Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

May 26, 2021

OECD: Conference of the Parties of the MLI approve opinion for MLI interpretation and implementation

Executive summary

On 20 May 2021, the Organisation for Economic Co-operation and Development (OECD) published an Opinion of the Conference of the Parties of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) (the Opinion), as approved by the Parties to the MLI under written procedure on 3 May 2021. The opinion sets out six principles for interpretation and implementation of the MLI, which are drawn from public international law, the design of the MLI itself, and its drafting history.

Detailed discussion


The MLI was developed by an ad hoc group of approximately 100 jurisdictions participating in the OECD Base Erosion and Profit Shifting (BEPS) project. It was agreed in November 2016,1 and it has been open for signature by any interested jurisdictions since then.

To date, 95 jurisdictions have signed the MLI, and 65 jurisdictions have deposited their instruments of ratification, acceptance or approval of the MLI with the OECD. The MLI entered into effect for the first time on 1 January 2019.

According to the text of the MLI, the Parties to the MLI may convene a Conference of the Parties for the purposes of making any decisions or exercising any functions as may be required or appropriate under the provisions of the MLI. Any question arising as to the interpretation or implementation of the MLI may be addressed by a Conference of the Parties. The Conference of the Parties may also be convened to consider amendments proposed by Parties to the MLI.

In March 2021, the OECD announced that the Conference of the Parties to the MLI adopted its first opinion regarding the entry into effect of the MLI with respect to taxes withheld at source in specific cases.2

Opinion of the Conference of the Parties of the MLI

On 20 May 2021, the OECD published the second Opinion of the Conference of the Parties of the MLI to set out principles for interpretation and implementation of the MLI.

According to the Opinion, questions about the interpretation and implementation of the MLI may arise in the following cases: (i) provisions of a Covered Tax Agreement (CTA) modified by the MLI; or (ii) provisions of the MLI itself. For the first category, questions should be settled by mutual agreement in accordance with the provisions of the CTA. For the second category, questions may be addressed by the Conference of the Parties convened in accordance with the procedure set out in the MLI. Further, the MLI should be interpreted in light of the provisions of the Vienna Convention on the Law of Treaties that provides that a treaty (e.g., MLI) shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

The opinion provides some general treaty interpretation principles, which were approved by the Parties of the MLI on 3 May 2021, and address the following:

Guiding principle 1

The MLI should be interpreted in light of its object and purpose, which is to implement the tax treaty-related BEPS measures.

Guiding principle 2

Each of the provisions of the MLI should be interpreted and implemented in light of the policy objectives of the relevant tax treaty-related BEPS measure. With the exception of Part VI (arbitration) of the MLI, all the substantive provisions in the MLI are intended to be identical in their effect to the provisions that were produced in the BEPS project. Thus, the Commentary developed during the course of the BEPS project and reflected in the OECD Model Convention 2017 has particular relevance. Further, the explanatory statement of the MLI forms part of the context of the MLI and should be taken into account when interpreting the provisions of the MLI.

Guiding principle 3

The MLI does not function in the same way as an amending protocol to a tax treaty, which directly amends the text of the tax treaty. Instead, the MLI applies alongside existing tax treaties, modifying their application in order to implement the tax treaty-related BEPS measures. Some jurisdictions consider that they may need to come to a mutual understanding with the competent authorities of their treaty partners of the precise effects of the modifications made by the MLI on their CTAs. The approach taken by the MLI follows the legal principle that when two rules apply to the same subject matter, the rule that is later in time rule prevails (lex posterior derogat legi priori). If there is a conflict between a CTA and the MLI, i.e., they are incompatible, the MLI prevails over the provisions of the CTA.

Guiding principle 4

The MLI does not modify a CTA beyond the boundaries set out by either of its two Contracting Jurisdictions, as set out in their MLI Positions. This ensures the sovereign autonomy of the Contracting Jurisdictions and the bilateral nature of tax treaties.

Guiding principle 5

When an MLI provision conflicts with an existing provision in a CTA covering the same subject matter, this conflict is addressed through a compatibility clause, which describes the existing provisions that the MLI is intended to modify, as well as the effect the MLI has on those existing provisions. Part VI (Arbitration) of the MLI differs from other provisions and rules for compatibility clauses are consolidated at the end of Part VI of the MLI.

Guiding principle 6

The notification clauses ensure clarity and transparency regarding the existing provisions of CTAs that are modified by the MLI. Notifications made under the MLI may trigger the application of the MLI. However, the extent to which the MLI applies to an existing provision in a CTA is provided in the compatibility clauses.


With its second opinion, the Conference of the Parties seeks to contribute to a consistent interpretation of the impact of the MLI and to a common understanding of the effects of the MLI on the tax treaties it covers and modifies. Taxpayers may find the Opinion of the Conference of the Parties useful and therefore are advised to evaluate each case in light of the traditional sources of interpretation and also putting into context the purpose and objectives of the MLI, i.e., implementation of tax treaty-related BEPS measures.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP, Rotterdam

Ernst & Young Belastingadviseurs LLP, Amsterdam

Ernst & Young LLP (United States), Global Tax Desk Network, New York



  1. See EY Global Tax Alert, OECD releases multilateral instrument to implement treaty related BEPS measures on hybrid mismatch arrangements, treaty abuse, permanent establishment status and dispute resolution, dated 2 December 2016.
  2. See EY Global Tax Alert, OECD publishes Arbitration Profiles of 30 countries under the MLI and a clarification regarding entry into effect, dated 1 April 2021.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more