MOU regarding the Protocol Amending the Convention… US and France... Taxes on Income and Capital, Jan 13, 2009

MEMORANDUM OF UNDERSTANDING

At the signing today of the Protocol Amending the Convention Between the
Government of the United States of America and the Government of the French
Republic for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and Capital, Signed at Paris on
August 31, 1994, as Amended by the Protocol Signed on December 8, 2004, the
undersigned have agreed to define the mode of application of paragraphs 5 and 6
of Article 26 (Mutual Agreement Procedure) of the Convention, as further
amended by the Protocol signed today, as follows:
In respect of any case where the competent authorities have endeavored but are
unable to reach an agreement under Article 26 regarding the application of the
Convention, binding arbitration shall be used to determine such application,
unless the competent authorities agree that the particular case is not suitable for
determination by arbitration. If an arbitration proceeding under paragraph 5 of
Article 26 commences (the Proceeding), the following rules and procedures
shall apply.
a) The Proceeding shall be conducted in the manner prescribed by, and
subject to the requirements of, paragraphs 5 and 6 of Article 26 and these
rules and procedures, as completed by any other rules and procedures
agreed upon by the competent authorities pursuant to subparagraph q)
below.
b) The determination reached by an arbitration panel in the Proceeding
shall be limited to a determination regarding the amount of income,
expense or tax reportable to the Contracting States.
c) Notwithstanding the initiation of the Proceeding, the competent
authorities may reach a mutual agreement to resolve a case and terminate
the Proceeding. Correspondingly, a concerned person may withdraw a
request for the competent authorities to engage in the Mutual Agreement
Procedure (and thereby terminate the Proceeding) at any time.
d) The requirements of subparagraph d) of paragraph 6 of Article 26 shall
be met when the competent authorities have each received from each
concerned person a statement agreeing that the concerned person and each
person acting on the concerned person's behalf shall not disclose to any
other person any information received during the course of the Proceeding
from either Contracting State or the arbitration panel, other than the
determination of the Proceeding. A concerned person that has the legal
authority to bind any other concerned person(s) on this matter may do so
in a comprehensive statement.

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e) Each Contracting State shall have 90 days from the date on which the
Proceeding begins to send a written communication to the other
Contracting State appointing one member of the arbitration panel. The
members appointed shall not be employees of the tax administration of the
Contracting State which appoints them. Within 60 days of the date on
which the second such communication is sent, the two members appointed
by the Contracting States shall appoint a third member, who shall serve as
Chair of the panel. If the members appointed by the Contracting States fail
to agree upon the third member, these members shall be regarded as
dismissed and each Contracting State shall appoint a new member of the
panel within 30 days of the dismissal of the original members. The
competent authorities shall develop a non-exclusive list of individuals
with familiarity in international tax matters who may potentially serve as
the Chair of the panel. In any case, the Chair shall not be a citizen of
either Contracting State.
f) The arbitration panel may adopt any procedures necessary for the
conduct of its business, provided that the procedures are not inconsistent
with any provision of Article 26.
g) Each of the Contracting States shall be permitted to submit, within 60
days of the appointment of the Chair of the arbitration panel, a Proposed
Resolution describing the proposed disposition of the specific monetary
amounts of income, expense or taxation at issue in the case, and a
supporting Position Paper, for consideration by the arbitration panel.
Copies of the Proposed Resolution and supporting Position Paper shall be
provided by the panel to the other Contracting State on the date on which
the later of the submissions is submitted to the panel. In the event that
only one Contracting State submits a Proposed Resolution within the
allotted time, then that Proposed Resolution shall be deemed to be the
determination of the panel in that case and the Proceeding shall be
terminated. Each of the Contracting States may, if it so desires, submit a
Reply Submission to the panel within 120 days of the appointment of its
Chair, to address any points raised by the Proposed Resolution or Position
Paper submitted by the other Contracting State. Additional information
may be submitted to the arbitration panel only at its request, and copies of
the panel's request and the Contracting State's response shall be provided
to the other Contracting State on the date on which the request or the
response is submitted. Except for logistical matters such as those
identified in subparagraphs l), n) and o) below, all communications from
the Contracting States to the arbitration panel, and vice versa, shall take
place only through written communications between the designated
competent authorities and the Chair of the panel.

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h) The presenter of the case to the competent authority of a Contracting
State shall be permitted to submit, within 90 days of the appointment of
the Chair of the arbitration panel, a Position Paper for consideration by the
arbitration panel. Copies of the Position Paper shall be provided by the
panel to the Contracting States on the date on which the later of the
submissions of the Contracting States is submitted to the panel.
i) The arbitration panel shall deliver a determination in writing to the
Contracting States within six months of the appointment of its Chair. The
panel shall adopt as its determination one of the Proposed Resolutions
submitted by the Contracting States.
j) The determination of the arbitration panel shall pertain to the
application of the Convention in a particular case, and shall be binding on
the Contracting States. The determination of the panel shall not state a
rationale. It shall have no precedential value.
k) As provided in subparagraph e) of paragraph 6 of Article 26, the
determination of an arbitration panel shall constitute a resolution by
mutual agreement under Article 26. Each concerned person must, within
30 days of receiving the determination of the panel from the competent
authority to which the case was first presented, advise that competent
authority whether that concerned person accepts the determination of the
panel. In the event the case is in litigation, each concerned person who is a
party to the litigation must also advise, within the same time frame, the
relevant court of its acceptance of the determination of the panel as the
resolution by mutual agreement and withdraw from the consideration of
the court the issues resolved through the Proceeding. If any concerned
person fails to so advise the relevant competent authority and relevant
court within this time frame, the determination of the panel shall be
considered not to have been accepted in that case. Where the
determination of the panel is not accepted, the case may not subsequently
be the subject of a Proceeding.
l) Any meeting(s) of the arbitration panel shall be in facilities provided by
the Contracting State whose competent authority initiated the mutual
agreement proceedings in the case.
m) The treatment of any associated interest or penalties is outside the
scope of the Proceeding and shall be determined by applicable domestic
law of the Contracting State(s) concerned.

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n) No information relating to the Proceeding (including the panel's
determination) may be disclosed by the members of the arbitration panel
or their staffs or by either competent authority, except as permitted by the
Convention and the domestic laws of the Contracting States. In addition,
all material prepared in the course of, or relating to, the Proceeding shall
be considered to be information exchanged between the Contracting
States. All members of the arbitration panel and their staffs must agree in
statements sent to each of the Contracting States in confirmation of their
appointment to the arbitration panel to abide by and be subject to the
confidentiality and nondisclosure provisions of Article 27 (Exchange of
Information) of the Convention and the applicable domestic laws of the
Contracting States. In the event those provisions conflict, the most
restrictive condition shall apply.
o) The fees and expenses shall be borne equally by the Contracting States.
In general, the fees of members of the arbitration panel shall be set at the
fixed amount of $2,000 (two thousand United States dollars) per day or
the equivalent amount in euro, subject to modification by the competent
authorities. In general, the expenses of members of the arbitration panel
shall be set in accordance with the International Centre for Settlement of
Investment Disputes (ICSID) Schedule of Fees for arbitrators (as in effect
on the date on which the arbitration proceedings begin), subject to
modification by the competent authorities. Any fees for language
translation shall also be borne equally by the Contracting States. Meeting
facilities, related resources, financial management, other logistical
support, and general administrative coordination of the Proceeding shall
be provided, at its own cost, by the Contracting State whose competent
authority initiated the mutual agreement proceedings in the case. Any
other costs shall be borne by the Contracting State that incurs them.
p) For purposes of paragraphs 5 and 6 of Article 26 and this
paragraph, each competent authority shall confirm in writing to the other
competent authority and to the concerned person(s) the date of its receipt
of the information necessary to undertake substantive consideration for a
mutual agreement. Such information shall be submitted to the competent
authorities under relevant internal rules and procedures of each of the
Contracting States. However, this information shall not be considered
received until both competent authorities have received copies of all
materials submitted to either Contracting State by the concerned person(s)
in connection with the mutual agreement procedure.

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q) The competent authorities of the Contracting States may complete the
above rules and procedures as necessary to more effectively implement
the intent of paragraph 5 of Article 26 to eliminate double taxation.
This Memorandum of Understanding shall enter into force on the date of entry
into force of the Protocol Amending the Convention Between the Government
of the United States of America and the Government of the French Republic for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income and Capital, Signed at Paris on August 31, 1994, as
Amended by the Protocol Signed on December 8, 2004, signed at Paris on
January 13, 2009.
IN WITNESS WHEREOF, the undersigned, being duly authorized thereto,
have signed this Memorandum of Understanding.
DONE at Paris, in duplicate, this thirteenth day of January, 2009, in the English
and French languages, each text being equally authentic.
FOR THE GOVERNMENT FOR THE GOVERNMENT
OF THE UNITED STATES OF OF THE FRENCH REPUBLIC
AMERICA