Interpretative value of the UN Commentaries in light of the differences with the OECD Commentaries and how to improve it

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Interpretative value of the UN Commentaries in light of the

differences with the OECD Commentaries and how to improve it

Adv LLM thesis

submitted by

Rose A. Nyongesa

in fulfilment of the requirements of the

'Advanced Master of Laws in International Tax Law'

degree at the University of Amsterdam

supervised by

Dr. Joanna Wheeler

co-supervised by

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PERSONAL STATEMENT

Regarding the Adv LLM Thesis submitted to satisfy the requirements of the 'Advanced Master of Laws in International Tax Law' degree:

1. I hereby certify (a) that this is an original work that has been entirely prepared and written by myself without any assistance, (b) that this thesis does not contain any materials from other sources unless these sources have been clearly identified in footnotes, and (c) that all quotations and paraphrases have been properly marked as such while full attribution has been made to the authors thereof. I accept that any violation of this certification will result in my expulsion from the Adv LLM Program or in a revocation of my Adv LLM degree. I also accept that in case of such a violation professional organizations in my home country and in countries where I may work as a tax professional, are informed of this violation.

2. I hereby authorize the University of Amsterdam and IBFD to place my thesis, of which I retain the copyright, in its library or other repository for the use of visitors to and/or staff of said library or other repository. Access shall include, but not be limited to, the hard copy of the thesis and its digital format.

3. In articles that I may publish on the basis of my Adv LLM Thesis, I will include the following statement in a footnote to the article’s title or to the author’s name:

“This article is based on the Adv LLM thesis the author submitted in fulfilment of the requirements of the 'Advanced Master of Laws in International Tax Law' degree at the University of Amsterdam.”

4. I hereby certify that any material in this thesis which has been accepted for a degree or diploma by any other university or institution is identified in the text. I accept that any violation of this certification will result in my expulsion from the Adv LLM Program or in a revocation of my Adv LLM degree.

signature:

name: Rose Nyongesa

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The UN Model tax treaty has extensive global application due to the widespread membership of the UN. It is therefore expected that the UN Model Commentaries would be just as popular for purposes of treaty interpretation. However, this does not appear to be the case as majority of scholars and national courts focus primarily on the OECD Commentaries for interpretation of tax treaty provisions, even where these provisions are clearly based on the UN Model treaty.

This research seeks to establish the interpretative value of the UN Commentaries in tax treaty interpretation. The manner of determining this value was by first examining the already prescribed interpretative value that is assigned to the OECD Commentaries to determine the extent to which this may be applied to the UN Commentaries. The basis of this approach is that the UN and OECD Model and Commentaries share the same history and serve the same purpose; and their commentaries should therefore have corresponding interpretative value.

The literature review therefore focussed on the application of Articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT) to the OECD Commentaries. The use of the OECD Commentaries for treaty interpretation was also analysed against the legal principles of acquiescence and estoppel as well as customary international law.

Once the interpretative value of the OECD Commentaries was determined, the thesis analysed whether the same value could similarly be applied to the UN Commentaries. The result of this analysis revealed that such application was limited to only a few instances. The variance in application of this value in all other cases is because of the differences between the UN and the OECD legal and structural manner of working, as well as in the wording of the commentaries themselves.

These differences were identified and discussed in detail. Subsequently the effect of these differences to the application of the OECD Commentaries interpretative value on the UN Commentaries was analysed. The findings of this analysis revealed that the differences identified appear to give the UN Commentaries a significantly lower value for treaty interpretation purposes than the OECD Commentaries.

With this in mind, the research makes a number of recommendations for changes in relation to the legal and structural working of the UN in the preparation of the Model and Commentaries as well as proposals for changes to the Commentaries themselves. It is anticipated that by implementing these changes, the UN Commentaries shall be more authoritative in tax treaty interpretation and that their interpretative value will be at par or even greater than that of the OECD.

If, however, the UN can’t beat them, they could find a way to join them! A further recommendation is thus proposed to have a single model treaty and commentaries under the umbrella of the UN. This may be achieved by incorporating all the proposals of the OECD Model and Commentaries, and having various alternative provisions which would be accompanied by their own commentaries. The result will be a toolkit for universal application in tax treaty negotiation with commentaries that provide for interpretation of every scenario negotiated between parties.

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Main Findings

The main findings of this research paper are that the UN Model Commentaries do not have the same interpretative value as those of the OECD Commentaries. The variance is due to the differences between the OECD and UN which include:

 The composition of the committees responsible for coming up with the model treaty and commentaries;

 The level of representation by members of these bodies in the commitees responsible for tax

 The implementation of the model treaty as a recommendation

 The opportunity for members to record their reservations and observations

 The extent of participation by non-members in preparing the model and commentaries

 The wording and content of the commentaries

The analysis of these differences showed that the UN Commentaries have a lower interpretative value when compared to the OECD Commentaries.

In order to improve the UN Commentaries and get them to the level of, or to a level greater than that of the OECD; it is recommended that the UN body changes its work, legal process and representation in preparing the Commentaries; as identified from the differences discussed.

It is also proposed that ultimately, the UN should prepare a globally applicable tax treaty toolkit that encompasses the OECD Model and Commentaries in its entirety and, in addition, provides various alternative provisions, with each alternative having its own authoritative commentaries. This should significantly reduce the instances of relying on an interpretation that falls outside the model treaty.

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1. Introduction

1.1. Background

In determining the applicable meaning of the provisions of a tax treaty, taxpayers, tax administrators and the judiciary may rely on various sources to guide them in arriving at this meaning. Although the interpretation rules appear to be similar to those applied in domestic tax legislation, there are a number of differences that would need to be taken into consideration. For instance, a tax treaty is drafted to cover a much wider audience, that is, the governments of more than one contracting state and their taxpayers, with each state having different domestic laws. Any questions of interpretation of the treaty will therefore involve determining the mutual intention and expectations of the parties to be governed by the treaty1_.

Tax treaties are on the most part based on two universally accepted models, that is the Model Tax Convention on Income and on Capital by the Organisation for Economic Co-operation and Development (the OECD Model) and the United Nations Model Double Taxation Convention between Developed and Developing Countries (UN Model). The model treaties constitute the basis for bilateral agreements and aim to create uniformity of practice and legislation, while still being fluid enough to allow parties of the treaty to adapt the terms to their circumstances and reach an agreement.

The UN Model is based on the OECD Model, following its structure and applying the same terminology. However it differs in the allocation rules to ensure more taxing rights for the source state. It is also meant to serve as the basis for tax treaties between developed and developing countries. The OECD model, on the contrary, is seen as being a more residence based model treaty that favours the capital exporting developed countries. Articles of the UN Model have, over the years, gained appeal in their use and application by states and can be found, not just in treaties between developed and developing countries but also in treaties between two developed countries, or between two developing countries2_.

The model treaties are accompanied by commentaries whose purpose is to provide clarity on the meaning and application of the articles in the model conventions. The commentaries also include an abbreviated form of conclusions reached in the reports published by the OECD or UN dealing with specific problems in the application of the model treaty3_{. The commentaries, though not binding, have}

been relied on when resolving tax disputes and are used to guide the courts in determining the meaning of a provision in a tax treaty.

1.2. Purpose of the study

Various scholars have discussed the legal interpretative value of the OECD Commentary but there has not been much written on the subject of the UN Commentaries interpretative value. This may partly be attributed to the fact that there judicial decisions in which the provisions of the UN Commentaries have been quoted or relied on are scarce. However, due to the increased use of the UN Model provisions in tax treaties, it is important to give attention to the UN Commentaries and determine the extent to which they may be applied in tax treaty interpretation.

1 _{Brian J Arnold, ‘An Introduction to Tax Treaties’ (2019)} <https://www.un.org/esa/ffd/wp-content/uploads/2015/10/TT_Introduction_Eng.pdf> accessed 15 February 2020.

https://www.un.org/esa/ffd/wp-content/uploads/2015/10/TT_Introduction_Eng.pdf (accessed 15 Feb. 2020) 2 _{W.F. Wijnen and J.J.P de Goede, ‘The UN Model in Practice 1997-2013’ [2014] 68 Bull. Intl. Taxn. 3 (2014),}

Journals IBFD. This paper shows generally how both OECD and non-OECD countries rely on various provisions of the UN Model to conclude their treaties

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Issues on when and whether to apply the interpretation provided by the UN Commentaries will arise in a number of cases as illustrated below:

a) Where non-OECD states apply UN Model provisions: For non-OECD countries, the UN Model may be considered to be more suitable, since it is generally aimed to cover a wider range of countries. In the case of developing countries that negotiate treaties among themselves, or where a developing country negotiates a treaty with a non-OECD developed country, then they may rely on the UN Model as a basis for treaty negotiation. In this case, parties may seek to rely on the UN Commentaries for purposes of treaty interpretation.

b) Where OECD member states apply UN Model provisions which do not appear in the OECD Model: The development of a treaty is a negotiation process with a give and take by each state.

Since the OECD Model is considered a more residence based treaty, an OECD member state which expects to be the source state in relation to a specific income stream would find it in its best interests to deviate from a complete application of the recommended articles of the OECD Model, and apply UN Model provisions. For instance, parties may apply an insurance PE or include an article on technical fees. This would serve to secure more source based taxing rights for a targeted income. Application of the provisions of the UN Model may subsequently require reference to the UN Commentaries for their interpretation.

c) Where an OECD state and a non-OECD state apply a provision which, though identical in both model treaties, contains a different interpretation in the UN Commentaries: As stated above,

there are a number of provisions in the UN Model that borrow from the OECD Model. However, the UN Commentaries relating to that provision give a different interpretation and application to that provision. For instance Article 19 of the Un and OECD Model are identical but the UN Model includes additional wording regarding taxation of public service pensions. Delegates participating in a negotiation may agree to apply the same provision in their bilateral treaty but assume a different interpretation depending on which model they rely on. In such a case, the question of whether to apply the UN Commentaries or the OECD Commentaries must be addressed.

All of the above variations have been found to occur in existing treaties4_{and are a result of the freedom}

each state has to include in the treaties that they negotiate, any provisions that they deem suitable for their best interests.

The purpose of this thesis is to explore the value of the UN Commentaries for interpretation of tax treaties. It is based on the observation that the interpretative value of the OECD Commentaries have been discussed and established, but those of the UN Commentaries have not been equally explored. To the extent that the two model treaties and commentaries serve the same purpose, then one would expect the two to have equal interpretative value and be applied in the same manner for treaty interpretation purposes.

It is observed, however, that the interpretative value of the OECD Commentaries may not similarly apply to the UN Commentaries due to a number of distinct differences between the two bodies and their legal structure and workings. As such this paper will examine how these differences cause a disparity in interpretative value of the two commentaries. At the end the paper makes proposals on how to ensure that the two Commentaries are at par or that the UN Commentaries have a much greater value for purposes of tax treaty interpretation. The desirability of such an improved interpretative value is based on the premise that every state has the possibility of including a UN Model provision in the tax treaties that they conclude for various policy reasons. As such, there should be certainty as to whether and to what extent they may rely on the UN Commentaries in order to interpret that provision. Since the UN

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has a bigger membership, it is expected that the UN Model will have a much wider usage and that the use of its Commentaries for interpretation should effectively lead to uniformity in tax treaty interpretation across jurisdictions.

1.3. Chapter breakdown

The first chapter of this paper is the background and introduction to the study.

The second chapter identifies the manner of treaty interpretation as provided for in the Vienna Convention on the Law of Treaties (VCLT) and shows how these principles of treaty interpretation have been applied to the OECD Commentaries. It shall also briefly examine other rules of legal interpretation that have been proposed to apply to the OECD Commentaries, such as the doctrine of estoppel or acquiescence and international customary law.

The third chapter gives a detailed background of the UN and OECD Models. It then explores the differences between the OECD Commentaries and UN Commentaries in order to demonstrate the reasons why the UN Commentaries may not have a similar interpretative value to the OECD Commentaries.

The fourth chapter contains recommendations for measures to be put in place and necessary changes that should be made to the UN Commentaries in order for their interpretative value to be at par with, or higher than the OECD Commentaries. This end result is based on the main premise that the UN Model and the OECD Model serve the same purpose and should therefore have the same interpretative value. A further proposal made is to have a single model convention and treaties applicable globally under the auspices of the UN.

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2. Application of International Law Rules of Treaty Interpretation in Tax Treaties.

2.1. Chapter introduction

The legal interpretation of treaties has been a subject of great debate over the years. The UN therefore considered that it was necessary to have a separate treaty, the Vienna Convention on the Law of Treaties of 19695_{(‘VCLT’), in order to guide states on the manner of interpreting bilateral and multilateral}

treaties. The VCLT is thus somewhat of a ‘treaty on treaties’ and may therefore be applied in interpretation of tax treaties, since these are bilateral treaties, and in some cases multilateral treaties, between different sovereign states.

This chapter shall provide an overview of the existing literature on the VCLT provisions on the general rule of interpretation of treaties (Article 31) and the rule on applying the supplementary means of interpretation (Article 32). For each provision, there shall be an analysis of how the VCLT rules may be interpreted or applied to the use of OECD Model Commentaries for tax treaty interpretation. Other rules of legal interpretation that may be applied to the OECD Commentaries will then be considered and briefly analysed. Finally, the chapter shall examine to what extent the interpretative value assigned to the OECD Commentaries may similarly be applied to the UN Commentaries.

It should be noted that this paper shall not cover issues relating to the interpretation of treaties authenticated in two or more languages nor will it discuss the ambulatory versus static approaches of applying the OECD Commentaries.

2.2. VCLT rules on treaty interpretation and their application to the OECD commentaries The VCLT provides the internationally accepted guiding principles and framework for interpretation of treaties. The basis of the VCLT is that the same rules of treaty interpretation must apply to all types of treaties, whether they are meant to regulate conduct between states or conduct between persons (natural or corporate) and a state. In the case of Anson V Revenue and Customs6_{, the UK supreme}

court applied the principles in Articles 31 and 32 of the VCLT in the interpretation of a tax treaty between the UK and the US, although the US Senate had not yet given its consent to the ratification of the VCLT. The need for a single autonomous interpretation is especially vital for the application of a tax treaty to ensure that its objective of avoiding juridical double taxation is achieved. In practice, it is left to tax authorities or national courts faced with a material disagreement on an issue of interpretation to determine the autonomous and international meaning of the text of the treaty7_{. This will inevitably result}

in different courts reaching a different interpretation to the same rule, in relation to a similar set of facts. Due to the wide nature of subjects that may be coverd under international treaties, the VCLT does not give specific guidance on interpretation of tax treaties nor on the use or application of commentaries to a model treaty for interpretation. The OECD Commentaries specifically state that ‘Although the

Commentaries are not designed to be annexed in any manner to the conventions signed by member countries, which unlike the Model are legally binding international instruments, they can nevertheless be of great assistance in the application and interpretation of the conventions and, in particular, in the

5_{‘Vienna Convention on the Law of Treaties (1969)’}

<http://legal.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf> accessed 26 April 2020. 6_{[2015] UKSC 44, para 54-56.}

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settlement of disputes’.8_{The Commentari}_{es have been equated to a form of ‘soft’ law which is to be}

adopted to achieve the aims of the OECD9_.

Scholars who have written on the topic of interpretative value of the OECD Commentaries provide conflicting views on whether, if at all, the OECD Commentaries fall under Article 31 of the VCLT as a general rule of interpretation or whether they should be considered as supplemental interpretative material under Article 32 of the VCLT. The provisions of these Articles and their interpretation with regard to the OECD Commentaries are discussed below.

2.2.1. Article 31(1)

Article 31(1) provides that ‘a treaty shall be interpreted in good faith in accordance with the ordinary meaning ..[of].. the terms of the treaty in their context and in the light of its object and purpose’.

The requirement for contracting states to interpret the treaty in good faith is on the basis that parties entered into the treaty with full knowledge of the consequences of entering such a commitment; and with the intent of performing their obligations under the treaty, taking into account such consequences10_.

The rule pacta sunt servanda is a manifestation of good faith to the extent that it requires the sanctity of contracts.

Interpretation in accordance with the ordinary meaning is based on the premise that the text must be considered as the authentic expression of the intention of the parties. Consequently, the starting point of interpretation is to determine the meaning of the text in the context of the entire agreement11_{. The}

difficulty with strict application of the ordinary meaning rule, however, is that a term may have multiple ordinary meanings. As such the meaning of the term cannot be determined in the abstract, but within the context and in line with its objects and purpose.

Treaty interpretation is therefore not limited to merely the original meaning of the text or taking the words at face value, but must be done with the perspective of creating an immediate link to the context of the treaty as well as the object and purpose of the treaty12_.

Application to the OECD Commentaries

It has been argued that the OECD Commentaries reflect the ordinary meaning to be given to the terms of the treaty in so far as the terms are identical to those in the corresponding model treaty. Further, in the case of a treaty between OECD members, parties should be presumed to have intended to conform to the OECD Commentaries unless there is an observation made by either party in relation to the Commentaries. Where this is the case, the interpretation of the OECD Commentaries cannot be used against that particular state13_{. Various court decisions have held that where a term given in a tax treaty}

has not been defined in the treaty and is not defined in domestic law, then the commentaries can be reffered to and relied upon14_.

An alternative argument, however, is that the Commentaries cannot fit into Article 31(1) as they are not an agreement relating to the particular bilateral treaty nor are they made in connection with the conclusion of a particular treaty15_.

8_{OECD Model Treaty (2017), Introduction Paragraph 29}

9_{S. Douma & F.A. Engelen, General Introduction in The Legal Status of the OECD Commentaries (S. Douma} et al. eds., IBFD 2008), Books IBFD (accessed 11 May 2020) pp 6.

10_{ibid pp 49.}

11_{John F Avery Jones, Treaty Interpretation -Global Tax Treaty Commentaries (IBFD Amsterdam 2019) s 3.2.} 12_{Gardiner (n 7) pp 181.}

13_{Klaus Vogel, ‘Double Tax Treaties and Their Interpretation’ (1986) 4 Int’l Tax & Bus. Law 1.} 14_{Essar Oil Ltd v ACIT [ITA no 2428/Mum/2007] para 36.}

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2.2.2. Article 31(2)

Article 31(2) focuses on the determination of ‘context’ in order to interpret the treaty as per the general rule in paragraph 1. This may require a review of the entire text of the treaty (including the preamble and annexes and related documents in search of the context within which the treaty has been prepared. It also allows reference to any related documents made in relation to the particular treaty, such as any notes or letters exchanged between the parties as well as agreements which may be annexed to the treaty.

The principle behind this paragraph is that while any documents agreed upon by both parties may be considered, a unilateral document should not be regarded as forming part of the context unless made in connection with the conclusion of the treaty and it is accepted by the other party16_.

It may be argued that in the case of a treaty signed between member states, the OECD Commentary should be considered as one of the documents that would provide the necessary context to the treaty since each member state has in the process of preparing the Commentaries had an opportunity to make observations where it does not agree to an interpretation applied in the treaty.17_{In the case of Crown}

Forest Industries Ltd18_{, the court stated, in considering whether to use the OECD Commentaries, that} the use of official commentaries of a model convention formed part of the legal context that a court may refer to.

John Avery Jones is of the view that the OECD Commentary is useful in providing context and states that: ‘there seems no point in the interpreter deliberately closing his eyes to the OECD Commentaries

when coming to the primary decision on the interpretation under Article 31. In nature, they are closer to the more normal Explanatory report to a multilateral treaty like the MLI …. which is clearly part of the context’ and as such, the OECD Commentary should be considered as context by analogy even though

they do not fit within the wording of Article 31 of the VCLT19_.

2.2.3. Article 31(3)

Article 31(3) permits reliance on subsequent agreement, practice or any other relevant rules of international law applicable between the parties.

An agreement regarding interpretation which is reached after the treaty is concluded will be regarded an authentic interpretation which shall be read into the treaty as would any understanding that is reached before conclusion of the treaty. Subsequent practice of the parties following conclusion of the treaty will also constitute objective evidence of the understanding of the parties as to the meaning of the treaty20_.

With regard to the relevant rules of international law applicable, the phrasing of Article 31(3)(c) implies that the rules of international law referred to need not have a particular relationship with the treaty other than assisting in the interpretation of its terms and providing their ordinary meaning. The requirement for the rules to be relevant means that they must be in relation to the subject matter of the treaty and the term ‘applicable’ should be interpreted to mean that rules are binding on all the parties to the treaty.21

16_{‘United Nations Conference On The Law Of Treaties Official Records’ (1971) pp 49}

<https://treaties.un.org/doc/source/docs/A_CONF.39_11_Add.2-E.pdf> accessed 26 April 2020.

17_{Franciscus Antonius Engelen, Interpretation of Tax Treaties under International Law, vol 7 (IBFD 2004) s} 10.9.2

18_{Crown Forest Industries Ltd v Her Majesty the Queen 2 SCT 902 pp 55.} 19_{Avery Jones (n 11) s 3.11.1.1..}

20_{UN Law of Treaties Official Records’ (n 13).}

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John Avery Jones argues that although they are not binding, the OECD Commentaries may fall within Article 31(3)(c). This is on the basis that they could be considered material that both parties had in mind as background material when negotiating the treaty and could therefore be considered as accepted international tax rules22_{. This was the opinion of the court in the case of National}

Westminister Bank23_{as well as the case of Garron Family Trust v. Her Majesty the Queen}24_{. In}

both these cases, the court noted that although the commentary was not binding for purposes of the treaty, the same had been adopted by the OECD members at the time that the treaty was negotiated and therefore the commentary would have been available as a guide to both parties at the time that the treaty was negotiated.

2.2.4. Article 31(4)

Paragraph 4 applies in instances where contracting states intend to have a special meaning assigned to a term, notwithstanding its apparent meaning within the context of the treaty. A term will have special meaning where it has a distinct definition or description in a certain area of application or where the meaning given by the document using the term gives it a different interpretation from the common meaning25_.

This provision may be considered a further elaboration of Article 31(1) where a special meaning needs to be provided to an ordinary term. It must be shown that parties intended, in good faith, to apply a different meaning to a term rather than the ordinary meaning and therefore allows parties to deviate from the application of the ordinary meaning interpretation recommended in Article 31(1) of the VCLT.

The OECD Commentaries shall in many cases indicate a special meaning of the terms within the treaty and may therefore be applied in line with Article 31(4) of the VCLT. In this case, it must be established that it was the intention of the parties that such special meaning should apply26_{. This intention may}

particularly be implied to exist when dealing with a treaty between OECD member states in relation to a provision where no observation or reservation has been made by either state.

Examples of a special meaning being given to a term include the meanings of the ’permanent home’ or ‘habitual abode’ as applied in Article 4(2) of the OECD Model or the meaning of ‘beneficial owner’ in the passive income articles (Articles 10, 11 and 12 of the OECD Model). The meaning of these terms have been described in detail in the Commentaries.

2.2.5. Article 32

Article 32 of the VCLT introduces the application of supplementary means to aid in interpretation. Its purpose is to supplement Article 31 and is a fall back to confirm the Article 31 interpretation; or to determine the meaning where Article 31 leaves it ambiguous or leads to a result that is absurd or unreasonable. The inclusion of this rule may have been intended to take into account multi-lateral conventions drafted in difficult and protracted negotiations27_{. States that later enter that treaty may then}

rely on the supplementary material, including the preparatory information to determine what the initial signatories to the treaty negotiated in good faith and their objective and purpose of including particular provisions. 22_{Avery Jones (n 11) s 3.11.2.2.} 23_{(1999) 1 ITLR 725, 737.} 24_{(2009) TCC 450 (CanLII)’.} 25_{Gardiner (n 7).} 26_{Avery Jones (n 11) s 3.11.1.2.} 27_{Vogel (n 13).}

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The supplementary means of interpretation are generally attributed a lower weight as compared to the means of interpretation that are stated in the main rule. The supplementary means are in-fact only a guide to assist in determining the choice of a meaning when the elements attributed from the application of the general rule result in an ambiguous or unreasonable interpretation.28

The ‘preparatory work’ referred to in the Article has in most cases been taken to refer to the material of each individual treaty.29_{However, the wording of the Article uses the term ‘including’ which denotes that}

the means mentioned in the provision serve only as an example and is not in complete exclusion of other supplementary means of interpretation30_.

The OECD Commentaries are not considered as preparatory work since they are not made in the course of the bilateral treaty negotiation. Even where this is not the case, as stated in the previous section, the definition of supplementary material is only illustrative and does not provide a closed list, so as not to exclude relevant interpretation material. One possible supplementary means of interpretation may therefore include OECD Commentaries31_{. This was the opinion of the court in the}

Swiss Case A-8400/201532_{, which considered that the OECD model and Commentaries were}

supplementary means of interpretation.

In cases where the Commentaries feature prominently during the treaty negotiation process and form the common or shared understanding of the states, there will be a stronger basis to consider that they are supplementary means of interpretation.

2.2.6. Interim conclusion

Despite the non-binding nature of the OECD Commentaries, there are arguments to apply them under the VCLT Article 31 primary rule of interpretation to the extent that they can provide the meaning of a term within the context of the treaty. In the alternative, there are valid arguments to apply the Commentaries as a supplementary means of interpretation under Article 32 of the VCLT.

The above notwithstanding, there is at least one bilateral tax treaty that has been concluded and which specifically provides that the interpretation of the OECD Commentaries shall by and large be followed unless parties have made an observation in the Commentaries or where a contrary interpretation is agreed in the protocol or by the competent authorities in the contracting states (See example Austria-Germany Tax Treaty at the protocol). Such a provision gives the Commentaries the unequivocal effect of a being a primary means of interpretation under Article 31.

Generally, a party seeking to rely on the interpretation of the Commentaries would prefer that they be applied under Article 31, since Article 32 only gives it a limited interpretation purpose. In case of a treaty interpretation question, where the Commentaries provides clear guidance on the meaning of a term, but does not apply under Article 31, then the court is less likely to follow its interpretation if it only has supplemental value33_.

The interpretative value of the OECD Commentaries focuses on their application to OECD member states and non-OECD member states which have given diverging positions to the provisions of the OECD Model and Commentaries. In cases where the states negotiate a treaty and adopt any provisions whose wordings are identical to the OECD Model, and in the absence of observation or reservation by

28_{Arginelli P., ‘Multilingual Tax Treaties: Interpretation, Semantic Analysis and Legal Theory’ (IBFD 2015),} Books IBFD (accessed 11 May 2020) s 6.2.3.

29_{UN Law of Treaties Official Records’ (n 13).}

30_{Mark Eugen Villiger, Commentary on the 1969 Vienna Convention on the Law of Treaties (Brill 2009) pp445.} 31_{Avery Jones (n 11) s 3.11.4.}

32_{Switzerland - Case A-8400/2015, Case Law IBFD.} 33_{Avery Jones (n 11) s 3.11.4.}

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either state, it is desirable that they also adopt the interpretation that has been applied in the Commentary34_.

2.3. Other legal theories on the interpretative value of the OECD Commentaries

This section discusses other theories, outside the VCLT, that have been explored by various scholars in determining the interpretative value of the OECD Commentaries.

2.3.1. The principles of acquiescence and estoppel

Acquiescence is a form of agreement that occurs where there is a proposal or request and the party concerned by it does not outrightly reject or raise protest but instead remains silent in circumstances that point to the party implicitly agreeing to that proposal or request35_.

In the case of estoppel, where a party makes a representation of the existence of certain fact(s), either explicitly or by conduct and another party acts on the basis of this representation to alter their legal position, then the former party shall be estopped from asserting a right or fact that is contrary to that representation36_.

Even with the explicit declaration that the OECD Commentaries are not binding, it has been suggested that in cases where a treaty is signed between OECD member states, the states will be taken to have agreed to the interpretation in the Commentaries. This is on the basis that a state that fails to register an observation or a contrary interpretation in the treaty, then it may be assumed to have agreed to the interpretation in the Commentary on the basis of acquiescence (by not objecting to a proposal a party is presumed to agree to it) and estoppel (that a party may not assert a contrary position from one implied by previous representation)37_.

Counter arguments raised against this is that the OECD Model and Commentaries are by their very nature and description to be taken as non-binding recommendations. A reservation or observation made by any state will not change this and there can be no action of acquiescence or estoppel implied by such observation, In fact, it is more likely that the parties have agreed to the legally non-binding nature of the OECD Commentaries which are a non-binding political obligation and not a binding agreement

in international law. Parties may only agree to change this position in the course of negotiation and

expressly state this in the concluded treaty38_{. Effectively, the OECD Commentaries may only be}

accepted as having ‘high persuasive value’ as they reflect what a particular state intended, but still fall short of being legally binding to the contracting states39_.

2.3.2. The application of customary international law

An alternative view is to consider the OECD Commentaries as customary international law or as providing general principles of law. A practice or interpretation will be considered to be customary

34_{Niels Blokker, ‘Skating on Thin Ice? On the Law of International Organizations and the Legal Nature of the} Commentaries on the OECD Model Tax Convention’ [2008] Douma, S. & Engelen, F. The Legal Status of the OECD Commentaries, IBFD, Ámsterdam pp 13.

35_{Monica Erasmus-Koen and Sjoerd Douma, ‘Legal Status of the OECD Commentaries-In Search of the Holy} Grail of International Tax Law’ (2007) 61 Bulletin for International Taxation 339 pp 341.

36_{‘Estoppel | Practical Law’}

<https://uk.practicallaw.thomsonreuters.com/2-383-2183?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1> accessed 22 June 2020. 37_{Hugh Thirlway, ‘The Role of the International Law Concepts of Acquiescence and Estoppel’ [2008] Douma,}

S. & Engelen, F. The Legal Status of the OECD Commentaries pp 22.

38_{David A Ward, ‘Is There an Obligation in International Law of OECD Member Countries to Follow the} Commentaries on the Model?’ [2008] Douma, S. & Engelen, F., The Legal Status of the OECD Commentaries, IBFD, Amsterdam pp. 73.

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international law where there is widespread substantially constant and uniform usage of the practise or interpretation and where it is recognised by states as being obligatory or accepted as law (opinio juris). Rueven Avi-Yonah first argued that international tax practises should be considered customary international law and noted the various practises and concepts in tax law are applied but would not generally be acceptable in international tax law. These include definitions of tax residence that go beyond place of incorporation/management and provisions of treaty over-ride through principal purpose tests in domestic law to prevent treaty abuse. He also observed that international tax lawyers do not generally refer to the VCLT in tax treaty cases but rather rely on the Commentaries in treaty interpretation40_.

To the extent that the Commentaries are not-binding on the OECD members or persons who sign a treaty on the basis of the OECD model, they may not be considered customary binding law in their entirety. However, where certain provisions and interpretation in the Commentaries correspond to general practice followed by most states, these may be said to reflect customary international law41_.

Acceptance of the Commentaries as law (opinio juris) may also be indicated by incorporation of their provisions into domestic law and in decisions of national courts42

2.4. Can the same interpretative value be assigned to the UN Commentaries

The UN Model and Commentaries serve a similar purpose as those by the OECD, albeit to parties that have differing interests and that seek different results.

The first UN Model tax treaty of 1980 consisted of articles and commentaries that, where appropriate and in many cases, reproduced the articles and commentaries of the 1977 OECD Model tax treaty. According to the Committee of Experts, the OECD Model was used as the main reference in order to take advantage of the expertise embodied in that OECD Model and its Commentary43_.

Since the UN Model and Commentaries are based on those of the OECD, there are a significant number of similarities when the two are viewed side by side. This includes instances where the wording of the Articles in the UN Model are partly or wholly similar to the OECD Model and where the UN Commentary states that they agree with the OECD Commentary provisions without any reservations or exceptions. In such cases, a logical assumption may be made that the interpretative value applicable to the OECD Commentaries should similarly apply to the UN Commentaries.

Instances in which the interpretative value of the OECD Commentaries may apply to the UN Commentaries are as follows:

i) Section 2.2.3 above presented the logic that the OECD Commentaries may be applied as a tool of treaty interpretation under Article 31(3) of the VCLT, to the extent that they are background material that parties had in mind when negotiating the tax treaty. The same assumption may be applied to the UN Commentaries where they are relied on during treaty negotiation. This will especially be the case for Articles which are exclusively found in the UN Model, such as Article 12A on Technical Fees or in the case of a service PE or insurance PE under Article 5. In such a case, the application of the UN Commentaries under Article 31(3) of the VCLT may be sustainable. In the case of Knights of Colombus V Her Majesty the Queen44_{the court relied}

40_{Reuven S Avi-Yonah, ‘International Tax as International Law’ (2003) 57 Tax L. Rev. pp 492-493.}

41_{Jan Wouters and Maarten Vidal, ‘The OECD Model Tax Convention Commentaries and the European Court} of Justice: Law, Guidance, Inspiration?’ [2008] Douma, S. & Engelen, F., The Legal Status of the OECD Commentaries, International Bureau of Fiscal Documentation, Amsterdam.

42_{Craig West, ‘References to the OECD Commentaries in Tax Treaties : A Steady March from “ Soft ” Law to “} Hard ” Law ?’ [2017] World Tax Journal 1 s 2.1.

43_{United Nations Model Double Taxation Convention between Developed and Developing Countries, 1980,} pp 10.

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on the UN Commentaries for purposes of determining the application of the Insurance PE in the Canada-US tax treaty.

ii) Section 2.3.2 provides an argument in favour of viewing the OECD Commentaries as international customary law. This is only to the extent that they have gained substantially constant and uniform usage in treaty interpretation and because they may be recognised as being accepted as law (opinio juris) due to their application in national court rulings and incorporation into domestic law. It may be considered that the same value could be applied to the UN Commentaries where the manner of interpretation provided threin has gained such wide use and application that they have been incorporated into countries’ domestic law or relied on in national courts. This may especially be the case for provisions not contained specifically in the OECD model provided that a method of interpreatation that is recommended in the UN Commentaries is also used to interprete that provision.

Other than the above instances, it is not automatic that the OECD Commentaries interpretative value will apply to the UN Commentaries. This is because of the differences in content between the Commentaries and also the differences in the manner of operation and working of the two organisations in preparing the model convention and commentaries. The next chapter shall therefore consider these differences and peculiarities and why they exist. It shall then provide an analysis on the effect of these differences to the application of the interpretative value found in the OECD Commentaries on the UN Commentaries.

2.5. Chapter conclusion

There are arguments to support the use of the OECD Commentaries as primary or supplementary means of interpretation under the VCLT. One may also apply the rules of estoppel or acquiescence to ensure application of the Commentariess or alternatively argue their establishment as customary international law.

To the extent that the UN Commentaries have a significant number of similarities to the OECD Commentaries, some of these rules of treaty interpretation may apply to the UN Commentaries. However, the differences, both intrinsic and extrinsic to the Commentaries will result in a number of these rules of interpretation not applying in an identical manner.

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3. Differences between the UN and OECD Commentaries and the effect on interpretative value

3.1. Chapter introduction

This chapter shall give a brief historical background of the two models and commentaries. It shall then examine the differences in the legal structure and make-up of the UN and OECD, the work process involved in preparing the models and commentaries of the two bodies, and an illustration of the difference in the content of the two commentaries. It shall then analyse how these differences affect the application of the OECD Commentaries interpretative value, as determined in sections 2.2 and 2.3 above, to the UN Commentaries.

3.2. Historical background of the OECD and UN Model and Commentaries

The first model bilateral tax treaty dealing with income and property taxes was the work of the Financial Committee of the League of Nations and was released in October 192845_{. In 1929, a Fiscal Committee}

was constituted to formulate the rules for allocation of business income of undertakings operating in more than one country. The Fiscal Committee prepared the Draft Convention for the Allocation of Business Income between states for the purposes of Taxation in 1933, which was subsequently revised in 193546_.

The Fiscal Committee then consolidated the 1928 Model Conventions with the 1935 Draft Convention which resulted in the Model Bilateral Convention for the Prevention of Double Taxation of Income and a Protocol thereto, which were discussed and adopted in 1943. In 1946, the Fiscal Committee reviewed the 1943 Model and recommended that ‘the work…could be usefully reviewed and developed by a

balanced group of tax administrators and experts from both capital-importing and capital-exporting countries and from economically advanced and less advanced countries..47_{’ However, the Fiscal}

Committee formed in line with this recommendation stopped functioning in 1954, having failed to further update the model convention. Subsequently, the work on development of international tax treaties shifted to the Organisation for European Economic Co-operation (OEEC), which is the current OECD. The OECD produced the 1963 draft convention which led to the publication of the 1977 model treaty48_.

The OECD Model was still considered to have the problems identified by the Fiscal Committee in 1946, as it produced tax conventions that worked in favour of capital-exporting countries. This is because the model treaty favoured residence based taxation and resulted in the source country giving up its taxing benefit. This was considered not to be appropriate for treaties between developed and developing countries as the income flows were from the developing countries and the revenue sacrifice would only be on the side of the source country49_.

With this in mind the UN Economic and Social Council (ECOSOC) by resolution requested the Secretary General of the UN to set up an ad hoc working group ‘consisting of experts and tax administrators

nominated by Governments, but acting in their personal capacity, both from developed and developing countries and adequately representing different regions and tax systems, with the task of exploring, in consultation with interested international agencies, ways and means for facilitating the conclusion of tax treaties between developed and developing countries, including the formulation, as appropriate, of possible guidelines and techniques for use in such tax treaties which would be acceptable to both groups of countries and would fully safeguard their respective revenue interests50_{. This Ad Hoc Group}

45 _{‘History of Tax Treaties’ <https://www.taxtreatieshistory.org/> accessed 9 June 2019.} 46_{UN Model, 1980 (n 43) [1980] pp 6-12.}

47_ibid. 48_ibid. 49_ibid. 50 _ibid.

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of Experts on Tax Treaties was established in 1968 and set to work on reviewing the OECD Model Convention of 1977.

The Group of Experts produced a manual for the negotiation of bi-lateral treaties between developing and developed countries that led to the first UN Model Treaty in 1980. Since then, the Group of Experts has revised and updated the UN Model Treaty in 2001, 2011 and more recently 2017. These revisions follow amendments and updates to the OECD Model and Commentaries.

It is apparent from this background that the source of the very first model tax treaty originated from the UN and was subsequently taken up by the OECD to become the OECD Model. Both the UN and OECD Model are intended to encourage cross-border investment by preventing double taxation of profits. The main difference between the two models is where the balance of taxation between the source state and residence state should lie in order to avoid double taxation; and the extent to which the source state should relinquish such taxing rights. The OECD Model is seen as a residence country biased model and therefore preferred by capital exporting countries while the UN Model is considered to be more source country oriented and preferred by capital importing countries that host the investments51_.

3.3. General differences

The UN and OECD Models share many common provisions since the UN Model, where appropriate and in many cases, reproduces the articles of the OECD Model and extracts of the Commentaries. It is acknowledged in the introduction sections of the 1980 and 2001 UN Models, that the OECD Model was used as the main reference in order to take advantage of the expertise embodied in that OECD Model and its Commentaries. It could also possibly have been a matter of not re-inventing the wheel, since the OECD Model was already based on a draft of the League of Nations.

There are, however, a number of differences in the two models and commentaries, besides the articles and their technical interpretations as provided in the commentaries. This section discusses these differences and an analysis of how the differences may affect the reliance on the model and commentaries by members of the two bodies.

3.3.1. Legal fundamentals and composition of committees responsible for tax. The Convention for the formation of the OECD provides at Article 7 that all the acts of the Organisation shall derive from the Council which shall be composed of all the members of the OECD. The Council may, under Article 9 of the OECD Convention establish subsidiary bodies that may be required to achieve the aims of the organisation52_{. As such, the OECD Fiscal Committee was formed in 1956.}

Membership of the Fiscal Committee is open to all member states53_{. The Fiscal Committee became the}

Committee on Fiscal Affairs (CFA) in 1971. The CFA has smaller working parties that deal with specific technical matters and prepare draft reports for consideration by the CFA, which will feed into the model convention and commentaries as amendments and updates. The Model and Commentaries are then agreed on by the CFA and adopted by the Council which has the power, under Article 5, to take decisions, make recommendations or enter into agreements with Members, Non-members and other international organisations54_.

With regard to the UN, the principal organ dealing with fiscal affairs is the Economic and Social Council (ECOSOC) established under Article 7 of the UN Charter. It is comprised of 54 members of the UN who are elected by the General Assembly. Under Article 62(3) of the UN Charter, ECOSOC may prepare draft conventions on matters falling within its competence, for submission to the General Assembly.

51 _{Michael Lennard, ‘The Purpose and Current Status of the United Nations Tax Work’ (2008) Asia-Pacific Tax} Bulletin 23.

52 _{‘Convention on the Organisation for Economic Co-Operation and Development - OECD’}

<https://www.oecd.org/general/conventionontheorganisationforeconomicco-operationanddevelopment.htm> accessed 5 May 2020.

53 _{‘On-Line Guide to OECD Intergovernmental Activity’}

<https://oecdgroups.oecd.org/Bodies/ListByNameView.aspx> accessed 7 May 2020. 54 _{‘OECD Convention’ (n 52).}

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Under Article 68, ECOSOC may set up commissions as may be required to perform its functions55_{. To}

this end, the Ad Hoc Group of Experts on Tax Treaties established in 1968 was set up as a sub-committee and consisted of experts and tax administrators of developed and developing countries who, though nominated by their respective governments, act in their personal capacity. The sub-committee was renamed the UN Committee of Experts on International Cooperation in Tax Matters (Tax Committee) in the year 2004. The proposals made by the Tax Committee for the model convention are submitted through ECOSOC to the General Assembly which then adopts it.

The similarities in the legal process of the two organisations are that they both have committees or organs to deal with the preparation of the model convention. They also have smaller groups of experts who have the technical discussions and prepare the drafts for approval.

The main difference is in the level of specialisation and focus on tax matters in the committees or organs responsible for the Model and Commentaries. The mandate of the CFA is limited to areas that revolve around taxation and financial matters. Appendix 1 attached, shows an organogram of the CFA’S various working groups and programs.

The UN ECOSOC, however, has a much wider mandate that covers a whole range of activities, with international taxation forming a very small portion of these activities. Appendix 2 attached shows the various commissions, programmes, funds, agencies, institutions and bodies that are the responsibility of ECOSOC. It is worthwhile to note that the Tax Committee function is not specifically mentioned as a main agency or program and falls within one of the functions of the ‘other bodies’, somewhat as an afterthought. As such, it is unlikely that the ECOSOC members will pay major focus on tax matters, and this will be clear from the professional background and expertise of individuals nominated to represent the members.

The OECD CFA is open to representation by all members. In the case of the UN, ECOSOC membership is limited to 54 members, out of a total of 193 that form the General Assembly of the UN. In comparative figures, the CFA has 100% representation while the ECOSOC has approximately 30% representation. As pointed out above, the ECOSOC has a very wide mandate and it is unlikely that issues relating to tax policy will feature significantly in determining the 54 members of the ECOSOC. Consequently, even with the 30% representation of the states, it is unlikely that a tax background will be the main consideration in determining the individual that will represent a member in ECOSOC. The CFA comparatively has a full tax mandate with 100% representation by individuals with tax policy or administration background from their own countries, who understand their own legal systems and can represent the best interests of their country.

The make-up of the main committee or organ that presents the draft model and commentaries for adoption by members of the body, may have an effect on the uptake by members of the organisation. Consider further that the same committee handles many other matters that could be perceived as more urgent and which are more politically charged such that taxation is of secondary importance. All these factors will have an effect on the willingness of members to adopt the articles of the UN Model and subsequently apply the interpretation of the Commentaries. There is unlikely to be sufficient political good will to rely on the UN model in treaty negotiation and to commit to the commentaries for interpretation of the treaty. Where ECOSOC is perceived as the committee that deals more with issues of environmental protection and food security with insufficient resources allocated to the UN model treaty and the commentaries, then members may perceive that the work of the OECD would be more authoritative. This would very easily be the case with a UN member who is a developed country, whether or not they are also an OECD country.

3.3.2. The model convention as a recommendation

The OECD Model recommends that its members apply its provisions in the negotiation of the treaty (as opposed to the Commentaries, which in both the UN and OECD are specified as not being binding).

55 _{‘Charter of the United Nations | United Nations’ <https://www.un.org/en/charter-united-nations/index.html>} accessed 8 May 2020.

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This is on the basis of Article 5 of the OECD Convention that allows the Council to make recommendations for its members. The OECD Model is therefore considered a recommendation under Article 5, made by the CFA and adopted by the Council. Unlike an agreement or decision, a recommendation is not legally binding on its members. By establishing it as a recommendation, members are free to deviate from the provisions of the Model where necessary. It is only when the member incorporates the provisions of the model into a treaty that it becomes binding56_.

Unlike the OECD, the UN Model Convention may not be interpreted as a recommendation by the UN to its members under Article 13(1)(b) of the UN Charter. This is stipulated in the introduction section of the UN Model which states that the Convention is ‘not intended to be prescriptive but to equip decision

makers with the information that they need to understand the consequences of these differing approaches for their country’s specific situation…the provisions of the Model Convention are not themselves enforceable. Its provisions are not binding and should not be construed as formal recommendations of the United Nations. Rather, ..[it].. is intended to facilitate the negotiation, interpretation and practical application of bilateral; tax treaties based upon its provisions.57

One of the reasons for this difference may be the fact that the OECD members are within economic proximity of each other and therefore have, more or less, similar interests in developing a model treaty. As such the CFA is more likely to reach a consensus on the provisions of the model and commentaries that would not reflect any kind of excessive compromise and that can easily be agreed by all members. From the perspective of the UN, the treaty model’s focus should be on source state taxation and developing country needs. However, this focus may easily be lost in pursuit of a globally acceptable outcome of all the member states, which includes a significant number of the OECD member states. This outcome is unlikely to meet the developing country aspirations and could be perceived as being imposed on countries. An attempt to impose a consensus shall only work against the objective of international tax cooperation58_{and it is unlikely to result in a Model that will be accepted by all members}

as a recommendation.

It may be argued that the Commentaries are more likely to be relied on where they are authoritatively represented as a recommendation of the Organisation to its members. If the UN Model is specifically intended to result in a more source based, and developing country needs balanced treaty, then it should be appropriate for it be a recommended model for treaties between developed and developing states as it achieves the necessary balance needed between the two types of states. Where it is only a guide to facilitate negotiation, then there will be more deviation from the model and consequently grounds for less reliance on its Commentaries.

3.3.3. The level of member representation in the tax committees

The difference in the member representation of the tax committees in the two bodies responsible for preparing the model and commentaries is also worth mention. For the OECD, the CFA is made up of senior tax officials from all the OECD members who are involved in formulation and implementation of tax policies in their own countries59_{. They participate as official representatives and their views are}

authorised views of their countries. For the UN, the Tax Committee is the level at which the experts in tax policy and administration will be concentrated. The Committee responsible for the UN Model consists of 25 individuals nominated by their governments and appointed by the Secretary-General of the UN for a term of four years.

56 _{D. Orzechowski, Chapter 1: The Relevance of the Commentaries on the OECD and UN Models for the} Interpretation of the UN Model in The UN Model Convention and Its Relevance for the Global Tax Treaty Network (M. Lang et al. eds., IBFD 2017), Books IBFD (accessed 5 May 2020) s 1.2.2.

57 _{United Nations, ‘Model Double Taxation Convention between Developed and Developing Countries’ (2011)} para 12

58 _{Armando Lara Yaffar and Michael Lennard, ‘An Introduction to the Updated UN Model’ (2011), 66 Bull. Intl.} Taxn. 11 (2012), Journals IBFD (accessed 8 May 2020) s 2.

59 _{Owens Jeffrey, ‘Current Work Programme’ [1994] Intertax 520}

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As such the work expected to be done by the UN Tax Committee is similar to what is done by the OECD CFA. However, the level of expertise, effort and resources (including sufficient funding and having a well staffed secretariat) of the OECD CFA in relation to the development of a model treaty and commentaries is not comparable to the work done by the UN Tax Committee. For the OECD, the states are individually represented by persons in official capacity and any contributions they make are taken as the views of the countries that they represent. However, the members of the UN Tax Committee serve in their individual capacity, rather than as representatives of their respective governments60_{. This}

is the case even though the committee members are recommended by their countries, with some of the members being government officials. Further, the membership of the Tax Committee changes every four years with experts being drawn from UN member states that represent different tax systems in different levels of development61_.

The differences highlighted above may be linked to the status of the OECD Model as a recommendation of the OECD to be applied by its members. This is in contrast to the UN Model, which is very categorical that it is not a recommendation of the UN. One may argue that the Council of the UN would hesitate to take a document as a recommendation where countries are not officially represented and did not fully participate in the preparation of the initial draft. It may easily be argued that it is not practical to have direct participation by each of the 193 UN member states, but that this is more easily achieved by the OECD that has a much smaller number of members.

This difference also similarly impacts the likelihood of members adopting the provisions of the UN Model as they appear and authoritatively relying on the accompanying commentaries for purposes of interpretation. Other than the fact that they do not provide their input into the model and commentaries in their country’s capacity as members, it may also be a stretch to presume that the 25 individuals can adequately represent and ensure the consideration of all the interests and concerns of the 193 members of the UN.

3.3.4. Reservations and observations

Another major difference can be found in the body of the model treaty and commentaries. The OECD Commentaries make provision for its members to record dissenting views on the provisions of the Model and Commentaries through reservations and observations. This is consistent with its character as a recommendation.

Reservations to the OECD model were included in the 1963 draft in order to express different opinions on specific aspects of the draft. At the time, this was necessary because the intention was to transform the 1963 draft into a multilateral convention between all the OECD members. As such, a reservation would be in line with treaty law allowing the unilateral statement whose purpose was to exclude or amend a provision of the treaty, to be made by a state not wishing to be bound by that provision62_{. This}

idea of a multilateral convention was later abandoned but the practice to record dissenting views through reservations and observations remained.

As discussed in section 3.3.1 above, the CFA constitutes 100% representation by all the members of the OECD, each representative having the mandate to state the position of their country. As such a reservation or observation is taken as the view of the member and recorded as such. Absence of either a reservation or observation is also taken as a statement that the member agrees with the provision and may be bound by the interpretation of that provision as provided in the commentaries.

In the case of the UN Model and Commentaries no dissenting views of the members is provided. The 1980 UN model does reproduce the observations and recommendations of the OECD Commentary, but these were quoted for information purposes63_{. Subsequent to this, the UN model only notes that}

60 _{Department of Economic and Social Affairs-Tax Committee accessed February 15, 2020,}

https://www.un.org/esa/ffd/tax-committee/about-committee-tax-experts.html. 61 _{Yaffar and Lennard (n 58).}

62 _{David Orzechowski, (n 56) s 1.3.2} 63 _{1980 UN Model Treaty (n 43).}

Interpretative value of the UN Commentaries in light of the differences with the OECD Commentaries and how to improve it