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Oracle Corporation Australia Pty Ltd & Ors v FC of T

Judges:
Hespe J
Button J
Younan J

Court:

MEDIA NEUTRAL CITATION: [2025] FCAFC 145

Judgment date: 21 October 2025

Hespe, Button and Younan JJ

BACKGROUND

1. The three Appellants are part of the Oracle group of companies. The Third Appellant ( Oracle Ireland ) is resident in Ireland for tax purposes, and the First Appellant ( Oracle Australia ) is tax resident in Australia. The Second Appellant ( Vantive ) is the provisional head company of a multiple entry consolidated group (MEC group) of companies, of which Oracle Australia is a subsidiary member, for the purposes of Subdivision 719-B of Part 3-90 of the Income Tax Assessment Act 1997 (Cth).

2. The three proceedings were filed on 7 November 2023. The first proceeding is an application for relief under s 39B of the Judiciary Act 1903 (Cth) and the other two proceedings are brought pursuant to Pt IVC of the Taxation Administration Act 1953 (Cth) ( TAA ), appealing the Commissioner's disallowance of objections to penalty assessments issued on the basis that there had been a failure to withhold amounts from royalty payments made by Oracle Australia to Oracle Ireland in the tax year 2013 and the tax years 2014-2018. Appeals to the Federal Court against objection decisions must be filed within 60 days of the objection decision: s 14ZZN of the TAA. There is no statutory power to extend the time for a Federal Court appeal.

3. The underlying tax issue is whether amounts paid by Oracle Australia to Oracle Ireland under intra-group licensing arrangements are royalties as defined by s 6 of the Income Tax Assessment Act 1936 (Cth) ( 1936 Act ) and Art 13 of the Agreement between the Government of Australia and the Government of Ireland for the Avoidance of

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Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, signed on 31 May 1983, [1983] ITS 25 (entered into force on 21 December 1983) ( DTA ). The Commissioner's position is that the amounts paid under the intra-group licensing agreements are royalties, as defined, such that Oracle Ireland was liable to pay withholding tax (at a rate of 10% because of the DTA) pursuant to ss 128B and 128C of the 1936 Act, thus exposing Oracle Australia to penalties for failing to withhold. Where an entity fails to withhold from a dividend, interest or royalty payment, or withholds less than the amount required, the entity is liable to a penalty equal to the amount they failed to withhold: s 16-30 of Sch 1 to the TAA, ss 128B(2B) and 128B(5A) of the 1936 Act.

4. The appeals concern the primary judge's refusal of the Appellants' applications to stay the three proceedings pending finalisation of the "mutual agreement procedure" ( MAP ) between the competent authorities of Australia and Ireland under the DTA:
Oracle Corporation Australia Pty Ltd v Commissioner of Taxation (Stay Application) [2024] FCA 1262 ( PJ ). The Commissioner suspended the MAP when the present domestic proceedings were initiated, and opposed the application for a stay. We will say something more about the chronology later in these reasons.

5. While the primary judge refused the stay applications, his Honour granted leave to appeal that refusal.

THE DOUBLE TAXATION AGREEMENT AND THE MUTUAL AGREEMENT PROCEDURE

6. The DTA is a bilateral agreement between the government of Australia and the government of Ireland (the contracting states ) which, like other double taxation agreements, has been enacted as and forms part of Australia's domestic taxation law: International Taxation Agreements Act 1953 (Cth) ( ITA Act ) ss 4(1), 4AA(1), 5(1), 11K.

7. Some of the DTA's terms are relevantly modified and/or supplemented by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, signed on 7 June 2017, [2019] ATS 1 (entered into force on 1 January 2019 for Australia and 1 May 2019 for Ireland) ( MLI ), to which both Ireland and Australia have acceded: MLI Art 2(1)(a). The primary judge referred to a "Synthesised Text" which incorporates the MLI modifications into the text of the DTA (PJ [6], Schedule A).

8. The purpose of the DTA is to eliminate double taxation with respect to the taxes covered by the agreement: DTA Preamble; MLI Art 6(1). Royalties are among the taxes covered by the DTA: DTA Art 13. Pursuant to Art 13(1)-(2), royalties "arising" in one contracting state, to which a resident of the other state is beneficially entitled, may be taxed in that other state, save that the contracting state in which the royalties "arise" may impose a tax, not exceeding 10% of the gross amount of the royalties. The term "royalties" is relevantly defined as follows by Art 13(3) of the DTA:

  • (3) The term "royalties" in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for-
    • (a) the use of, or the right to use, any copyright , patent, design or model, plan, secret formula or process, trademark, or other like property or right;
    • …
    • (d) the supply of any assistance that is ancillary and subsidiary to , and is furnished as a means of enabling the application or enjoyment of, any such property or right as is mentioned in subparagraph (a) , any such equipment as is mentioned in subparagraph (b) or any such knowledge or information as is mentioned in subparagraph (c); …

(Emphasis added.)

9. Although taxpayers are not parties to this intergovernmental agreement, they are the objects of the agreement and are by no means passive bystanders. Not only is the DTA incorporated into domestic law (by the ITA Act), by its terms, the DTA is stated to "apply to persons who are residents of one or both of the Contracting States": DTA Art 1. Further, and as set out below, it is taxpayers who submit instances of perceived double taxation to the competent authorities of the contracting states,

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and who may invoke the arbitration process under Part VI of the MLI.

10. The intended method by which double taxation is to be eliminated is set out in Art 25 of the DTA. Broadly, subject to their respective domestic laws, each of Ireland and Australia is to allow, as a credit against tax payable in its jurisdiction, tax paid in the other jurisdiction on the same income.

11. Article 26 of the DTA makes provision for the MAP. Article 26(1) (as modified by MLI Art 16(1)) provides that, where a resident of a contracting state considers that the actions of one or both of the contracting states result, or will result in, taxation not in accordance with the provisions of the DTA - ie that there will be double taxation - that person may "irrespective of the remedies provided by the domestic law" of the contracting states, "present" the case to the competent authority of either state. For the purposes of the DTA, Australia's competent authority is the Commissioner of Taxation or his authorised representative ( Commissioner ), and Ireland's competent authority is the Revenue Commissioners or their authorised representative: DTA Art 3(1)(j). In practice, officers of the Australian Taxation Office ( ATO ) handle the MAP on behalf of the Commissioner.

12. Any MAP must be initiated by a resident within three years of the first notification of the action resulting in taxation contrary to the terms of the DTA: DTA Art 26(1); MLI Art 16(1).

13. Provided the claim appears to be justified, and the competent authority is not itself able to arrive at an appropriate solution, the competent authority is obliged to endeavour to resolve the case with the competent authority of the other contracting state, with a view to avoiding taxation contrary to the DTA: DTA Art 26(2).

14. Any agreement reached between the two contracting states is to be implemented "notwithstanding any time limits in the domestic law of [the contracting states]": DTA Art 26(2); MLI Art 16(2).

15. If the competent authorities are unable to reach an agreement resolving a case presented by a taxpayer within two years, subject to a potential extension of time, the taxpayer may request that any unresolved issues be submitted to an arbitration process under Part VI of the MLI: MLI Art 19(1). Each contracting state is to appoint one member to the arbitral panel, with that individual to have "expertise or experience in international tax matters": MLI Art 20(2). The two appointed members appoint a third as their Chair, with default appointment mechanisms provided if the Chair cannot be appointed by agreement. There are strict time limits for the appointment of the panel: MLI Art 20(2)-(4).

16. Pursuant to the terms of Art 23 of the MLI, the arbitration conditions to which Australia and Ireland have agreed provide for each contracting state to submit a "proposed resolution" which is generally limited to being a specific monetary amount. While the contracting states can submit position papers for consideration by the arbitral panel, the panel is to "select as its decision one of the proposed resolutions" with respect to each issue. The panel's decision is in writing, but it is prohibited from including any "rationale or any other explanation of the decision". In other words, where the arbitral panel selects one of the monetary sums put forward by one of the contracting states, it does not give any reasons for its decision(s). However, the competent authorities can agree to vary the manner in which an arbitration is to be conducted: MLI Art 23(1).

17. Any arbitration decision is final and, subject to some exceptions, binding on both contracting states: MLI Art 19(4). However, it is not binding on the taxpayer. The taxpayer can choose not to accept the outcome of any mutual agreement reached under the MAP, whether that be a mutual agreement reached as a result of negotiations between the competent authorities, or a mutual agreement that implements an arbitration decision: MLA Art 19(4)(b)(i). A taxpayer will be taken not to have accepted the arbitral panel's decision if it does not, within 60 days, withdraw all issues dealt with by the decision from consideration by any court or administrative tribunal process, or otherwise terminate those proceedings.

18. Not all double taxation agreements adopt the arbitration procedures set out in Part VI of the MLI, but the DTA between Australia and Ireland does adopt those procedures.

19.

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A MAP may be suspended in certain circumstances. In particular, Art 19(2) of the MLI refers to a competent authority having "suspended the mutual agreement procedure … because a case with respect to one or more of the same issues is pending before a court or administrative tribunal". This provision implicitly empowers each competent authority to suspend a MAP where an issue is brought before a domestic court or tribunal. Article 19(2) provides that any such suspension has the effect of stopping time running on the two-year pre-arbitration period until either: a final decision has been rendered by the court or administrative tribunal, or the case has been suspended or withdrawn.

20. There was no dispute that, although the power is implicit in Art 19(2) of the MLI, the Australian competent authority did have the power to suspend the MAP upon the Appellants having commenced the domestic proceedings. It is also common ground that, although the DTA and MLI address the interaction between the MAP and domestic proceedings in a number of respects, they do not explicitly provide for what is to occur where a taxpayer commences domestic proceedings in order to comply with a strict time limit, but wishes to have a MAP continue.

21. Where a domestic proceeding is not stayed, but proceeds to judicial resolution, the reservation made by Art 19(12) of the MLI will apply such that any (unresolved) issue within the scope of the arbitration process provided for by the MLI will not be submitted to arbitration if a decision on the issue has been rendered by a domestic court or tribunal of either contracting state.

FACTS CONCERNING THE WITHHOLDING TAX DISPUTE AND INTERACTIONS CONCERNING THE MAP

22. Oracle Australia and Oracle Ireland were parties to a "Fourth Amended & Restated Distribution Agreement" ( 4 th Distribution Agreement ) and a "Fifth Amended & Restated Distribution Agreement" ( 5 th Distribution Agreement ) (together, Distribution Agreements ). Under each agreement, Oracle Ireland granted Oracle Australia the right to market, promote, distribute, copy (for limited purposes) and sell licenses for the "Programs" to "End Users", as defined. Oracle Australia undertook, pursuant to the terms of the agreements, to do a number of things, "[i]n consideration for the rights granted herein": Art 2.4 of the Distribution Agreements.

23. The End User Licence Distribution rights granted under Art 2.2.A of the 4th Distribution Agreement permitted Oracle Australia to do a number of things, including: to enter into End User Licenses for the Programs; to use the Programs to provide training product support and additional support to End Users and Subdistributors; to use the Programs for demonstrations; to use the Programs to prepare marketing material; to grant trial End User Licenses; and to use and reproduce the Programs, only to the extent necessary for internal use, safekeeping, back-up and archival purposes. The End User Licence Distribution rights granted under Art 2.2.A of the 5th Distribution Agreement were in similar terms.

24. Under each of the agreements, Oracle Australia was to "pay a fee as set forth in Schedule 1 hereof" "[i]n consideration for the distribution rights granted under Article 2.2.A": Art 4.4 of the 4th Distribution Agreement and Art 5.2.A of the 5th Distribution Agreement. Schedule 1 of each of the agreements contains five parts, labelled "Part I", "Part II" etc. The heading to each such part purports to refer to the Article to which the part relates, but in the case of the 4th Distribution Agreement, all but one of those references is wrong and two such references are wrong in the 5th Distribution Agreement. Nevertheless, it appears to be the case that Parts II to V are revenue recognition provisions, and do not provide for any fee to be payable by Oracle Australia to Oracle Ireland.

25. In addition to "Schedule 1" being referred to in Arts 4.4 and 5.2.A of the Distribution Agreements, respectively, both of the agreements contain a further provision that cross-refers to fees payable under Sch 1. Article 4.4.A of the 4th Distribution Agreement provides that "[i]n consideration for each End User License of a Program granted by [Oracle Australia or its Subdistributors]", Oracle Australia is to provide Oracle Ireland "a fee equal to that set out in Part I of Schedule 1": Art 4.4.A of the 4th Distribution Agreement and

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Art 5.2.B of the 5th Distribution Agreement. As mentioned, Part I of Sch 1 in each agreement is the only part of that schedule which appears to provide for a fee to be paid by Oracle Australia to Oracle Ireland, but that fee is specified to be payable in consideration both for the grant of general distribution rights pursuant to Art 2.2.A and the grant of each "End User License".

26. In the 4th Distribution Agreement, the fee specified by Part I of Sch 1 was determined by a formula which was calculated - to paraphrase - as the amount that would provide Oracle Australia with the amounts set out in two sub-clauses, the first of which was 97% of "Program and Support Net Revenue" less a stated percentage of Oracle Australia's "Direct and Indirect Software Operating Costs". The corresponding fee payable under the 5th Distribution Agreement was the amount that would provide Oracle Australia with stated amounts calculated by reference to five sub-clauses.

27. The 4th Distribution Agreement made provision for a number of tasks to be undertaken by Oracle Australia, which included: using commercially reasonable efforts to promote the marketing and distribution of the Programs; maintaining a suitable sales organisation; preparing marketing materials; servicing End Users and others; providing education and training; providing support to End Users and Subdistributors; maintaining and submitting financial records; and representing Oracle Ireland. These obligations were the subject of detailed terms. Oracle Australia's obligations under the 5th Distribution Agreement were in similar terms, but included provisions in relation to "Managed Cloud Services", and "Cloud Software Services".

28. On 30 May 2018, the ATO issued to Oracle Australia a "Notice of penalty for failure to withhold amounts" for the 2013 financial year. This notice was issued after an audit process conducted by the ATO through 2017, which included the issue, by the ATO, of a position paper and, later, a statement of audit position.

29. The Commissioner decided, on 6 December 2019, not to remit the penalty. That rejection was preceded by a letter dated 5 November 2019, in which Oracle Australia summarised its arguments. These arguments included that the rights granted under the 4th Distribution Agreement fall under the definition of "simple use" rights where payments for licenses for such rights are not royalties, and that, except for those "simple use" rights, the other rights conferred on Oracle Australia under the 4th Distribution Agreement would not infringe copyright even if exercised without a licence. Oracle Australia contended, alternatively, that even if the rights it acquired under the agreement did include a right to use copyright, such rights were of minimal value. Oracle Australia contended that the Commissioner had misconstrued Art 2.2.A of the 4th Distribution Agreement and the rights conferred on it pursuant to the terms of that agreement.

30. On 23 March 2022, the ATO issued to Oracle Australia a "Notice of penalty for failure to withhold amounts" for the 2014 to 2018 financial years.

31. The penalties were premised on amounts paid by Oracle Australia to Oracle Ireland under Art 4.4 of the 4th Distribution Agreement and Art 5.2 of the 5th Distribution Agreement being "royalties".

32. On 3 February 2020, Oracle Australia lodged an objection to the penalty notice issued in respect of the 2013 year. The supporting submissions contended that the Commissioner misconstrued the 4th Distribution Agreement in concluding that the payments were royalties. It contended, in the alternative, that if any part of the payments were royalties, that part was nominal or, failing that, that there should be an apportionment of the payments made under Art 4.4 on the basis that they were only royalties in part.

33. On 18 May 2021, Oracle Ireland wrote to the Irish competent authority, invoking the MAP under Art 26 of the DTA in respect of the 2013 year (relevantly to the royalty withholding tax issue). Oracle Ireland requested the Irish competent authority enter into a mutual agreement with the Australian competent authority requiring the Australian competent authority to withdraw the assessed tax or, if Oracle Ireland's position were rejected, to allow Oracle Ireland a corresponding downward adjustment to its income so that the

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amounts in question were not subject to taxation both in Australia and Ireland.

34. The ATO issued a statement of audit position to Oracle Australia on 11 February 2022, addressing the 2018-2022 years. In a later letter to the Irish competent authority (dated 8 March 2022), the ATO referred to the Australian taxpayer having requested MAP in respect of those years on 22 February 2022. By a letter dated 4 March 2022, Oracle Australia referred to the ATO's statement of audit position in relation to the 2014-2018 years and requested that the ATO "reconsider the need to issue any penalty notices, or at least defer the issue of the penalty notices until the conclusion of MAP". As that letter noted, the issues in respect of the 2014-2018 years were substantively the same as those in respect of the 2013 year, which was already the subject of an active MAP under the DTA.

35. It appears that that request was not acceded to, as the Commissioner issued the penalty notice on 23 March 2022 and, it appears, a decision not to remit penalties issued the same day, following which, on 20 May 2022, Oracle Australia lodged an objection against the Commissioner's decision not to remit the penalty for the 2014-2018 years. This objection decision set out the same analysis as that advanced in the objection decision in respect of the 2013 year, but by reference to the terms of the 5th Distribution Agreement.

36. The decision to proceed and issue an objection decision was taken even though, on 8 March 2022, an officer of the ATO wrote to the Irish competent authority and said that, as the "Australian taxpayer ha[d] requested that the objection process be put into abeyance while the MAP process is undertaken", it was no longer necessary to discuss the request in the ATO's earlier correspondence for an extension of the arbitration process pending the outcome of the objection process. The same letter noted that Oracle Australia wanted the 2014-2018 years included in the MAP and proposed that those years be treated as constituting a separate MAP. It also observed that "the taxpayers are now relying on the MAP process as the primary mechanism for resolving the [redacted] and royalty withholding tax issues".

37. Consistent with its understanding that the 2014-2018 years were also to be addressed under the MAP, the ATO provided its position paper to the Irish competent authority on 4 May 2022. That paper addressed both the 2013 year, and the 2014-2018 years. It also referred to both Australia and Ireland having accepted those years into the MAP. That position paper set out, at length, the ATO's views, which views were again advanced through a detailed analysis of the Distribution Agreements between Oracle Ireland and Oracle Australia, the nature of the operations undertaken pursuant to those agreements, the nature of the rights conferred, the fees paid and how all of those matters were to be regarded having regard to the concept of "copyright" under the Copyright Act 1968 (Cth) ( Copyright Act ). (While we note that the Appellants' submissions on the appeals raised the point that it should not be assumed that the term "copyright" in the DTA takes its meaning from domestic law (ie Australian law), that point was not taken any further in argument before us. Rather, the appeals were conducted on the basis that the resolution of the Appellants' proceedings would bring the Copyright Act into consideration. Accordingly, we say no more about the Appellants' apparent reservation of their position on this point.)

38. By a letter to the ATO dated 3 August 2022, the Irish competent authority noted that the objection process was being put into abeyance, and agreed that the 2014-2018 years should be addressed pursuant to the MAP, but asked whether a formal MAP request had been made to the ATO for those years. The ATO responded by a letter dated 5 July 2023, noting that no formal MAP request had yet been submitted to it for the 2014-2018 years, thus confining the extant MAP to 2013. The Irish competent authority agreed with this approach (by a letter dated 25 July 2023).

39. On 8 September 2023, the ATO notified Oracle Australia that its objection in respect of the 2013 year had been disallowed. That was despite the ATO having, in 2022 and earlier in 2023, proceeded in its interactions with the Irish competent authority on the apparent basis that the objection process would be put into abeyance while the MAP was pursued.

40.

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In its objection decision, the ATO noted that, pursuant to Art 13(3) of the DTA, the term "royalties" means payments or credits "to the extent to which they are made as consideration for … the use of, or the right to use, any copyright …". The next step in the reasoning is that, as copyright is not defined in the DTA, it takes its meaning from domestic law, specifically the Copyright Act pursuant to Art 3(3) of the DTA. The ATO referred to the definition of copyright in s 31 of the Copyright Act and then addressed, in detail, the rights granted to Oracle Australia under Art 2.2.A of the 4th Distribution Agreement, including by reference to whether the nature of the rights conferred extended to the right to "reproduce" a work in material form (by reference to the scope of reproduction under s 21(5) of the Copyright Act). Further detailed analysis of the provisions of the 4th Distribution Agreement was undertaken by reference to other concepts addressed in the Copyright Act, including the right to communicate to the public (s 22(6)), the right to authorise (ss 13(2), 36(1A) and 101(1A)), and the right to make an adaptation (s 10(1)). The objection decision also addressed the detailed terms of the 4th Distribution Agreement having regard to the DTA's inclusion (in Art 13(3)(d)) of payments in respect of ancillary and subsidiary services. The ATO concluded that the rights granted to Oracle Australia went beyond "simple use" rights, and that neither the exception to copyright infringement for certain incidental and automatic reproductions in s 47B of the Copyright Act, or the exception for back-ups in s 47C, applied. Finally, the ATO detailed its reasons for rejecting the alternate contention that the payments should be apportioned and were only partly referable to any royalty.

41. On 18 October 2023, the ATO wrote to Oracle Australia advising it that the two competent authorities had agreed to extend the pre-arbitration time period by one year, making the earliest date that arbitration could be requested 18 November 2024. In corresponding with the Irish competent authority about the extension to the arbitration date, the ATO noted that it had issued an objection decision and, if the Australian taxpayer exercised its review rights before an Australian court or tribunal, the ATO would advise the Irish competent authority and the MAP would be suspended.

42. A formal MAP request was submitted to the Irish competent authority in respect of the 2014-2018 years on 2 November 2023 (GMT) (being 3 November 2023 in Australia). While the formal application was submitted then, it should be recalled that it is clear from the ATO's correspondence with the Irish competent authority in March 2022 that Oracle Australia had already indicated in February 2022 that it wanted a MAP in respect of those years, and also that the taxpayers were treating the MAP as the primary mechanism for resolution of the double taxation issues.

43. On 3 November 2023, Oracle Australia's solicitors wrote to the ATO and noted that Oracle Australia "requested that the issuing of the objection decisions be delayed so as to enable alternative dispute resolution mechanisms (including MAP proceedings) to be completed". This observation was made in explaining that, as that request had not been acceded to, proceedings would be commenced, but would be accompanied by an application for a stay of the proceedings pending the conclusion of the MAP proceedings. The solicitors noted that "[o]ur clients consider that the dispute between the parties can and should be resolved through agreement or binding arbitration under the processes prescribed by the [DTA]". The proceedings were commenced on the last possible day for the filing of Part IVC proceedings, and the s 39B proceeding was filed at the same time. An affidavit sworn in support of the stay reiterated that the Oracle companies wanted to pursue processes under the DTA (as modified by the MLI) to conclusion, including through arbitration, but the ATO's suspension of the MAPs prevented these processes from continuing.

44. After proceedings were commenced on 7 November 2023, the ATO notified Oracle Australia on 17 November 2023 that the 2013 MAP had been suspended as at 7 November 2023 following the filing of the proceedings. At the same time as the Irish competent authority confirmed, on 21 December 2023, the entry of the 2014-2018 years into the MAP, the ATO notified Oracle Australia that the 2014-2018 MAP had also been suspended as at 20

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December 2023, as a result of the filing of these proceedings.

45. The following are the relevant points to be observed, having regard to this chronology:

  • (1) The issues arising in relation to the question of whether the fees paid by Oracle Australia under the Distribution Agreements were "royalties" for the purposes of Art 13(3) of the DTA require a close analysis of the terms of the two Distribution Agreements, and consideration of how the arrangements and rights established by those agreements mapped to several aspects of the Copyright Act including, but by no means limited to, the definition of "copyright". The centrality of these issues is further evidenced by the description of the issues arising in the underlying tax dispute in the affidavit of Ms Melissa Anne Spurge, filed by the Commissioner in opposing the stay application below (at [31]-[36]). Similarly, the Commissioner's oral submissions on the appeal addressed the contractual terms between Oracle Australia and Oracle Ireland in detail. None of the material concerning the underlying tax dispute identified any question of construction about the meaning of "royalty" in the DTA that was capable of being answered at a level of generality, or in a manner divorced from the specific terms of the agreements between Oracle Australia and Oracle Ireland.
  • (2) The ATO was, for a significant period of time, proceeding on the basis that it was open to the Commissioner to defer making decisions on the objections, so as to allow the MAP to progress at the taxpayers' request. When and why the Commissioner changed his view and decided to issue objection decisions was not explained in the evidence. While it did not have to be, the change in the Commissioner's position exposes his argument, in the appeals, that he was merely issuing the objection decisions because he was duty bound to do so, as an ill-conceived submission diverting attention from the fact that the Commissioner decided to take a step that would force the taxpayers to elect either to bring domestic proceedings in 60 days and risk one or both of the competent authorities suspending the MAP, or to forever forego domestic appeal rights and place all their eggs in the MAP basket. In the abstract, putting a taxpayer to an election may be routine, and not a matter that would feature in an application for a stay, but in the specific context of the MAP and the procedures and interactions with domestic remedies for which it provides, the commencement of domestic proceedings by the Appellants needs to be considered in light of the context and manner in which their hand was forced.
  • (3) Although the formal request for a MAP for the 2014-2018 years was made after the objection decision had already issued on 8 September 2023, that bare fact (which was relied on by the Commissioner in argument on the appeal) obscures the history, which makes it clear that it was always apparent to all concerned that Oracle Australia wanted the 2014-2018 years also to be considered under the MAP. In February 2022, Oracle Australia had requested this be done and, for quite some time, the MAP process was being pursued on that basis - including by the ATO, whose position paper covered the 2014-2018 years, as well as the 2013 year - until it appears that it was realised that a separate process needed to be initiated.

THE PRIMARY JUDGE'S REASONS

46. After addressing factual matters and describing the operative provisions of the DTA, MLI and, in particular, the MAP provisions, the primary judge addressed the matters relevant to the question of whether a temporary stay ought to be granted under s 23 of the Federal Court of Australia Act 1976 (Cth) ( FCA Act ). In particular, the primary judge identified that matters that can be inferred from the subject matter, purpose and scope of any relevant legislative context will be relevant in exercising the discretion to grant a stay (PJ [20], citing
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40 (Mason J, Gibbs CJ agreeing at 30 and Dawson J agreeing at 71) and
HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd [2002] FCA 1638; (2002) 44 ACSR 169 at [48]-[49] (French J)).

47. The primary judge then turned to addressing the subject matter, purpose and

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scope of the DTA and the MLI, both of which are to be interpreted in accordance with Arts 31 and 32 of the Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331, [1974] ATS 2 (entered into force 27 January 1980) ( Vienna Convention ) (PJ [22]). Pursuant to Art 31(3)(b) of the Vienna Convention, subsequent practices in the application of treaties which establish the agreement of the parties regarding their interpretation may be taken into account (PJ [22]).

48. The primary judge then turned to a number of documents issued by the Organisation for Economic Co-operation and Development ( OECD ) to which regard may be had in the interpretation of double taxation agreements modelled on the OECD's Model Convention with Respect to Taxes on Income and on Capital, and in appreciating their intended operation (PJ [23]). Those documents include the OECD's 'Commentary on Article 25 Concerning the Mutual Agreement Procedure' in Model Tax Convention on Income and Capital: Condensed Version (OECD Publishing, 2017) (the Commentary ), the OECD's Explanatory Statement to the MLI (adopted on 24 November 2016) (the Explanatory Statement ) and the OECD's Making Dispute Resolution Mechanisms More Effective, Action 14 - 2015 Final Report (OECD Publishing, 2015) ( Action 14 Report ).

49. The primary judge considered the following matters arising from the subject matter, scope and purpose of the DTA and MLI relevant to the exercise of the Court's discretion under s 23 of the FCA Act (PJ [24]-[46]):

  • (1) A final judicial determination of whether the payments are royalties within the meaning of DTA Art 13 would bind the Commissioner such that it would not be possible for any MAP outcome by consensus to contradict that determination. Consequently, refusal of the stay would have the effect of making the determination of the royalty question by this Court (or any higher court) definitive of Oracle Ireland's liability to Australian withholding tax and Oracle Australia's liability to penalty. If a MAP follows a judicial determination in this proceeding, and the competent authorities do not reach an agreement, the matter will not proceed to arbitration under the MAP due to the reservation in MLI Art 19(12), which precludes an issue from being submitted to arbitration if a decision on the issue has been rendered by a court or administrative tribunal of either contracting state (PJ [25]-[29]).
  • (2) Refusing the stay "may carry the risk of double taxation", because the revenue and judicial authorities of Ireland and Australia may arrive at different interpretations of DTA Art 13 (PJ [30]-[32]). However, that risk would not be eliminated by granting the stay, because the taxpayers may choose not to accept the outcome of the MAP negotiations or arbitration, in which case the issues would proceed to determination by the Australian courts in any event.
  • (3) Both the MAP process in DTA Art 26 and the arbitration process in MLI Art 19 seek to achieve the central purpose of the DTA, namely, the avoidance of double taxation (PJ [33]).
  • (4) Refusing a stay would empower the Commissioner to force taxpayers to choose between a MAP and pursuing their domestic proceedings by issuing an objection decision and thus commencing the 60-day period for the taxpayer to bring domestic proceedings pursuant to s 14ZZN of the TAA. Such an outcome would be inconsistent with textual indications in the DTA and MLI that the taxpayer should be able to access both mechanisms and to access MAP in addition to any domestic procedures (PJ [34]-[35]). The primary judge identified the following examples (PJ [35]):
    • (a) prior to the adoption of the MLI, DTA Art 26(1) provided that a taxpayer may present their case to the relevant competent authority "notwithstanding the remedies provided by the national law of those States";
    • (b) DTA Art 26(1) was then modified by MLI Art 16(1), which provides that a taxpayer may present their case to the relevant competent authorities "irrespective of the remedies provided by the domestic law";

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    • (c) MLI Art 16(2) provides that any agreement reached through the MAP "shall be implemented notwithstanding any time limits in the domestic law of the Contracting States"; and
    • (d) the taxpayer is not bound by any agreement reached by the competent authorities under the MAP or the outcome of any arbitration procedure under MLI Art 19(4)(b)(i).
  • (5) Relevant extrinsic materials from the OECD support the position that taxpayers are to have access to both mechanisms, albeit that they cannot pursue them both simultaneously (PJ [36]-[39]). In particular, the primary judge referred to the OECD's Commentary, Explanatory Statement, and Action 14 Report.

    The primary judge quoted from paragraph 77 of the Commentary, which directly addresses the intersection of domestic proceedings and the MAP, and suggests that the usual position would be to suspend legal remedies pending the outcome of the MAP involving the arbitration of the issues the competent authorities are unable to resolve. Paragraph 17 of the Commentary refers to the MAP being "as widely available as possible", but paragraph 76(a) of the Commentary makes it clear that a person should not be allowed to pursue arbitration by MAP if a domestic court or tribunal has already rendered a decision, and that the approach adopted by most countries is that a person "cannot pursue simultaneously the mutual agreement procedure and domestic legal remedies". That paragraph goes on to state that "[w]here domestic legal remedies are still available, the competent authorities will generally either require that the taxpayer agree to the suspension of these remedies or, if the taxpayer does not agree, will delay the mutual agreement procedure until these remedies are exhausted" (PJ [38]).

    Importantly, the primary judge concluded (PJ [39]) that the Commentary "shows that generally, where domestic proceedings are commenced, a competent authority in the position of the ATO should seek to suspend the domestic proceedings".

  • (6) The extrinsic materials (the Action 14 Report and the Commentary) also suggest that it is the taxpayer - not the competent authority - that typically chooses whether to proceed by a MAP or by domestic procedures (PJ [40]). The Action 14 Report states that choice of remedies should remain with the taxpayer. Paragraph 44 of the Commentary states that, depending on domestic procedures, "the choice of redress is normally that of the taxpayer" and, in most cases, it is the domestic recourse provisions (eg appeals or court proceedings) that are "held in abeyance in favour of the less formal and bilateral nature of mutual agreement procedure".
  • (7) Although the Commissioner disclaimed that a competent authority could determine which of domestic proceedings or a MAP is to proceed, the effect of the position he adopted by making a decision to disallow the taxpayer's objection was to require the taxpayer to abandon one of the two procedures (PJ [42]). The primary judge said he was "unpersuaded that this is what the DTA or the MLI contemplate" (PJ [42]).
  • (8) The primary judge further observed that nothing in the DTA, the MLI or the extrinsic materials supports the view that a competent authority may seek to force a taxpayer to pursue its domestic remedies by opposing the taxpayer's application to stay its own proceeding (PJ [43]).
  • (9) The Commentary (at paragraph 25) recognises that time limits in domestic law may create difficulties by requiring a taxpayer to choose between domestic remedies and the MAP remedies and, in this context, again indicates an intention on the part of the drafters of the DTA that the taxpayer be the one to choose whether to proceed by a MAP or by domestic proceedings (PJ [45]-[46]).

50. The primary judge's consideration of various arguments advanced by the Commissioner may be passed over, as they have not resurfaced on the appeal. It is relevant to observe, however, that in many respects, the primary judge addressed those arguments by reference to his Honour's conclusion that the DTA and MLI do not contemplate

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a taxpayer being forced to elect between remedies (eg PJ [49]).

51. In light of his Honour's analysis of the DTA and MLI regime, the primary judge found that, generally speaking, if a taxpayer has been forced to commence domestic proceedings to meet a time limit, proceedings should be stayed to permit the MAP (including any arbitration) to proceed, if that is what the taxpayer wishes (PJ [82]). Refusing a stay in such cases would effectively result in the competent authority being able to force the taxpayer to abandon one process, a consequence which is not contemplated by the DTA or the MLI (PJ [49], [54]).

52. The primary judge then addressed several "non-treaty considerations" raised by the parties as relevant discretionary considerations. The primary judge addressed several matters raised by the Commissioner as supporting the refusal of a stay, as follows:

  • (1) The Commissioner submitted that the critical royalty issue at the heart of the Appellants' proceedings concerned the construction and application of Australian copyright law, which is a matter in which the Federal Court of Australia has expertise. By contrast, the Commissioner submitted, an arbitral tribunal appointed under a MAP would have expertise in international tax matters. The primary judge considered the concern to be somewhat overstated in that the ATO will have the right to appoint one of the arbitrators, and could appoint someone experienced in Australian copyright law and tax. The primary judge concluded that there was "some risk" that any arbitral panel would not have the same expertise as this Court (PJ [61]).
  • (2) The Commission raised the matter of delay, noting that there could be no arbitration under the MAP until September 2025 (for the 2013 year MAP) and September 2026 (for the other MAP in respect of the 2014 to 2018 years). The primary judge observed that, even if a stay were refused, the Appellants' domestic proceedings would be unlikely to go to trial until 2026, an appeal was "inevitable" and the matter may go to the High Court, meaning that the proceedings would likely not be finalised until 2027. The primary judge also observed that, if the stay were granted and the Appellants rejected the outcome of the MAP arbitration and only then proceeded with their domestic litigation, the matter might not be finalised until 2029. The primary judge regarded delay as favouring the refusal of the stay "although not strongly" (PJ [68]).
  • (3) The Commissioner submitted that the MAP was not very far advanced, as the only step that had been taken was the provision of the ATO's position paper, and the domestic proceedings going ahead would not waste court resources. The primary judge noted that, if the MAP progressed and the Appellants rejected the outcome of arbitration, there would have been wasted time and effort in pursuing the MAP. While this was a function of the treaty machinery, the primary judge regarded it as relevant and favouring the refusal of the stay sought, "although not strongly" (PJ [69]).

53. It is the other discretionary matter raised by the Commissioner that lies at the heart of this appeal. That matter was explained and addressed by the primary judge as follows:

62 Secondly, the Commissioner submitted that a judicial determination by this Court (or, more likely, any appellate court) will provide guidance both to him and other taxpayers about the operation of the royalty tax . In that regard, Ms Melissa Spurge, a Deputy Commissioner of Taxation, gave evidence that there were approximately fifteen other entities whose distribution of software or related arrangements require consideration of the definition of 'royalty' for Australian tax purposes .

63 In addition to those matters, it is also apparent that the Commissioner's approach to what constitutes a royalty for the purpose of double taxation treaties has created friction with the United States . The Commissioner's position on royalties in relation to software distribution arrangements is the subject of two draft taxation rulings: Income tax: royalties - character of receipts in respect of software (Draft TR 2021/D4) and its revised version, Income tax: royalties - character of payments

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in respect of software and intellectual property rights (Draft TR 2024/D1). On 23 August 2022 , Mr Jose E. Murillo, Deputy Assistant Secretary (International Tax Affairs) in the Office of Tax Policy within the US Treasury Department, wrote to Mr Marty Robinson, First Assistant Secretary - CBR in the Corporate and International Tax Division of the Australian Treasury, indicating that the United States had 'strong concerns' about the approach to software distribution flagged in Draft TR 2021/D4 . He also indicated that it would be inconsistent with United States Treasury regulations which provide that payments of the present kind are to be treated as payments in exchange for services which were not royalties. On 5 April 2024 , the US Department of the Treasury again wrote to the Australian Treasury urging the ATO to withdraw Draft TR 2024/D1 or to 'revise it as it applies to the Australia-U.S. tax treaty to bring it into conformity with the OECD Model Commentaries'.

64 The taxpayers submitted that these matters should be given little weight and that the stay should not be refused to allow the Commissioner's quest for guidance on the issue: ASR [12]. In that regard, it was submitted that the dispute with the United States is a diplomatic issue. Whilst this is no doubt formally true, it does not gainsay the fact that it is a diplomatic issue concerned with the meaning of word the 'royalty' in a treaty with the United States . Further, that word derives from the Model Convention and appears in a large number of other double taxation agreements which Australia has made with other members of the OECD. Thus, the dispute with the United States is potentially emblematic of a larger dispute within the OECD about how royalties are to be approached in the case of software distribution arrangements . …

65 I accept that any decision by this or an appellate court will provide guidance to the Commissioner about his draft ruling . If this guidance were for the Commissioner alone, I would be disposed to see the force of the Applicants' submission. However, there are approximately 15 other taxpayers whose arrangements raise the principal issue in these proceedings, an ongoing dispute with an important trading partner and, if one accepts the Applicants' submission about the highly controversial nature of the Commissioner's position, possibly other similar disputes in the wings.

66 These matters, which it is true do not directly relate to the current taxpayers, are a powerful discretionary consideration favouring the refusal of the stay application. Under Art 23(1)(c) of the MLI, the decisions of an arbitral panel have no precedential effect and are not to include 'a rationale or any other explanation of the decision' . In the context of 15 other taxpayers whose circumstances seem to raise similar concerns, a dispute with at least one significant trading partner, and the potential for additional disputes with other contracting states in future, it would be useful to have a judicial determination of whether arrangements such as the present do or do not involve a royalty under the various double taxation treaties which exist. A series of 15 arbitrations would give no guidance on the correct answer and each decision would provide no guidance to the Commissioner as to what he was to do with the other cases. Indeed, I accept that there is a risk that the arbitrations may result in inconsistent outcomes including in this case (because there are two mutual agreement procedures on foot which need not be determined by the same panel). Nor would any such arbitral decisions provide guidance in negotiating the dispute with the United States .

67 To this may be added another consideration. The existence of a final appellate conclusion on whether distribution arrangements such as the present involve royalties will assist in the conduct by the IRC and ATO of other mutual agreement procedure cases and any subsequent arbitrations . Contrary to the Applicants' submissions at AS [30(d)] and ASR [5], such a determination will clarify, rather than 'constrain', the options available for resolving the issues in dispute between the ATO and IRC through a mutual agreement procedure.

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These last two matters are powerful considerations in favour of refusing the present stay application.

(Emphasis added.)

54. In the section of his Honour's reasons headed "Decision", the primary judge returned to the importance of judicial guidance in the exercise of the discretion:

82 The Court's decision of whether to stay the proceedings is discretionary. The terms of the treaties show that, generally speaking, in a case where a taxpayer has been forced to commence domestic proceedings to meet a time limit, proceedings should be stayed to permit the mutual agreement procedure (including any arbitration) to proceed if that is what the taxpayer wishes. It is the taxpayer which, generally speaking, gets to choose whether to pursue domestic proceedings or to enliven the mutual agreement procedure between the competent authorities. Denying a stay in such cases would effectively result in the competent authority being able to force the taxpayer to abandon one process. Because this is not what the treaties contemplate, this is a powerful consideration favouring the grant of the stay sought.

83 However, the question of what a royalty is under the various double taxation agreements and how it is to be applied to 15 different taxpayers is a question which subtends the position of the taxpayers in this case, as does the dispute with the United States . This larger consideration speaks powerfully to the need for there to be a final appellate judicial determination of the issue . Such a determination will provide guidance to the various competent authorities, to the other taxpayers, to arbitrators and to any other trading partners with whom the Commonwealth is presently in dispute about the nature of a royalty . This consideration strongly suggests that one case should proceed to final appellate determination for the guidance of all .

…

85 Were it not for the position of the 15 other taxpayers and the dispute with the United States, I would grant the stay sought. The balance of the other discretionary matters are outweighed by my impression of how these treaties are generally to operate in circumstances such as the present.

86 However, the need for a judicial determination of the royalties question for the benefit of others persuades me that a stay should not be granted for public interest reasons.

(Emphasis added.)

55. As his Honour's reasoning made clear, were it not for the public interest discerned in the domestic proceedings progressing to judicial determination and so providing guidance vis-à-vis the approximately 15 other taxpayers and the dispute with the United States, the primary judge would have granted the stay sought.

CONSIDERATION

56. There was no serious challenge on the appeal to the primary judge's characterisation of the nature of the DTA and MLI and, in particular, his Honour's conclusion that those instruments anticipate that a taxpayer will be able to access both the MAP and domestic appeal remedies, albeit not simultaneously. Similarly, it was not seriously argued that the primary judge was wrong to conclude that, absent discretionary factors tending in support of a stay being refused, "generally speaking, in a case where a taxpayer has been forced to commence domestic proceedings to meet a time limit, proceedings should be stayed to permit the mutual agreement procedure (including any arbitration) to proceed if that is what the taxpayer wishes" (PJ [82]). (The Appellants' only quibble with the primary judge's analysis of the regime was that the risk of double taxation, if the stay were refused, was inevitable, not merely possible (cf PJ [30]).)

57. To the extent that any challenge to these conclusions of the primary judge featured in the appeal, it arose from the terms of the Commissioner's Notice of Contention. But, as is addressed below, the key ground of the Notice of Contention was abandoned, several other grounds were said not to require consideration, and the balance did not articulate any clear challenge to these conclusions of the primary judge. The high point of the argument, insofar as it was maintained, was that it should be remembered that the DTA

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and MLI empower the ATO, as representing the competent authority of Australia, to suspend a MAP, as it did. The existence of that power was accepted by both the Appellants and the primary judge. On the appeal, as it was run, the Commissioner accepted that the power to suspend was itself subject to the Court's capacity to stay domestic appeal proceedings. The contention that any such grant of a stay would stultify or unduly restrict the Commissioner's power to suspend a MAP was abandoned.

58. We agree with the primary judge's careful and comprehensive analysis of the DTA and MLI regime, and his Honour's conclusions as regards the general position that arises under them where a taxpayer wishes to invoke a MAP in addition to keeping alive domestic appeal rights, and the legislative policy those matters reveal and which is relevant to consideration of whether a stay of domestic proceedings should be granted.

59. As is evident from the primary judge's reasons, it was the public interest in domestic proceedings giving guidance in respect of the matters in issue concerning the approximately 15 other taxpayers and the dispute with the United States that resulted in the primary judge being persuaded that the general position his Honour had identified - which would have seen the present proceedings being stayed - should not prevail, and the stay should be refused.

60. The Appellants' principal contention on the appeal was that the primary judge erred in concluding that the stay should be refused on public interest grounds on the basis that refusing the stay, and thereby ensuring that the Appellants' proceedings would - unless discontinued - progress to judgment, and an appeal, would provide guidance in relation to the 15 other taxpayers and the dispute with the United States. The Appellants contended that the evidence did not support the primary judge's conclusions on these matters.

61. In the course of the Commissioner's oral submissions on the appeal, senior counsel twice confirmed that the Commissioner did not contend that the other matters that the primary judge identified as militating against the stay would be sufficient to warrant the stay being refused. Those three matters were the expertise of an arbitral tribunal under the MAP versus the expertise of this Court in copyright matters, delay and wasted resources (PJ [61], [68]-[69], set out above at paragraph 52). Counsel for the Commissioner stated explicitly that he did not submit that delay, wasted costs and the point about expertise "would independently support the refusal of the stay if your Honours are against us on the main public interest point".

62. The "main public interest point", as it was characterised by counsel for the Commissioner, is the primary judge's conclusion that judicial (and particularly appellate) determination of the issues in the domestic proceedings would address the "nature of a royalty" and so "provide guidance" that could be applied to the 15 other taxpayers, "the various competent authorities", arbitrators and trading partners with whom the Commonwealth is in dispute about the nature of a royalty (PJ [83]). While the primary judge referred, in this passage of his Honour's reasons, to "trading partners with whom the Commonwealth is in dispute", it is clear from other parts of the reasons that the only evidence of such a "dispute" concerned the United States, and that the tension with the United States was only characterised as being "potentially emblematic" of a larger dispute within the OECD (PJ [64]); there was no evidence of any such wider dispute.

63. Consequently, and because we have concluded that the primary judge erred on the facts as the Appellants contended, it is not necessary to decide the Appellants' subsidiary arguments. We will, however, address some of those matters to put them in context and explain why it is not necessary to reach a concluded view.

Preliminary matters

Public interest considerations

64. One strand of the Appellants' case, albeit not one advanced with great vigour, was that the matters that led the primary judge to consider that the stay should be refused - the guidance said to be afforded in respect of approximately 15 other taxpayers and the dispute with the United States - were not matters of "high" public interest, and so were irrelevant. It was said that:

The bases on which public interest factors were considered relevant in
Epic Games Inc v Apple Inc (2021) 286 FCR 105 at [55]-[58] and
Sterling Pharmaceuticals Pty Ltd v Boots Co (Aust) Pty Ltd (1992) 34 FCR 287 at 288, 293 do not apply here.

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65. Given that the appeal has been determined based on the factual matters addressed above, it is not necessary to dwell on this issue. However, for completeness, we note that we do not consider that the matters of "public interest" to which regard may be had are confined in the manner for which the Appellants contended. A public interest can inhere in particular private litigation in different ways. As the Appellants noted, in some cases, the public interest arises from the characteristics of the subject matter of the litigation, such as litigation concerning the protection of consumers (eg the claims made about product safety and characteristics in
Sterling Pharmaceuticals Pty Ltd v Boots Co (Aust) Pty Ltd (1992) 34 FCR 287) or the enforcement of competition law, which affects the economic market for certain segments of consumers (
Epic Games Inc v Apple Inc [2021] FCAFC 122; (2021) 286 FCR 105 ( Epic ) is an example of this kind of case: see, eg the observations of the Full Court (Middleton, Jagot and Moshinsky JJ) at [97] and [108]).

66. In Epic, the Full Court identified, as one of its points of departure from the primary judge, that the primary judge's position did not "deal with the fact that Epic's proceeding has the potential to affect the position of app developers generally who are subject to the same contractual regime as Epic": at [65] (see also at [105] concerning the capacity of private litigation to help develop and clarify the law). In our view, the Full Court in Epic regarded the potential for a particular piece of private litigation to affect non-parties as an element, albeit only one of many, of the public interest considerations that led the Full Court to consider that the primary judge erred in staying the proceedings in the Federal Court. Of course, as is clear from the Full Court's reasons, the point to which we have directed attention concerned developers with the "same" contractual terms, which is not the situation in the case at hand. But the relevant point here is that the implications of particular litigation for third parties are not excluded from the ambit of the public interest considerations to which the Court can have regard.

Standard of review

67. The Appellants contended that, if it matters to the result, the decision of the primary judge is not to be approached on the basis that an error of the kind identified in
House v R (1936) 55 CLR 499 at 504-5 ( House v R ) needs to be established. Rather, so the Appellants contended, the correctness standard of review applies. That position was said to arise on the basis that the permanent effects of a stay being refused are analogous to the "extreme" consequences of a permanent stay that lead the High Court to conclude, in
GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 280 CLR 442 ( GLJ ) that the decision in respect of a permanent stay on abuse of process grounds is not discretionary, but permits only one legally permissible outcome: GLJ at [1], [15]-[17] (Kiefel CJ, Gageler and Jagot JJ).

68. The Commissioner disagreed, contending that the decision to refuse a temporary stay was discretionary, such that appellate review is to be conducted according to the principles in House v R. He submitted that there is no relevant analogy between a decision to refuse a stay and a decision to grant a permanent stay, of the kind considered in GLJ.

69. If it were necessary to decide, we would reject the contention that the decision to refuse the stay sought is not discretionary and is analogous to the decision under review in GLJ. Temporary stays are usually regarded as discretionary. There is Full Court authority that temporary stay determinations are discretionary. In
Onslow Salt Pty Ltd v Buurabalayji Thalanyji Aboriginal Corporation [2018] FCAFC 118, which concerned a temporary stay, the Full Court stated that the power to stay proceedings is discretionary: at [15] (Besanko, Barker and Colvin JJ). Additionally, and in any event, the analogy with GLJ fails. The plurality in GLJ determined that the assessment of whether a trial would be so unfair as to be an abuse of process for the purposes of determining whether there should be a permanent stay was evaluative, but admitted of only one correct answer: GLJ at [15] and [23] (Kiefel CJ, Gagler and Jagot JJ). In this case, a stay was sought to preserve the Appellants' domestic rights while the MAP progressed. The

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refusal of a stay required the Appellants to choose whether to proceed with their domestic proceedings, thereby effectively terminating the MAP in practice, or to discontinue their domestic proceedings, thereby foregoing their domestic appeal rights. That situation is not analogous to the factors leading to the result in GLJ.

70. In
Impiombato v BHP Group Ltd [2025] FCAFC 9; (2025) 308 FCR 250 ( Impiombato ), Beach and O'Bryan JJ confirmed at [193] that: even where House v R applies, "a discretionary decision may be set aside if it is based on an error of fact"; in an appeal against a discretionary decision, "the appeal is by way of rehearing in which the Court is required to determine whether the primary judge's findings of fact involved error"; and where no witnesses have given oral testimony and there has been no cross-examination, the Court hearing the appeal is in "as good a position as the primary judge to make findings of fact on the evidence that was adduced at the hearing".

71. In the present case, nothing turns on whether or not the decision below is regarded as discretionary, so as to attract the principles in House v R. That is because mistaking the facts is one of the errors identified in House v R, and, as set out below, we have concluded that the primary judge erred in relation to factual matters. Further as there was no cross-examination or other oral evidence before the primary judge, this Court is, on the appeal, in as good a position as the primary judge to make findings of fact: Impiombato at [193]. The Appellants have established an error of the requisite kind, whether or not House v R applies. The Appellants accepted that, if they succeed on their contentions as to errors of fact, their contention that House v R does not apply will not arise.

Onus

72. One of the grounds of appeal asserted error in the primary judge's analysis of where the burden rests. The primary judge rejected the contention that the Commissioner bore the onus of demonstrating there is a good reason to refuse the stay, concluding that, other things being equal, the burden rests on the moving party in an interlocutory application (PJ [57]-[58]). The primary judge went on to observe "I do not think that where the burden lies in this case matters very much" (PJ [59]). We agree. The critical issues, and the issues upon which the disposition of the appeal turns, are the factual errors concerning the approximately 15 other taxpayers and the dispute with the United States. We have determined those matters by reference to the evidence, such as it was, about the approximately 15 other taxpayers and the dispute with the United States, and the significance of domestic court proceedings to those matters. In short, the outcome of this appeal is not informed by the issue of onus, and it is not necessary or productive to further address the parties' arguments on onus.

The approximately 15 other taxpayers and the dispute with the United States

73. As is apparent from the reasons of the primary judge, his Honour considered that the "question" or "principal issue" that arises in the present Oracle proceedings also arises in the arrangements of the approximately 15 other taxpayers and the dispute with the United States (PJ [65], [83]). More than that, the commonality of the issue was such that the primary judge not only considered that determination of Oracle's domestic proceedings would provide "guidance" (PJ [62], [65], [66]), but considered that that guidance was of such importance and utility that there was an identified "need for there to be a final appellate judicial determination of the issue", which determination would provide "guidance to the various competent authorities, to the other taxpayers, to arbitrators and to any other trading partners with whom the Commonwealth is presently in dispute about the nature of a royalty": (PJ [83], emphasis added).

74. As may be seen, in the primary judge's assessment, judicial determination would provide definitive and reasoned guidance, which would address an issue lying at the heart of the affairs of the approximately 15 other taxpayers and the dispute with the United States, in a way that binding arbitration under the MLI would and could not. The primary judge considered that the provision of guidance to all concerned - not only the other taxpayers, and the United States' competent authorities, but also all other competent authorities, arbitrators generally, and other trading partners around the world

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with whom the Commonwealth may be in dispute concerning the nature of a royalty - was such that there was a strong suggestion that "one case should proceed to final appellate determination for the guidance of all": (PJ [83], emphasis added).

75. On the appeal, the Appellants took issue with the primary judge's factual findings concerning the nature of the "approximately" 15 other taxpayers' affairs, their similarity with the controversy arising in the Appellants' case, and the extent to which resolution by this Court of the Appellants' proceedings would affect the 15 other taxpayers. (While noting that the figure of 15 other taxpayers is an approximate figure and no reasons explaining the imprecision were proffered, we will refer to them as the "15" other taxpayers for simplicity.)

76. In respect of the 15 other taxpayers, the Appellants point to the paucity of evidence concerning those other entities and the nature of their royalty-related tax issues.

77. The sum total of the evidence on the other 15 taxpayers is a single paragraph in the affidavit of the Commissioner's deponent, Ms Spurge, an Assistant Commissioner. In her affidavit, Ms Spurge stated as follows:

The ATO is aware of approximately fifteen entities whose arrangements require consideration of the definition of a "royalty" for an [sic] Australian tax purposes in connection with software distribution and related arrangements for the purposes of their Australian tax affairs.

78. There was no evidence regarding the nature of the 15 taxpayers' "arrangements". Nor was there any evidence regarding what aspects of the definition of "royalty" were in dispute, how those disputed aspects arose in relation to the 15 taxpayers' "arrangements", or whether any of these 15 taxpayers was involved in substantively the same dispute as another (as was, eg, the case in respect of the Appellants). While the Commissioner observed that Ms Spurge's evidence was not challenged, that is not to the point. A lack of challenge to evidence does not elevate that evidence; the evidence went no higher and no further than the single sentence of Ms Spurge's affidavit.

79. Based on such slender evidentiary foundations, we do not consider that it was open to the primary judge to conclude that judicial determination of the Oracle proceedings would - not "might" - provide material "guidance" in relation to the 15 other taxpayers.

80. We have emphasised that the primary judge proceeded on the basis that judicial determination would provide guidance. Moreover, the nature of the guidance the primary judge perceived would be afforded by the Appellants' proceedings advancing to determination was such that his Honour referred to there being a "need" for there to be "final appellate judicial determination" on the perceived common principal issue (see paragraphs 73 to 74 above). But what is the basis for that conclusion? The single paragraph of Ms Spurge's affidavit simply does not provide the necessary factual foundation for the finding. The dispute between Oracle and the Commissioner is anchored in the very particular circumstances of the contracts between Oracle Ireland and Oracle Australia. The Commissioner's evidence provided no foundation for the conclusion that the affairs of the 15 other taxpayers were such that judicial determination of the Appellants' proceedings would quell the controversy with the 15 other taxpayers, or materially contribute to its resolution by offering "guidance" on a common principal issue.

81. In one sense, it is accurate to say that the underlying tax issues of concern to the Appellants concern the definition of "royalty" under the DTA. It is also accurate to say, as the Commissioner did, that the underlying tax dispute and the Commissioner's decisions took place in the "broader context" of the treatment of payments by software distributors being a controversial issue. But those matters do not take one very far. As the narrative regarding the tax dispute above (at paragraphs 22-44) shows, the definition of "royalty" under the DTA is not itself the source of the controversy in the sense of there being some question of construction of Art 13(3) or question of law that is exposed for resolution that can be answered in a way that is divorced from the specific terms of the arrangement in issue.

82. Rather, the controversy arising in relation to the Appellants' tax affairs concerns whether the payments made by Oracle Australia to Oracle Ireland under the Distribution Agreements were payments "made as consideration for … the use of, or right to

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use, any copyright …", where the question of what constitutes "copyright" is determined under domestic law by reference to the Copyright Act. The narrative set out above exposes that determination of that issue involves an in-depth analysis of: the terms of the Distribution Agreements; the particular nature of the rights acquired by Oracle Australia under those agreements; the arrangements in operation between Oracle Australia and Oracle Ireland; how those rights and arrangements are to be evaluated by reference to the terms of the Copyright Act; what the fees paid by Oracle Australia are consideration for; and whether those payments are to be apportioned in any way.

83. In short, the tax controversy is mired in the facts of the specific arrangements between Oracle Australia and Oracle Ireland. That this is the case is to be expected. As the High Court's recent decision in
Commissioner of Taxation v Pepsico Inc [2025] HCA 30; (2025) 99 ALJR 1211 exposes, the question of whether payments under particular contractual arrangements are "consideration for" particular rights turns on the terms of the contracts between the parties: at [159] (Gordon, Edelman, Steward and Gleeson JJ). Similarly,
International Business Machines Corporation v Commissioner of Taxation [2011] FCA 335; (2011) 91 IPR 120 illustrates that determining whether or not certain payments are royalties is a fact-dependent exercise involving close analysis of the terms of the contracts between the parties, and the nature of their arrangements. That case concerned whether certain payments made pursuant to a software licensing agreement were "royalties" for the purposes of Art 12 of the double taxation agreement between Australia and the United States.

84. In the present case, there is simply no basis upon which to conclude that determination of the proceedings brought by the Appellants by this Court will shed meaningful light on whether the "arrangements" of 15 other taxpayers, said by Ms Spurge to involve "software distribution and related arrangements", are or are not royalties for Australian tax purposes. The affidavit evidence relied on by the Commissioner does not include any evidence about the nature of those rights, beyond saying they concern "software distribution and related arrangements". Nor does the affidavit suggest that the tax affairs of the other taxpayers involve the application of a double taxation agreement.

85. For these reasons, we consider that the primary judge mistook the facts in concluding that the present proceedings would, if determined by this Court, provide material guidance on the correct tax treatment of the arrangements of the 15 other taxpayers.

86. This conclusion is sufficient to vitiate the primary judge's determination that the stay should be refused. What then of the significance of judicial determination of the Appellants' proceedings in this Court to disagreements between the Commonwealth and the United States? In our view, and in any event, the view taken regarding the dispute with the United States suffers from similar errors of fact.

87. The evidentiary basis for the dispute with the United States was very limited. The evidence comprised only two letters, one from a Deputy Assistant Secretary and the other from an Acting Deputy Assistant Secretary in the United States Treasury Department, to the First Assistant Secretary of the Commonwealth Treasury. The first letter is dated 23 August 2022 (the first US letter ) and the second is dated 5 April 2024 (the second US letter ) (together, US letters ). Both letters were produced by the Commissioner's deponent, Ms Spurge, without any comment beyond noting their receipt and that they related, respectively to the position taken in the draft tax rulings TD 2021/D4 and TD 2024/D1. The US letters also raised the issue of whether Australia was departing from the international consensus view regarding the ambit of "royalties", as reflected in the "Commentary to Article 12 (Royalties) of the OECD Model Tax Convention" (we infer, a reference to the OECD's 'Commentary on Article 12 Concerning the Taxation of Royalties' in Model Tax Convention on Income and Capital: Condensed Version (OECD Publishing, 2017)).

88. There was no evidence of any response to the US letters that may have been sent to the United States Treasury, although the second US letter does refer to some "constructive

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engagement" having taken place following the first US letter.

89. Similarly to the position in relation to the 15 other taxpayers, it is not apparent that a resolution by this Court of the fact-specific controversy concerning the payments made by Oracle Australia to Oracle Ireland (including their treatment in light of Australian domestic legislation (the Copyright Act)) will provide "guidance" that will materially contribute to resolving the disagreement between Australia and the United States, whatever its precise ambit may be. While the Commissioner would be bound by the result of judicial determination of the Appellants' domestic proceedings, there is no identified basis to suppose that the United States Treasury would necessarily accede to whatever view might be taken by this Court in these proceedings. As the Appellants point out in their submissions, disagreements between sovereign nations concerning international treaties are primarily political questions, to be determined at the level of the executive, or parliament. The proposition that a decision of a domestic court of one national party to an international disagreement will resolve, or materially assist in the resolution of, that disagreement is speculative on the evidence in this matter; yet that is the foundation of the primary judge's finding (see paragraphs 73 to 74 above).

90. The various double taxation agreements to which Australia is a party, including the double taxation agreement between Australia and the United States, provide mechanisms by which taxpayers can be relieved of the burden of double taxation. Where such double taxation is not avoided by the provision of credit in one jurisdiction for tax paid in the other, the primary method by which that objective is to be pursued is through the MAP. Where invoked by a taxpayer, a MAP involves, in the first instance, the competent authorities of the contracting states attempting to "come to an agreement" by which the double taxation may be relieved. While the arbitration provisions agreed between Ireland and Australia provide, as a default, a mechanism whereby no reasons are given for an arbitral tribunal's determination, as set out above at paragraph 16, it is open to Ireland and Australia to vary the basis upon which an arbitration is conducted so that reasons are given. Article 16(3) of the MLI also provides for contracting states to resolve, by mutual agreement, any "difficulties or doubts arising as to the interpretation or application of [the DTA]". As these provisions show, if the Commonwealth considers that "guidance" is desirable on matters of concern in its relations with other trading partners (such as the United States), progressing the Appellants' domestic proceedings to conclusion is not necessarily the only way in which such guidance may be procured (cf PJ [66]). Conversely, and while accepting that an arbitral tribunal under a MAP may have regard to - in the sense of reading and taking into account - a decision of a domestic court of one of the contracting states, there is no basis on which to assume that domestic judicial determination of the instant proceedings would form the basis of any arbitral disposition under a MAP in relation to other taxpayers or residents of other countries.

91. For these reasons, we do not consider that the evidentiary record, such as it was, supported the conclusion that there was a "dispute" between Australia and the United States whose resolution would be materially assisted by the judicial determination by this Court of the Oracle proceedings. It follows that, in our view, the primary judge erred in concluding that the "dispute" with the United States, together with the position of the 15 other taxpayers, established the existence of a public interest supporting the refusal of the stay. In the absence of those factors founding the presence of a "public interest" tending against the grant of a stay, and given our agreement with the primary judge's conclusions regarding the nature of the DTA and MLI processes generally warranting a stay to avoid a taxpayer who wishes to preserve domestic appeal rights being effectively deprived of the opportunity to have a MAP progress, including to arbitration, it follows that the stay application should succeed.

92. We have proceeded on the basis that the matters we have addressed concerning the significance of the judicial resolution of the Appellants' proceedings to resolution of Australia's disagreement with the United States constitute (or at least include) errors of fact. If that were not the case, in our

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view the error identified with respect to the 15 other taxpayers vitiates the primary judge's determination to refuse the stay, meaning that it is for this Court to re-determine that application. As we have just noted, we would not regard the matters raised concerning the dispute with the United States as exposing such utility in the proceedings continuing as to warrant the stay being refused.

Notice of Contention

93. The Commissioner filed a Notice of Contention with eight sub-paragraphs (1(a)-(h)).

94. Grounds 1(a)-(d) were cast in terms of matters that the taxpayer had "no right, or unqualified right" to do (in substance, to commence and maintain a MAP and choose whether to proceed by the MAP or domestic proceedings), and, conversely, matters that the Commissioner had a "power and a right" to do (in substance, to suspend a MAP). Ground 1(e) similarly referred to any "right" of the taxpayer in respect of a MAP and domestic proceedings being qualified by the Commissioner's "power and right" to suspend the MAP.

95. Grounds 1(f) and (g) set out two propositions that it was contended are "not the law". The first of these was the proposition that, where a taxpayer has commenced domestic proceedings to comply with a time limit, proceedings should be stayed to permit the MAP to proceed, "if that is what the taxpayer wishes". The second proposition said to be "not the law" was that the treaties do not contemplate that the exercise, by a competent authority, of the power to suspend a MAP will or may result in a taxpayer abandoning the MAP in favour of domestic proceedings.

96. Ground 1(h) contended that "to stay the proceedings would stultify, or alternatively unduly restrict, the Commissioner's exercise of his power and right to suspend the mutual agreement procedure". Buried in a footnote to the Commissioner's submissions on the appeal, and appearing in small, single-spaced type face, was the following: "Par 1(h) of the Notice of Contention is not pressed." It was inappropriate for an important point - the abandonment of a ground stated in a Notice of Contention - to be buried as such in a footnote.

97. The same footnote also stated that "For more abundant caution these matters are raised at par. 1(a)-(e) of the Notice of Contention". The matters to which that note refers must be the matters referred to in the sentence to which that footnote was attached, which read: "In that context, as the primary judge observed, the language of 'rights' is inapposite or, at least, unhelpful (J[77])". The Commissioner did not advance any written or oral submissions in support of grounds 1(a)-(e) of the Notice of Contention. In oral submissions, senior counsel for the Commissioner described those grounds as "trying to make the same point as his Honour was there making, that the language of rights … is inapposite", and also said that there was no need for the Court to decide those grounds of the Notice of Contention.

98. Although the Appellants' written submissions were advanced in terms that deployed the term "right[s]", it was not contended that anything turned on whether that language was, or was not, used. Despite using the language of "rights" (and "power") in his Notice of Contention, the Commissioner endorsed the primary judge's view that the language of "rights" is inapposite or unhelpful. The Appellants also clarified their position in oral submissions, highlighting that taxpayers have a right or power under domestic law to commence the MAP process, but any so called "right" as regards the continuation of that process, once commenced, is qualified by the competent authority's right or power to suspend that process. It was not in dispute that this is, in turn, qualified by the power of the Court to grant or refuse a stay. Accordingly, none of the issues in dispute on appeal turn on the use of the language of "rights".

99. It follows that nothing more needs to be said about grounds 1(a)-(e) of the Notice of Contention.

100. The Commissioner made written submissions on grounds 1(f) and (g) of the Notice of Contention. Those submissions were in the following terms:

21. It remains to address two remaining matters raised by the Commissioner's Notice of Contention. Par 1(g) : At J[42], [43], [46], [49] and [54] the primary judge expressed the view that the Irish Treaty (including the MLI) did

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not contemplate that the Commissioner could force a taxpayer to choose between proceeding by way of a MAP or domestic proceedings. However, as the balance of the primary judge's reasoning reveals, where the Commissioner (in discharge of his statutory duty) makes an objection decision and the taxpayer commences domestic proceedings, the power of the Commissioner to suspend a MAP recognised by Art. 19(2) of the MLI may be exercised to give effect to the CA's view that the public interest requires that the issue should be determined in the domestic proceedings and, if that view is sustained by the Court on a subsequent stay application, the result may be that the taxpayer abandons the MAP in favour of the domestic proceedings.

22. Par 1(f) : At J[82] the primary judge expressed the view that where a taxpayer has been forced to commence domestic proceedings to meet a time limit, generally speaking proceedings should be stayed to permit the MAP to proceed if that is what the taxpayer wishes. The Commissioner submits that the better approach is that the Court in such a stay application should not commence with any disposition in favour of the proceedings progressing through one process or another, but should assess which procedure more appropriately serves the interests of justice in all the circumstances of the case, including having regard to the matters referred to in Sterling and Langford. In the present case, such an approach would yield the same conclusion as reached by the primary judge.

101. In oral submissions, the Commissioner referred to his written submissions on these grounds and did not advance any further substantive submissions in support of those grounds. The Commissioner described these grounds as "slightly different perspectives" on the approach the primary judge took on how the Court "should weigh the various desirability of the domestic proceedings as opposed to the MAP, and … whether the exercise of the Commissioner's power to suspend could force the taxpayer to pursue the domestic proceedings". The Commissioner further stated that neither ground was going to have a "definitive operation" in the appeal. In the absence of any argument that anything turns on these two grounds of contention, and where it was not suggested by the Commissioner that either of these points would warrant this Court not disturbing the order below if persuaded that the primary judge erred in relation to the 15 other taxpayers and the dispute with the United States (see paragraph 61 above), it is not necessary to address these grounds. Neither ground advances a coherent basis upon which the stay should still be refused in light of the errors we have found.

DISPOSITION

102. It follows from the foregoing that the primary judge's determination not to stay the proceedings cannot stand. This Court must determine the question of whether there should be a stay.

103. As set out above, the primary judge detailed the features of the MAP under the DTA and MLI. Subject to the matters noted above concerning the Notice of Contention, no party disputed the accuracy of the primary judge's analysis of the features of the MAP under the DTA and MLI, its role relative to the processes available to taxpayers under the domestic law or that, while the regime anticipates that taxpayers will not be free to pursue a MAP and domestic court or tribunal proceedings simultaneously, it anticipates that the choice of remedy remains with the taxpayer.

104. We agree with the primary judge's analysis and his Honour's observations (at [42]) that the practical effect of the Commissioner's approach in issuing the objection decisions and then opposing the grant of a stay that would prevent the simultaneous pursuit of a MAP and domestic court proceedings, was that the taxpayers were required to abandon one of the two options. The primary judge concluded, and we agree, that this is not what the DTA and the MLI contemplate (PJ [42]).

105. The primary judge's analysis of these matters led his Honour to conclude that, were it not for the 15 other taxpayers and the dispute with the United States, he would have granted the stay sought (PJ [85]).

106. It follows from the Commissioner's concession (referred to above at paragraph 61), and also because we otherwise agree

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with the primary judge's analysis of the DTA and MLI, and his Honour's analysis of the non-treaty considerations favouring a stay, that the orders to be made should allow the appeals, revoke the primary judge's order dismissing the applications to stay each of the three proceedings, and stay those proceedings until the conclusion of the MAP processes (including by any arbitration).

107. The parties are to submit proposed orders giving effect to our reasons, and addressing costs within seven days of the publication of these reasons. If the parties cannot agree on orders, they are to submit their competing proposals for consideration along with a submission of no more than two pages within 10 days of the publication of these reasons. Any responsive submissions, limited to two pages, may be submitted within 13 days of the publication of these reasons, following which orders will be made on the papers.


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