Mandatory Binding Arbitration in the BEPS Multilateral Instrument

Part VI of the MLI establishes the mandatory binding arbitration procedure. Since no consensus was reached among the participants in the BEPS Project on the adoption of the mandatory binding arbitration procedure as a mechanism to ensure the timely resolution of MAP cases, the treaty makers of the MLI designed flexible provisions for its implementation. Part VI of the MLI combines the use of optional provisions, alternative provisions and reservations. Thus, the question arises whether the MLI achieves a coordinated effect in regard to the implementation of the mandatory binding arbitration procedure, in spite of the high level of flexibility offered to its parties and signatories. For answering this question, the article provides an in-depth analysis of the mandatory binding arbitration procedure adopted in the MLI and the policy reasons behind the decisions taken by the treaty makers to design the procedure in the form it is found in the MLI. Additionally, it illustrates how the mandatory binding arbitration procedure of Part VI of the MLI works with a focus on the effects of the reservation clauses and optional provisions that allow parties to customize the mandatory binding arbitration procedure. And, it explains how parties and signatories have availed themselves of the flexibility provided by the MLI in connection with the mandatory binding arbitration procedure.