The medium is the message: non-judicial avenues for settling disputes and obtaining certainty

A report on a panel session from the IBA Annual Conference held in Toronto entitled ‘The medium is the message: non-judicial avenues for settling disputes and obtaining certainty’, which took place on 4 November 2025

Session Co-Chairs

Ricardo León Santacruz  Garrigues, Monterrey

Amanda Heale  Osler, Hoskin & Harcourt, Toronto

Speakers

Amie Colwell Breslow  Jones Day, Washington, DC

Andrew Loan  Boodle Hatfield, London

Jerome Tse  King & Wood Mallesons, Sydney

Wojciech Marszałkowski  Wardyński & Partners, Warsaw

Yushi Hegawa  Nagashima Ohno & Tsunematsu, Tokyo

Reporter

Luis Enrique Torres Asomoza  Von Wobeser y Sierra, Mexico City

Introduction

The panel explored the increasing relevance of non-judicial mechanisms in regard to resolving tax disputes and securing certainty at a time when audits are more complex, cross-border interactions more frequent and judicial systems more strained. Drawing on experiences from Canada, the United States, Australia, Japan, Mexico, Poland and the United Kingdom, the speakers examined mediation, real-time engagement, mutual agreement procedure (MAP) and advance pricing agreement (APA) programmes, proactive administrative channels and other tools designed to avoid or reduce litigation.

The discussion emphasised the growing importance of early intervention, transparent engagement with tax authorities and the institutional frameworks that can facilitate or impede the efficient resolution of tax controversies.

Panel discussion

Canada: navigating statutory processes and internal administrative structures

Amanda Heale began the discussion with an overview of Canada’s hybrid system, which combines formal statutory routes and non-statutory administrative practices. The process begins with an audit by the Canada Revenue Agency (CRA), which may involve specialised internal committees, such as the Transfer Pricing Review Committee or the General Anti-Avoidance Rule (GAAR) Committee. Although taxpayers are able to make written submissions, they are not able to participate in hearings, and these committees are not legally bound to follow their internal protocols.

Heale emphasised the significance of the Audit File Resolution Committee, now a permanent body, which reviews significant or precedent-setting settlements that are proposed at the audit stage. From there, taxpayers must often navigate three timelines simultaneously: objecting to reassessments, filing MAP requests when certain treaty rights are implicated and seeking interest or penalty relief in a timely fashion before the expiry of the ten-year statutory window. These overlapping avenues create a complex administrative landscape that requires rigorous strategic planning.

Australia: continuous reviews and powerful information-gathering tools

Jerome Tse explained that Australia shares several structural similarities with Canada, but places strong emphasis on real-time reviews for large taxpayers. The Australian Taxation Office (ATO) conducts semi-annual reviews of the top 1,000 taxpayers, which will soon be expanded to the top 5,000, functioning as early-stage monitoring mechanisms.

Tse highlighted the ATO’s unusually broad statutory information-gathering powers, which surpass even those of law enforcement, allowing dawn raids to be carried out without judicial warrants.

Litigation is also affected by Australia’s reverse onus of proof, requiring taxpayers to demonstrate that assessments are excessive. Most disputes are resolved at the objection stage, with only ten to 15 per cent reaching the courts. The MAP becomes available once the ATO issues its statement of audit position, which sets out its settled view on a particular case.

Poland: limited settlement culture and high reliance on litigation

Wojciech Marszałkowski described Poland’s system as structurally inclined towards litigation, due to limited statutory space for settlement, relatively low litigation costs and a dual-instance administrative appeal system that often funnels disputes into the courts.

The MAP is generally invoked after the second administrative instance, although European Union law introduces additional avenues for a resolution: preliminary references to the Court of Justice of the European Union for issues related to the free movement of capital and, in rare cases, extraordinary remedies, such as European Convention on Human Rights petitions or investor–state arbitration under the auspices of bilateral investment treaties. He noted that Poland rarely allows negotiated settlements, which explains the prevalence of fully litigated cases in the country.

Mexico: the Ombudsman of Mexican Taxpayers (La Procuraduría de la Defensa del Contribuyente or PRODECON) as a unique early-stage settlement mechanism

Ricardo León Santacruz outlined Mexico’s distinctive pre-assessment procedure involving PRODECON, which serves as the only institutional avenue for taxpayers to negotiate substantive settlements during an audit’s preliminary phase. Such settlements require PRODECON’s validation, as tax auditors otherwise lack the authority to negotiate in regard to tax liabilities.

The option to pursue an administrative appeal remains crucial because it constitutes the final opportunity to present evidence before litigation. León Santacruz warned that due to a recent reform, taxpayers must now guarantee a tax credit in order to enter a MAP, increasing the financial stakes of early strategic decisions. With Mexico’s judiciary undergoing structural changes and facing significant backlogs, the MAP and the relevant bilateral investment treaty protections are becoming increasingly important alternative pathways for a resolution.

US: multilayered administrative relief and a choice of strategic forum

Amie Colwell Breslow provided details on the nuances of the US system, which offers several non-judicial pathways that begin even before a tax return is filed, through the use of APAs, private rulings or pre-filling agreements. Once an Internal Revenue Service (IRS) audit begins, taxpayers face a ‘black box’ selection process, broad information requests, potential involvement of the IRS National Office and complex decisions on whether to extend the relevant statutes of limitation.

The available administrative resolution tools include fast-track settlement, IRS appeals and the MAP when treaty issues arise. Judicial recourse then offers three separate forums: the US Tax Court (where taxes do not have to be prepaid), the Court of Federal Claims and federal district courts. Breslow emphasised the tactical importance of forum selection and noted that penalties are initially assessed mechanically through automated IRS systems, although settlement procedures provide meaningful opportunities for relief.

UK: early disclosure, relationship-based compliance and alternative dispute resolution (ADR)

Andrew Loan provided an overview of the UK’s proactive compliance environment, which relies heavily on the relationship between large taxpayers and His Majesty’s Revenue and Customs (HMRC) that is brokered through assigned customer compliance managers. The early disclosure of potentially controversial items in self-assessment returns helps reduce the risk of extensive inquiries.

Loan explained HMRC’s Litigation and Settlement Strategy, which prohibits HMRC from accepting less than what it believes it can successfully defend at trial. As a result, settlements must be grounded in principled legal positions rather than negotiated compromises. Internal reviews are widely used, but rarely successful, functioning more as preparatory steps before litigation. Mediation is encouraged and increasingly used, although it is accepted in only about 40 per cent of requests.

Japan: the MAP for transfer pricing and arbitration as a negotiating lever

Yushi Hegawa noted that Japan’s MAP inventory is dominated by transfer pricing cases and, while many of Japan’s treaties include detailed arbitration provisions, no arbitration cases have occurred to date. According to government sources, arbitration clauses serve mainly as a tool to incentivise an agreement during the MAP, rather than as mechanisms intended to be used in practice.

Hegawa emphasised that taxpayers wishing to avoid prolonged litigation must invest heavily in preparing strong technical defences at the audit stage, because Japan’s administrative appeals and judicial system provide limited opportunities for settlement or compromise once an assessment has been issued.

Conclusion and final remarks

The panel reached a shared conclusion: within the evolving landscape of global tax enforcement, the procedural pathway often determines the effectiveness and efficiency of dispute resolution as much as the substantive tax rules themselves. Across jurisdictions, tax administrations increasingly rely on real-time monitoring, proactive administrative channels, MAPs, APAs, mediation and structured internal reviews to manage disputes before they escalate into litigation.

The speakers emphasised that taxpayers must actively engage early in the audit process, understand jurisdictional nuances and consider the financial, strategic and procedural consequences of each of the available mechanisms. While political pressures, administrative capacity and legal culture vary widely, non-judicial avenues now play a critical role in preventing double taxation, controlling costs and securing long-term certainty.

Ultimately, the ‘medium’ of dispute resolution, be it the MAP, mediation, proactive engagement or administrative appeal, shapes the outcome, timing and even the substance of tax controversies. In today’s environment, proactive, well-timed and jurisdiction-specific strategies are indispensable for achieving certainty and avoiding prolonged litigation.