Multilateral dispute resolution initiatives: Time for a global reset?
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Multilateral dispute resolution initiatives: Time for a global reset?

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Eric Lesprit and John Breen of Deloitte look to the future of transfer pricing dispute resolution, including the proposals in the OECD’s pillar one digital tax blueprint, multilateral negotiations and joint audits.

Multinational enterprises (MNEs) have devoted considerable resources to complying with the final output from the BEPS project and adapting to changes to applicable domestic laws and practices with respect to the arm’s-length principle.

In many cases, these activities led to significant transfers of functions, assets, or risks among the members of the MNE. As taxpayers implement such changes to controlled transactions, the result will likely be an increase in TP controversies from the current baseline level. A distinguishing feature of these controversies is a greater potential to impact multiple treaty partners.

In an effort to prevent or to manage controversy in this area, various initiatives have been taken to adapt existing dispute resolution paradigms and to develop new ones that are better suited to multilateral disputes. This article provides observations about the recent direction-of-travel and offers several predictions concerning future developments.

New approach to dispute resolution: BEPS 2.0

The OECD Inclusive Framework proposals with regard to pillar one and pillar two acknowledge the importance of achieving ‘tax certainty’ with respect to the taxing measures under consideration in that project.

The ‘Tax challenges arising from digitalisation – report on pillar one blueprint’ (blueprint), contains a range of proposals, including an upfront panel procedure (‘request for early certainty’) that, if elected by the MNE, will evaluate whether and to what extent a specific MNE is subject to Amount A under pillar one. To quote from the blueprint at page 15: “The blueprint embeds a mechanism to ensure that the application of the new taxing right to a particular MNE group is agreed among all interested jurisdictions.”

Assuming that such a procedure is adopted, it would be capable of addressing various threshold issues, such as whether the taxpayer is in or out of scope and, in the case of a customer facing business (and possibly other businesses as well), whether the taxpayer has sufficient nexus to a specific jurisdiction to warrant application of the new taxing right.

In addition, the Inclusive Framework members agreed that, in the event of a dispute related to Amount A that is not subject to the Amount A dispute prevention process, appropriate mandatory dispute resolution processes will be developed. In other respects, the potential application of binding arbitration beyond pillar one, Amount A, has not yet been agreed.

These proposals, the details of which are still under discussion, reflect an implicit conclusion on the part of the Inclusive Framework that the historic mutual agreement procedure (MAP) dispute resolution mechanisms (which often have cycle times extending to four years or more) are not fit-for-purpose when it comes to the ‘new taxing right’ being considered under pillar one.

Interestingly, the provisions under discussion would combine an up-front review process with a back-end dispute resolution process, the results of which would be binding on all applicable tax authorities. Some of these features expand on traditional TP dispute resolution techniques in order to increase the ability to handle disputes that are inherently multilateral in nature. These latter techniques, several of which are reviewed below, are the main focus of this article.

International Compliance Assurance Programme

The growth of multilateral disputes under the existing TP rules has led to the development of various dispute resolution initiatives, both formal and informal. For example, in February 2021, the OECD Forum on Tax Administration issued a revised version of the International Compliance Assurance Programme (ICAP 2.0).

Building on a pilot programme that started in 2018, ICAP 2.0 enables a specific taxpayer to engage with three or more tax authorities on an upfront basis concerning controversial issues (which may include, but are not limited to, TP issues). The timeline under this particular procedure (including intake, analysis, and documentation of outcome) is completed within 28 weeks.

Although the final output from ICAP 2.0 is much less formal than an advance pricing agreement (APA), it allows the taxpayer to benefit from a commitment that a specific tax authority (or authorities) will not pursue specific issues, based on an up-front review of specific controlled transactions. Given its reliance on compressed fact-finding and analysis, the main limitation on ICAP 2.0 seems to be resource constraints on the part of taxpayers and tax administrations. Although the MNE and the participating countries commit to devote sufficient resources to meet tight timelines, in practice some countries may not have sufficient resources, or they may be able to participate in only a limited number of cases. Despite these apparent limitations, ICAP 2.0 is an example of a novel and forward-looking approach to evaluating TP risks in real time and on a multilateral basis.

Multilateral APAs

Most countries with APA programmes are willing to consider APA requests covering more than two treaty jurisdictions. With regard to global dealing and some other specialised types of controlled transactions, multilateral APAs are relatively common. As a general matter, however, multilateral APAs have drawn limited interest from MNEs. In the US, for example, the ‘2020 Annual Report for the Advance Pricing Mutual Agreement (APMA) Programme’ noted that a total of only 26 multilateral APAs have been executed in the history of the programme, and only three multilateral APA requests were filed in 2020. Although the report did not provide average cycle times for multilateral APAs, it is recognised that those cases generally take longer to resolve than bilateral APAs.

Paradoxically, this is one area in which the COVID-19 pandemic may have had a positive impact. The historic practice of most competent authorities was to negotiate cases in face-to-face meetings, held annually or semi-annually. As in-person meetings were precluded during the pandemic, most competent authorities pivoted and conducted negotiations and other business via telephone or videoconference (clearly, it is easier to schedule a conference call between the competent authorities of Japan, the US, and France than it is to hold a series of face-to-face meetings in Tokyo, Washington and Paris).

Some of these new practices may be adopted permanently, and if so, they may reduce some practical constraints that made multilateral APAs (and MAPS) more time-consuming. However, it is unlikely that face-to-face meetings will cease entirely; once the pandemic abates, these historic procedures will likely be re-adopted, to some extent.

Late discovery of multilateral disputes

A related but distinct scenario is what one might call a ‘late discovered’ multilateral TP dispute. Such a case may arise in either the bilateral MAP or the bilateral APA context, when two tax authorities belatedly find that one or more other treaty countries have interests directly affected by the potential MAP or APA resolution.

At that stage, the proceeding may need to be expanded to include the third country, or it may be necessary to address subsequent years on a multilateral basis (e.g. via accelerated competent authority procedure (ACAP) in the case of MAP or APA renewal in the case of an APA). In either event, a case of this type is likely to join the inventory of difficult (and often over-aged) TP disputes.

Ideally, a simplified procedure could be developed that would allow inclusion of one or more additional treaty partners in an existing proceeding, when this would advance the final resolution of the controversy.

Joint TP audits

Some tax authorities have pointed to joint or simultaneous TP audits as a potential means to address (or prevent) multilateral disputes. Theoretically, such a multipartite audit might include three or more tax authorities, each of which would undertake its own fact-finding and analysis. This may provide a useful way for tax administrations to collect information and better understand the audited company, which would prevent double taxation from arising. When the fact-finding process concludes, the competent authorities would attempt to resolve the case based on a common understanding in the audit – as opposed to a controversy – setting.

In our experience, most countries have been hesitant to date to adopt this procedure. For practical and legal reasons, certain tax administrations (including the IRS and the French tax administration) are generally not willing to conduct joint audits with one or more other revenue authorities. At the same time, the IRS will occasionally engage in limited fact-finding and analysis in conjunction with a treaty partner, if it concludes that this activity would support an APA roll-back proceeding or an ACAP. Query whether such procedures, which might include site visits, taxpayer interviews, and other activities typical of an audit, are qualitatively different from a joint TP audit.

Impact of time deadlines for completion of MAP and APAs

In recent years, tax authorities have come under external pressure to resolve MAP and APA cases on a timelier basis. For example, the final BEPS Action Item 14 Report contained a non-binding directive on competent authorities to resolve disputes within a two-year (MAP) or four-year (APA) timeframe, to the extent possible.

Although these time limits do not have the force of law, they do allow for peer review and, in any event, similar limits also apply under several bilateral income tax treaties that provide for mandatory binding arbitration (e.g. US–France treaty), as well as the EU Arbitration Convention and now Directive.

While the competent authorities have some flexibility to adjust time limits on cases that they deem to be highly-complex (for example, allowing additional consultation before referral to arbitration), countries have been tasked with resolving cases more expeditiously – and multilateral cases in particular, which as noted have the longest cycle times.

As a group, multilateral cases tend to be more complex than the average bilateral case, and they may present other challenges in terms of resolution. As tax authorities make improvements to the underlying MAP and APA procedures, and apply appropriate resources to these cases, this should eliminate incentive for tax authorities to impose artificial limits on taxpayers’ access to MAP or APAs – a practice that has sometimes been observed in recent years.

Commitment to resources and staffing

Resolving multilateral disputes requires a baseline level of resources and technical expertise on the part of each tax authority involved in the proceeding. As one might expect, a negotiation tends to progress at the pace of the least-experienced competent authority, and developing countries, which may lack sufficient resources, may be reluctant to accept procedures that they perceive to be weighted against them.

At the same time, the number of disputes involving these countries will likely increase, due to the BEPS-driven focus on TP matters and recommendations, as well as the tax-inspectors-without-border OECD initiative, which is helping developing countries to increase their knowledge and technical resources.

In this context, ensuring that countries have dispute resolution mechanisms and staff in place to comply with the full range of BEPS Action 14 recommendations and standards takes on special importance. These countries will likely be willing to not only have a competent authority that meets minimal standards but, ideally, will ensure that each competent authority in a multilateral dispute is fully qualified under the standards in BEPS Action 14.

Ongoing technical support from the OECD and other non-governmental organisations is critical to advancing this trend, in parallel and at the same pace as it does regarding audits and reassessments.


Tax authorities have available a range of techniques to address TP controversies with multilateral dimensions, including addressing potential controversies by means of up-front risk assessment or prospective agreements (multilateral APAs).

It is important that these techniques and others be refined in the coming years, as such controversies will otherwise account for an even greater share of the overall case inventory and have the potential to reduce tax certainty and frustrate avoidance of double taxation.

The OECD and country-level initiatives to improve multilateral dispute resolution procedures and to address backlogs of double taxation cases will likely take on greater importance as tax authorities seek to increase tax revenues and to restore fiscal balance in the wake of the COVID-19 pandemic.

Click here to read Deloitte's TP Controversy Guide 2021

Eric Lesprit



Deloitte France

T: +33 7 8511 8364


Eric Lesprit is a partner of Deloitte. He assists his clients in implementing and defending TP policies (restructuring, documentation, and defence).

Before joining Deloitte, Eric held different positions at the French Tax Administration in relation to tax audit, regulation, and litigation. He has more than 20 years’ experience in international tax and TP. He assists his clients in managing risks associated with TP-related matters. He participated in the design and creation of the APA programme in France. He was responsible for procedures for eliminating double taxation (MAPs and APAs).

Eric is a frequent speaker in various conferences and a recurrent author of articles regarding a range of international tax and TP issues. He is regularly consulted by the French Parliament concerning international tax matters. He is an advisor for the IMF on issues related to public revenues (taxes and customs duties).

John Breen


Managing director

Deloitte Tax LLP

T: +1 20 2220 2113


John Breen is a tax managing director at Deloitte Tax LLP. He has more than 20 years’ experience handling complex TP matters. He specialises in TP planning and controversy matters, attribution of profits to permanent establishments, and treaty-related issues.

John served for 10 years in the TP branch (Branch 6) in the Office of Associate Chief Counsel (International), IRS, including service as senior technical reviewer and later as branch chief. While in the IRS Office of Chief Counsel, he served for five years as a US delegate to OECD Working Party 6. Before joining Deloitte, he was counsel at a national law firm, where he focused on TP, APAs, and related matters.

John holds a bachelor’s degree from Cornell University, a JD degree from the University of Georgia School of Law, and a master’s degree in tax from Georgetown University Law Centre. He is a member of the District of Columbia Bar.

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