Canada, like the other oddball (Portugal), has reserved to limit “mandatory” MLI arbitration to only factual disputes
Under the new Multilateral Instrument binding arbitration provisions, only those cases that have been accepted by both competent authorities are to be resolved, either in the mutual agreement process or through arbitration, so that cases that have been rejected by either authority cannot be resolved through arbitration.
Of the 26 states that have signed up for mandatory arbitration, only eight states (including Belgium, Luxembourg, the Netherlands, Switzerland and the U.K.) have not made any reservations with regard to the scope of the arbitration. Of the other 18 states (including Australia, Austria, Finland, Germany, Ireland, Italy, Portugal and Spain), the most common reservation is for excluding cases concerning the application or interpretation of anti-abuse provisions from arbitration.
Some states (e.g., Finland, France, Germany, Italy, Portugal and Spain) exclude cases that do not involve double taxation from the scope of arbitration.
It is unfortunate that these reservations have been made, as cases of double non-taxation or low taxation may be entirely legitimate under a tax treaty and not be the result of aggressive tax planning. For instance, many tax treaties apply a 0% withholding tax rate on dividends paid to jurisdictions that apply a participation exemption.
Certain states (e.g., Italy) also exclude from arbitration cases involving dual resident persons, and some states (e.g., France, Spain and Sweden) exclude cases where both competent authorities agree that the case is not suitable for arbitration.
Canada and Portugal essentially limit arbitration to more factual transfer pricing cases and the question of the existence of a permanent establishment.
Neal Armstrong. Summaries of Gerrit Groen, "The Nature and Scope of the Mandatory Arbitration Provision in the OECD Multilateral Convention (2016)," Bulletin for International Taxation, November 2017, p. 607 under Treaties – MLI – Art. 20, Art. 19 and Art. 28(2).