the arbitration decision will, unless the competent authorities decide otherwise, be reached without taking into account that information even if the chair of the arbitration panel receives it later and the decision will be communicated to the competent authorities and the person who made the request for arbitration within 240 days after the date on which the notice was sent.
3. Where the arbitration decision is not expected to be communicated within the required period due to any unforeseen events, the periods in this section may be extended by a period agreed on by the competent authorities and the person directly affected by the case.

Article 16: failure to communicate the decision within the required period

In the event that the decision has not been communicated to the competent authorities within the period provided for in section 15, the competent authorities and the person directly affected by the case may agree to extend that period for a period not exceeding 180 days or, if they fail to do so within 30 days after the end of the period provided for in section 15, the competent authorities will appoint a new arbitrator or arbitrators in accordance with section 5.

Article 17: streamlined arbitration process

1. Notwithstanding the provisions of sections 5, 10, 15 and 16, the competent authorities may decide to apply the following streamlined rules to a particular arbitration case if:
   1. a) the competent authorities decide on the issues to be resolved by the arbitration panel in accordance with section 3; and
   2. b) the competent authorities indicate in the Terms of Reference that such rules are to apply.
2. Section 5 will apply to the selection and remuneration of the arbitrators under this process except that the competent authorities will each appoint one arbitrator within 60 days 5 after the Terms of Reference have been received by the person who made the request for arbitration.
3. Within 60 days after the Terms of Reference have been received by the person who made the request for arbitration, that person may, either directly or through their representatives, present their position to the arbitrators (but only in writing). Unless otherwise decided in the Terms of Reference, the paper setting forth that position will not exceed 20 pages (not including any exhibits).
4. Within 60 days after the appointment of the third arbitrator, the competent authorities will each present their proposed resolution and supporting position paper regarding each of the issues contained in the Terms of Reference to the arbitrators and each other. Any proposed resolution and supporting position paper received outside of this time period will not be considered by the arbitration panel. Unless otherwise decided in the Terms of Reference, the proposed resolution and supporting position paper will not exceed 20 pages (not including any exhibits).
5. Within 60 days after the receipt of the proposed resolution of the other competent authority, either of the competent authorities may submit a reply to the arbitrators, so that they may address any points raised by the other competent authority. Unless otherwise decided in the Terms of Reference, such replies will not exceed 20 pages (not including any exhibits).
6. Within 150 days after the appointment of the third arbitrator, the chair of the arbitration panel may request any additional information from either of the competent authorities with the consent of the other competent authority. The competent authority so requested will respond to the chair within 60 days after such a request has been made. Within 45 days after the date which is the later of:
   1. a) 120 days after the appointment of the third arbitrator; or
   2. b) the latest date on which the chair of the arbitration panel received the additional information referred to in the preceding paragraph,
7. the arbitration panel will decide each issue included in the Terms of Reference in accordance with one of the two proposed resolutions received from the competent authorities and will communicate that decision to both competent authorities in writing.
8. In the event that the decision has not been communicated to the competent authorities within the period provided for in the preceding paragraph, the competent authorities and the person directly affected by the case may agree to extend that period for a period not exceeding 45 days or, if they fail to do so within 30 days after the end of the period provided for in the preceding paragraph, the competent authorities will appoint a new arbitrator or arbitrators in accordance with this section.

Article 18: final decision

The arbitration decision will be final, unless that decision is found to be unenforceable by the courts of one of the Contracting States due to a violation of paragraph 5 of Article 25 of the Convention, of paragraph 5 of the Protocol to the Convention or of any procedural rule in the Terms of Reference or in this Arrangement that may reasonably have affected the decision.

If a decision is found to be unenforceable for one of these reasons, the request for arbitration will be considered not to have been made and the arbitration process will be considered not to have taken place except for the purposes of sections 7 and 12.

Article 19: implementing the arbitration decision

The competent authorities will implement the arbitration decision within the period of 180 days after the communication of the decision to them by reaching a mutual agreement on the case that led to the arbitration.

The period may be extended by the period agreed on by the competent authorities and the person directly affected by the case.

Article 20: where no arbitration decision will be provided

Notwithstanding sections 14, 15, 16 and 17, where, at any time after a request for arbitration has been made and before the arbitration panel has delivered a decision to the competent authorities and the person who made the request for arbitration, the competent authorities notify in writing the arbitrators and that person that they have reached an agreement on all the unresolved issues submitted to the arbitration, the case will, in accordance with the provisions of subparagraph (e) of paragraph 5 of the Protocol to the Convention, be considered as resolved pursuant to paragraph 2 of Article 25 of the Convention and no arbitration decision will be provided.

Article 21: final provisions

This Arrangement applies to any request for arbitration made pursuant to paragraph 5 of Article 25 of the Convention after that provision has become effective.

If a case has been presented by a person to the competent authority of a Contracting State and the information specified in section 2 has been presented to the competent authority of the other Contracting State before the entry into force of the Convention, the case will be considered to have been presented to the competent authority of the other Contracting State on the date of the entry into force of the Convention.

The competent authorities may modify or supplement this Arrangement by an exchange of letters between them.

Signed in duplicate, in the Japanese and English languages, both texts having equal value.

For the Competent Authority of the United Kingdom of Great Britain and Northern Ireland

Andrew Dawson

Head of Tax Treaty Team

HM Revenue and Customs

Date:2 December 2014.

For the Competent Authority of Japan

Toshiyuki Kemmochi

Director

Office of Mutual Agreement Procedures National Tax Agency

Date: 25 November 2014.