Interim arrangements in response to the Multinational Anti Avoidance Law (MAAL)

The foreign entity enters into a limited risk distribution agreement with an Australian group entity with effect from 1 January 2016. 2. At the same time, the parties enter into an agency agreement with a stated purpose of giving full operational effect to the distribution agreement. The parties state that it is necessary to enter into this agency agreement, and thus reverse the roles of the principal and agent under the distribution agreement, in order to give legal effect to the distribution agreement in relation to customer arrangements. In some instances, the distribution and agency relationship only covers new customer arrangements and contracts, and not existing arrangements and contracts. 3. There is no material change to the functions that were undertaken by the employees of each of the parties (regarding the supply to Australian customers) before and after these agreements were entered into. 4. The foreign entity continues to enter into contracts with Australian customers for the supply of products or services, including contracts that supply Australian customers with licences for the use of products or services. These customer contracts are purported to be entered into by the foreign entity as agent on behalf of the Australian distributor. However, the requisite rights have not been assigned to the distributor under the distribution agreement which would enable it to makes such supplies. In particular, the Australian distributor has no legal right to license Australian customers to use the product or service and only the foreign entity holds this legal right. As the Australian company does not have the right to authorise the use of the intellectual property by the Australian customers, to that extent at least, this demonstrates that the foreign entity would be contracting with Australian customers as principal, rather than agent. 5. The foreign entity already has the right to enter into contracts in its own right with Australian customers regardless of the agency agreement, i.e. it can license the use of software and distribute the products in its own right. By comparison, under the agency and distribution agreements, the Australian distributor is only deemed to acquire rights to the products, excluding intellectual property rights, and then immediately pass those rights to the Australian customer.