PIB Daily

PIB Daily -13th June 2019– IASToppers

Article 356; International Arbitration Centre (NDIAC) Bill, 2019; Multilateral Convention to Implement Tax Treaty Related Measures;
By IASToppers
June 13, 2019

Contents

Polity & Governance

  • Cabinet approves extension of President’s Rule in J&K for six months with effect from 3rd July, 2019

Government Schemes & Policies

  • Cabinet approves International Arbitration Centre Bill

Economy

  • Ratification of the Multilateral Convention to Implement Tax Treaty Related Measures

 

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Polity & Governance

Cabinet approves extension of President’s Rule in J&K for six months with effect from 3rd July, 2019

The Union Cabinet has approved the extension of President’s Rule in Jammu and Kashmir for a further period of six months from 3rd July, 2019, under article 356(4) of the Constitution of India.

PTI6_12_2019_000203B

IMPLICATIONS:

  • The present term of President’s Rule is expiring on 2nd July, 2019 and the Governor has recommended that the President Rule in the State may be extended for a further period of six months with effect from 3rd July, 2019.

BACKGROUND:

  • The Governor of Jammu & Kashmir issued a proclamation in June 2018 under Section 92 of the Constitution of Jammu and Kashmir with the concurrence of the President of India, thereby assuming to himself the functions of the Government and Legislature of the State.
  • The State Assembly was dissolved by the Governor in November 2018.
  • Under Section 92 of the Constitution of Jammu and Kashmir, there is no provision for further continuation of such Proclamation after six months.
  • Hence, on the recommendation of Governor and having regard to the prevailing situation in the State, President issued a proclamation promulgating President’s Rule in J&K under article 356 of the Constitution of India.
[Ref: PIB]

 

Government Schemes & Policies

Cabinet approves International Arbitration Centre Bill

Cabinet-approves-International-Arbitration-Centre-Bill

The Cabinet has approved the International Arbitration Centre (NDIAC) Bill, 2019, to promote ease of doing business in India.

ABOUT THE INTERNATIONAL ARBITRATION CENTRE (NDIAC) BILL, 2019

  • The Bill provides for setting up an independent an autonomous body for institutional arbitration and to acquire and transfer the undertakings of International Centre for Alternative Dispute Resolution (ICADR) to New Delhi International Arbitration Centre (NDIAC).
  • The Bill will replace the New Delhi International Arbitration Centre Ordinance, 2019, promulgated by President in March, 2019 while saving all the actions done or taken under the Ordinance which will be deemed to have been done or taken under the provisions of this Bill.

OBJECTIVE OF THE NDAIC:

Objective of the NDAIC

  • Bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration
  • Provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings
  • Maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators
  • Facilitate conducting of international and domestic arbitrations and conciliation in the most professional manner
  • Provide cost effective and timely services for the conduct of arbitrations and conciliations at Domestic and International level
  • Promote studies in the field of alternative dispute resolution and related matters, and to promote reforms in the system of settlement of disputes
  • Co-operate with other societies, institutions and organisations, national or international for promoting alternative dispute resolution

COMPOSITION OF NDIAC:

  • The New Delhi International Arbitration Centre (NDIAC) will be headed by a Chairperson, who has been a Judge of the Supreme Court or a Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, law or management, to be appointed by the Central Government in consultation with the Chief Justice of India.
  • Besides, it will also have two Full-time or Part-time Members from amongst eminent persons having substantial knowledge and experience in institutional arbitration in both domestic and international.
  • In addition, one representative of a recognized body of commerce and industry shall be nominated on rotational basis as a Part-time Member.
  • The Secretary, Department of Legal Affairs, Ministry of Law & Justice, Financial Adviser nominated by Department of Expenditure, Ministry of Finance and Chief Executive Officer, NDIAC will be ex-officio Members.

SIGNIFICANCE:

  • Institutionalized arbitration will attract quality experts in India, and as a consequence, it will substantially reduce the cost incurred in the process of arbitration, especially at various international forum.
  • It will facilitate India becoming a hub for institutional arbitration.

BACKGROUND:

  • A High-Level Committee (HLC), headed by Mr. Justice B.N. Srikrishna, was constituted in the year 2017 which recommended that the Government may take over the International Centre for Alternative Dispute Resolution (ICADR), using the public funds and develop it as an Institution of National Importance.
  • Taking into consideration the HLC’s recommendations and in the view of the provisions of the Article 107 (5) and 123 (2) of the Constitution, a Bill, namely the New Delhi International Arbitration Centre (NDIAC) Bill 2018 was approved.
  • The President, in view of the importance of the matter and urgency to make India a hub of institutionalized arbitration and promote ‘Ease of Doing Business’ in India, promulgated an Ordinance namely “The New Delhi International Arbitration Centre Ordinance, 2019” on 2nd March, 2019.

WHAT IS ARBITRATION?

  • Arbitration may be defined as the process by which a dispute or difference between two or more parties as to their mutual legal rights and liabilities is referred to and determined judicially by one or more persons (the arbitral tribunal) instead of by a court of law.
  • The objective of arbitration is to provide fair and impartial resolution of disputes without causing unnecessary delay or expense.
  • Some common institutions are the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), the Dubai International Finance Centre (DIFC) etc.
  • There are two forms of arbitration namely, ad hoc arbitration and institutional arbitration.

WHAT IS INSTITUTIONALISED ARBITRATION?

  • An institutional arbitration is one in which a specialised institution intervenes and takes on the role of administering the arbitration process.
  • Each institution has its own set of rules which provide a framework for the arbitration, and its own form of administration to assist in the process.

ADVANTAGES OF INSTITUTIONAL ARBITRATION:

  • Availability of pre-established rules and procedures which ensure the arbitration proceedings begin in a timely manner
  • Administrative assistance from the institution, which will provide a secretariat or court of arbitration
  • A list of qualified arbitrators to choose from
  • Assistance in encouraging reluctant parties to proceed with arbitration
  • An established format with a proven record

WHAT IS AD-HOC ARBITRATION?

  • An ad hoc arbitration is one which is not administered by an institution and therefore, the parties are required to determine all aspects of the arbitration like the number of arbitrators, manner of their appointment, procedure for conducting the arbitration, etc.

ADVANTAGES OF AD-HOC ARBITRATION:

  • A properly structured ad hoc arbitration should be more cost effective, and therefore better suited to smaller claims and less wealthy parties.
  • A primary advantage of the ad hoc process is its flexibility, enabling the parties to decide the dispute resolution procedure themselves.
[Ref: PIB, Business standard, Livemint]

 

Economy

Ratification of the Multilateral Convention to Implement Tax Treaty Related Measures

Union Cabinet has approved the ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).

  • India has already ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

ABOUT THE MULTILATERAL CONVENTION:

About-the-Multilateral-Convention

  • The Multilateral Convention is an outcome of the Organisation for Economic Co-operation and Development (OECD) / G20 Project to tackle Base Erosion and Profit Shifting (the BEPS Project).
  • India was part of the Ad Hoc Group which finalized the text of the Multilateral Convention, which was adopted in 2016.
  • The Convention implements two minimum standards relating to prevention of treaty abuse and dispute resolution through Mutual Agreement Procedure.
  • The Convention will operate to modify tax treaties between two or more Parties to the Convention. It will not function in the same way as an amending protocol to a single existing treaty, which would directly amend the text of the Covered Tax Agreement.
  • Instead, it will be applied alongside existing tax treaties, modifying their application in order to implement the BEPS measures.
  • The Convention will modify India’s treaties in order to curb revenue loss through treaty abuse and base erosion and profit shifting strategies.
  • A list of Covered Tax Agreements as well as a list of reservations and options chosen by a country are required to be made at the time of signature or when depositing the instrument of ratification.

Significance

SIGNIFICANCE:

  • The Convention will modify India’s treaties in order to curb revenue loss through treaty abuse and base erosion and profit shifting strategies by ensuring that profits are taxed where substantive economic activities generating the profits are carried out and where value is created.
  • The Convention enables to implement the tax treaty related changes to achieve anti-abuse BEPS outcomes through the multilateral route without the need to bilaterally re-negotiate each such agreement which is burdensome and time consuming.

WHAT IS BASE EROSION AND PROFIT SHIFTING (BEPS)?

  • BEPS refers to tax planning strategies used by multinational companies, that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

BEPS PROJECT:

  • The project headed by the Organization for Economic Cooperation and Development (OECD) was initiated by the G20 in 2012.
  • The OECD/G20 Inclusive Framework on BEPS has a global membership, including about 70% of non-OECD and non-G20 countries from all geographic regions.
  • Developing countries have been engaged since the beginning of the BEPS Project.
  • The Final BEPS Project identified 15 actions to address BEPS in a comprehensive manner.
  • There are over 125 members and 14 observer organisations in this project. More than 85 countries and jurisdictions have signed the Multilateral Instrument on BEPS.
[Ref: PIB, OECD]

 

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