Double Taxation Avoidance in India and Mauritius

A major portion of international capital flows entering the Indian economy is aided by
taxation laws and systems among countries like the Double Taxation Avoidance
Agreement.

The phenomenal growth in international trade and commerce and increasing interaction
among nations, citizens, residents and businesses of one country has extended their
sphere of activity and business operations to other countries. A person earning any
income has to pay tax in the country in which the income is earned (as Source Country)
as well as in the country in which the person is resident. As such, the income is liable to
be taxed in both the countries. To avoid this hardship to individuals and also with a view
to ensure that national economic growth does not suffer, the Central government under
Section 90 of the Income Tax Act has entered into Double Tax Avoidance Agreements
(DTAA) with other countries.

Definition: Double taxation can be defined as the levy of taxes on income or capital in the
hands of the same tax payer in more than one country, in respect of the same income or
capital for the same period DTAAs provide for the following reduced rates of tax on
dividend, interest, royalties, technical service fees, etc., received by residents of one
country from those in the other. Where total exemption is not granted in the DTAAs and
the income is taxed in both countries, the country in which the person is resident and is
paying taxed, the credit for the tax paid by that person in the other country is allowed.

DTAT with Mauritius:

The Indo-Mauritius DTAT was first signed in 1983. The main provision of the agreement
was that no resident of Mauritius would be taxed in India on capital gains arising out of
sale of securities in India. The treaty gives capital gains exemption for investments if
routed via Mauritius. The treaty remained on paper until 1992 when FIIs were allowed
into India. The same year, Mauritius passed the Offshore Business Activities Act which
allowed foreign companies to register in the island nation for investing abroad.
Registering a company in Mauritius has obvious advantages such as, total exemption
from capital gains tax, quick incorporation, total business secrecy and a completely
convertible currency.

For foreign investors willing to invest in India, it made sense to set up a subsidiary in
Mauritius and route their investments through that country. By doing so, they would
avoid paying capital gains tax all together — India won’t tax because the company is
based in Mauritius and Mauritius had anyway exempted investors from capital gains tax.

In the last few years Mauritius has emerged as the largest foreign investor [analysts
estimate about 25% of all inbound FII money is routed thorough Mauritius] in India thus
clearly indicating that it has become a tax haven for foreign investors. This indicates the
route investors are taking into India to avoid otherwise due taxation.
There are allegations that foreign companies are using ‘notional residence’ in Mauritius
to avoid paying taxes in India. It has even been claimed that tax losses to India are more
than incoming investments. In spite of the controversies generated, it has been kept in its
present form. As it was felt that changing its clauses would lead to flight of capital from
the country, slowing down foreign investment inflows and may lead to a significant stock
market crash. It is reported that Indians used Mauritius-registered companies and
Mauritius offshore trusts to hold assets abroad beyond the reach of Indian tax laws. This
is called ’round-tripping’, where Indians re-route their money stashed abroad through the
Mauritius route.

It is now hoped that the Treaty, duly modified, will help encourage Indian investments in
Mauritius, rather than the other way around. It is expected that Mauritius will agree to the
changes as having signed similar DTATs with other ASEAN countries, it will be able to
highlight its attraction as a tax haven and also plug gaps to stop both ‘round tripping’ and
‘treaty shopping’.

The list of FIIs that have preferred to invest in India via Mauritius includes Aberdeen
Asset Management, Citi Group Global, CLSA Merchant Bankers, Deutsche Securities,
Emerging Markets Management LLC, Fidelity Assets Management, Golden Sachs
Investments, HSBC Global Investment, JP Morgan Fleming Asset Management, Merrill
Lynch Investment Managers and UBS Securities Asia

It is not unusual for a business or individual who is resident in one country to make a
taxable gain (earnings, profits) in another. This person may find that he is obliged by
domestic laws to pay tax on that gain locally and pay again in the country in which the
gain was made. Since this is inequitable, many nations make bilateral Double taxation
agreements with each other. In some cases, this requires that tax be paid in the country of
residence and be exempt in the country in which it arises. In the remaining cases, the
country where the gain arises deducts taxation at source ("withholding tax") and the
taxpayer receives a compensating foreign tax credit in the country of residence to reflect
the fact that tax has already been paid. To do this, the taxpayer must declare himself (in
the foreign country) to be non-resident there. So the second aspect of the agreement is
that the two taxation authorities exchange information about such declarations, and so
may investigate any anomalies that might indicate tax evasion.

India has comprehensive Double Taxation Avoidance Agreement (DTAA ) with 79

countries. What it means is that there are agreed rate of tax and jurisdiction on specified
types of income arising in a country to a tax resident of another country. Under Income
Tax Act 1961 of India ,there are two provisions - Section 90 and section 91 - which
provides specific relief to tax payers to save them from DTAA. Section 90 is for tax
payer who have paid the tax to a country with which India has signed DTAA. While
Section 91 provides relief to tax payers who have paid tax to a country with which
India has not signed DTAA. Thus, India gives relief to both kind of taxpayers.

A large number of Foreign Institutional Investors who trade on the Indian stock markets
operate from Mauritius. According to the tax treaty between India and Mauritius, Capital
Gains arising from the sale of shares is taxable in the country of residence of the
shareholder and not in the country of residence of the Company whose shares have been
sold. Therefore, a company resident in Mauritius selling shares of an Indian company
will not pay tax in India. Since there is no Capital gains tax in Mauritius, the gain will
escape tax altogether.

Mauritius Double Tax Treaties

Mauritius has entered into a considerable number of double-tax treaties (unusually for a
low-tax jurisdiction). Generally speaking, the treaty benefits are available to all Mauritian
companies other than International Companies.

All of Mauritius' treaties are based on the OECD model treaty, and contain exchange of
information clauses; however, the exchange is limited to matters concerning the working
of the treaties themselves.

The treaty with India, which had underpinned the emergence of Mauritius as the
dominant channel for FDI into India, came under attack from Indian tax authorities in
2002 as a result of alleged abuses by Indian-resident investors. After a series of high-
profile court hearings, the status quo appeared to have been restored. However, rumblings
from the Indian authorities with regard to the alleged 'abuses' are still continuing in 2010.

In October 2006, in an attempt to head off pressure from India to change the countries'
Double Tax Avoidance Agreement, the Mauritian government announced that it would
tighten up rules on the issuance of Tax Residence Certificates, and in future would issue
them for only one year at a time.

Mauritius Minister of Finance, Rama Sithanen Mauritius said earlier that month that he
was willing to co-operate with India to prevent misuse of the treaty.

"Let me state very clearly that we will collaborate to prevent any alleged misuse of the
treaty," said Mr Sithanen, at a news conference on a trip to New Delhi. "But keeping in
view historical, cultural, political and diplomatic ties between the two countries we need
a global solution that will not penalise Mauritius."

He claimed that: "The problem of roundtripping has been eliminated completely."

In September that year, an Indian government official had said: “We are proposing to
bring the DTAA with Mauritius on a par with the DTAA with Singapore. The DTAA
with Singapore had included additional clauses to check round-tripping of investments.”
The new proposals were said to include a rule that only companies listed on a recognised
stock exchange be eligible for capital gains tax exemption under the treaty, and that a
company should have a total expenditure of $200,000 or more on operations in the
residence state (ie Mauritius) for at least two years prior to the date on which a capital
gain arises. Under the treaty as it stands, there is a very basic residence requirement.
These provisions would match those included in the India/Singapore treaty.

In January 2007, it emerged that talks between Indian and Mauritian officials would
focus on changes to the two countries' Double Tax Avoidance Treaty.

Indian tax officials expressed the hope that Mauritius would stiffen the requirements for
tax exemptions under the DTAA, and pointed to a new protocol that Mauritius had added
to its treaty with China, under which capital gains arising in Mauritius on the sale of
Chinese assets are subject to a 10% tax in China in some circumstances. The protocol
came into force on 1st January 2007.

The Mauritian authorities had moved to placate the Indians in 2006, tightening up on the
issuance of Category 1 Global Business Licence applications for Collective Investment
Schemes, Private Equity Funds, Venture Capital Funds, Investment Companies, CIS
Manager, and Investment Adviser/Managers; but India announced that it wanted further
action before it would implement parts of the Comprehensive Economic Cooperation
Partnership Agreement (CECPA) which will be highly favourable for Mauritian exports
to India.

The DTAA with Indonesia, for somewhat similar reasons, was lapsed on 1st January
2005 after the Indonesian government gave notice of termination in 2004 and refused to
discuss the matter. "The reasons given were that, following an assessment and evaluation
of the implementation of the treaty, the Indonesian government has concluded that there
was an abuse that was inflicting a loss upon Indonesia. The letter referred specifically to
those foreign companies that are registered in Mauritius as Global Business Licence
companies and to our domestic legislation tht enabled them to obtain tax dispensation or
nullification on their business income from Indonesia," said the government.

In November 2008, a proposal by Japan Tobacco International's Mauritius operation to

increase its stake in its Indian arm from 50% to 74% came under fire from several sides.

The increase was cautioned against by the Finance Ministry, which argued that allowing
such a move would constitute a tacit approval of 'treaty shopping', a particular bugbear of
the Indian authorities when it comes to companies routing investment via Mauritius.

In August 2009, India said that it is revising its double taxation avoidance treaties,
especially those which were concluded prior to 2004. Its objective is to renegotiate anti-
abuse provisions.

The following countries are among those which have double-tax treaties with Mauritius
(an * indicates that the treaty is awaiting ratification):
 • Bangladesh* • Nigeria*
• Barbados • Oman
• Belgium • Pakistan
• Botswana • Qatar*
• China • Singapore
• Croatia • Romania
• Cyprus • Russia*
• France • Rwanda
• Germany • Senagal
• Hungary • Seychelles
• India • Singapore
• Indonesia (suspended) • South Africa
• Italy • Sri Lanka
• Kuwait • Swaziland
• Lesotho • Sweden
• Libya • Thailand
• Luxembourg • Tunisia*
• Madagascar • United Kingdom
• Malawi* • Vietnam*
• Malaysia • Zambia*
• Mozambique
• Namibia • Zimbabwe

• Nepal

Meanwhile, it also emerged that Mauritius had signed a new DTA with Uganda. The
treaty covers income tax, capital gains tax, business profits tax as well as various other
levies. Under the treaty, the maximum rate for dividends, interest and royalties are each
set at 10% and capital gains other than on immovable property is taxed in the country of
residence.

In March, 2005, An Agreement on Double Taxation Avoidance and Prevention of Fiscal

Evasion with respect to taxes on income between the Government of the Republic of
Mauritius and the Government of the Republic of Seychelles was signed by the Prime
Minister of Mauritius, Paul Raymond Bérenger and the President of Seychelles, James
Alix Michel.

In 2006, a Protocol to the China-Mauritius DTAA was signed. The Protocol amended the
Capital Gains and Exchange of Information Articles of the DTAA, making harder for
Mauritius based companies investing in China to get a capital-gains tax exemption.

A DTAA between Mauritius and the United Arab Emirates was signed on 18 September
2006 in Singapore during the 2006 Joint IMF-World Bank Annual Meeting, and will
come into force after both countries have completed the necessary internal legal
procedures and notified each other of its completion.
Additionally, the first round of negotiations for the conclusion of a DTAA with the Arab
Republic of Egypt was held in Mauritius from 11 to 14 September 2006.

10 other treaties are being negotiated with: Canada, Czech Republic, Egypt, Greece,
Portugal and Republic of Iran, Burkina Faso, Algeria, Yemen, Ghana.

BACK TO TOP

Mauritius Table of Treaty Rates

This table lists the percentage rates of withholding tax on certain types of payment made
between Mauritius and some of its key Treaty partners (2006).

Dividends Royalties Interest

Country Rcvd. in Rcvd. in Rcvd. in Paid from
Mauritius Mauritius Mauritius Mauritius*
China 15 10 nil 10
France 15 15 nil 35
Germany 15 15 nil 35
India 15 15 nil 35
Malaysia 15 15 nil 15
Pakistan 10 12.5 nil 10
South Africa 15 15 nil nil
Swaziland 15 7.5 nil 5
Sweden 15 15 nil 15
United
15 15 nil 35
Kingdom
Zimbabwe 20 15 nil 10

* The rules governing the deduction of tax from outgoing payments of interest from
Mauritius are complicated, depending on the type of interest, the type of company paying
it, and the terms of the tax treaty in question; the rates given here are broadly correct, but
individual treaties and circumstances need to be taken into account also

Mauritius Other International Treaties

Mutual Assistance Treaties: Until 2005, Mauritius had entered no mutual assistance
treaties as such, and there were no formal procedures for cooperating with other
countries. The Reciprocal Enforcement of Judgements Act 1923 covers most British
Commonwealth countries; non-Commonwealth countries would have to obtain a
Mauritian court judgement before being able to enforce judgement locally.
However, in May, 2003, Sushil Khushiram, Mauritius Minister of Economic
Development, Financial Services and Corporate Affairs set out details of the country's
current moves in combatting money laundering and terrorist financing, at the opening of
a Financial Intelligence Unit seminar.

'Since this Government took office in September 2000', said the Minister, 'the political
will to combat money laundering and terrorist financing and promote clean and reputable
financial services has been strong and steadfast. We have implemented a programme of
deep seated reforms in the regulatory and supervisory framework of financial services,
which led to the establishment of the FSC and the FSPA. In parallel, we have modernised
our Companies Act and introduced a new Trusts Act.

'We know the dramatic changes that took place in the international financial environment
in the wake of global terrorist threats and amplified money laundering. Government
introduced a series of legislation in early 2002, namely the Prevention of Corruption Act,
The Prevention of Terrorism Act and the Financial Intelligence and Anti-Money
Laundering Act, following which the ICAC, and soon after the FIU, became operational.

'Mauritius also volunteered for a diagnosis of the strengths and vulnerabilities of our
financial sector by the IMF/World Bank under a Financial Sector Assessment Programme
(FSAP) at the end of last year. This exercise is designed to help countries enhance their
resilience to financial crises, and to foster growth by promoting financial soundness and
stability. The assessment included a review of AML/CFT regime in place. It is now in the
process of being completed. The FSAP reports will be presented to the IMF Executive
Board next month, and Mauritius will then seek an upgrading of its ranking by the
Financial Stability Forum. You will recall that Mauritius was ranked in the third and
lowest category of offshore financial centres by the FSF in April 2000 with regard to the
quality of its financial supervision. It has not been an easy toil, but we are almost there,
and the expected adjustment the country’s FSF ranking will further strengthen our
credibility in attracting new and better business in financial services.

'As part of the FSAP exercise, certain amendments have been proposed to the existing
legislation to fine-tune some provisions and clear certain ambiguities. We obtained
technical assistance from the World Bank and IMF to look deeper into the proposed
AML/CFT amendments. A TA Team of two AML/CFT experts visited us in March 2003
and submitted their final report in April. A broad-based National Coordination AML/CFT
Committee set up in early 2003 under the aegis of my ministry met with the experts and
discussed the final report. The Committee, which has been meeting regularly to
coordinate national AML/CFT policies, comprises the intelligence and investigative
bodies, namely FIU, ICAC, the Police, the regulators, i.e. the BOM and the FSC, the
relevant ministries – the Prime Minister’s Office, the Ministry of Finance, the Ministry of
External Affairs, the State Law Office and the Commissioner for Drugs.

'Further measures will be examined with IMF/World Bank technical assistance to

reinforce the operational effectiveness of the institutions involved in AML/CFT. A Task
Force has been set up by the AML/CFT Coordination Committee to streamline and
formalize procedures for dealing with financial crime, from a STR to final prosecution.
Moreover, we are consolidating the AML/CFT framework through other supporting
legislation to be introduced in the coming months. A Convention for the Suppression of
Terrorism Bill, in obligation to UN requirements, a Mutual Legal Assistance Bill and an
Extradition Bill are being finalised.

'No one should entertain any doubts about Government’s commitment to combating
corruption, money laundering and the financing of terrorism. Institutions such as ICAC
and FIU are coming up fast on their learning curve and will soon reach their cruising
speed. ICAC is investigating several high profile cases, while some 80 suspicious
transactions reports have been received by the FIU. I understand that a number of these
STRs have already been disseminated by the FIU to ICAC or Police for investigation.
The regulators, namely the Bank of Mauritius and the Financial Services Commission
have finalised AML/CFT guidelines for their licensees. I am sure that during the
presentations this morning you will learn more about the operations of these
organisations and the role they play in achieving our common AML/CFT objectives.

'Ladies and gentlemen, the most effective way to combat money laundering is for both
the public and the private sectors to play their part in understanding and targeting
criminal finance. This involves intelligence, investigation and prosecution. Without these
three components, an AML/CFT strategy cannot be truly effective. There is a clear divide
between those who receive and disseminate financial intelligence i.e. the Financial
Intelligence Unit, and those whose job is investigate, determine the criminality and
prosecute, e.g. the ICAC, Police and Customs. The logic behind this approach is that
intelligence is different from evidence. Intelligence reports prepared by experts produce
pictures of the criminality – not just who is doing what, but what type of crime is being
committed, how criminality is evolving and where the next threat is coming from. Using
intelligence to follow the money – identified through suspicious transactions reports –can
often lead to the criminal.

'However, some banks and financial institutions are not making sufficient efforts to
understand the institutional or legal framework that emphasizes financial intelligence in
combating money laundering and terrorist financing. A few banks are invoking legal or
other reasons in refusing to provide full and complete information to the FIU. Let me
make it clear that the existing legal ambiguities in the Banking Act will be dealt with very
shortly. Those of you who are familiar with the forty recommendations of the Financial
Action Task Force on Money Laundering, or more precisely Recommendation 5, will
know that a country’s banking secrecy laws must not conflict with, or inhibit, the
effectiveness of a national anti-money laundering strategy. The FATF recommendations
are applied worldwide.

'Let me also comment on the role that “gate keepers” i.e. accountants, barristers and other
professional advisers are expected to play in the AML/CFT combat. While I understand
that new legislation may need time to sink down, I think that we need an accelerated
culture change here. The Financial Intelligence and Anti-Money Laundering Act makes it
mandatory for members of the relevant professions or occupations to make suspicious
transactions reports to the FIU. But it seems that the submission of STRs by them will
take some time to come by. The Bar Council, the Law Society, the Association of
Notaries and Accounting Bodies represented in Mauritius are no doubt calling members
to take disclosures of suspected money laundering cases seriously.

'Ladies and Gentlemen, AML/CFT also has a regional and international dimension.
International action to combat money laundering started in the late 1980s with the
ensuing development of international standards and national initiatives. The Financial
Action Task Force which was set up in 1989 by the G7 nations has a leading role in the
global drive to combat money laundering, and more recently terrorism financing. Its 40
plus 8 recommendations constitute the international benchmark for assessing the
standards of an AML/CFT regime. Mauritius is initiating action to obtain observer status
in the FATF, on the same basis as was granted to South Africa.

'At another international level, the Egmont Group is an informal forum open to all
Government agencies having the means to prevent criminals from using the legitimate
financial system and other economic sectors to profit from illegal activities. Membership
of Egmont means direct involvement in the decision making process of the Group,
participation in the activities of its Working Groups, participation in training sponsored
by Egmont and more importantly access to Egmont Secure Web for information sharing
and intelligence gathering.

'The Mauritian FIU was sponsored by the US FIU (FinCEN) for membership of the
Egmont Group and I am pleased to announce that at its meeting of 31st March 2003 the
Legal Working Group of Egmont has endorsed the application of Mauritius to join the
Egmont Group and will make a formal recommendation on our candidacy before the 69
Egmont member FIUs during the next plenary meeting of the Group in Sydney on 23rd
July, 2003. This will put Mauritius to the top league of countries with world class
standards and structures to combat global financial crime.

'The Mauritius FIU is working closely with the newly created Financial Intelligence
Centre of South Africa and the French FIU - Tracfin. As for FinCEN, it continues to be
active in our FIU development and will be organising a regional training session in
Mauritius in September this year for FIU and law enforcement officials from South
Africa, UAE and India.

'Mauritius is also actively associated with a regional AML/CFT initiative, as a founding

member of the Eastern and Southern Africa Anti Money Laundering Group
(ESAAMLG), which is an FATF-style regional body receiving the full support of all
international organisations involved in AML/CFT. ESAAMLG members have started a
mutual evaluation of their respective AML/CFT regimes to assess compliance with the
FATF 40 + 8 Recommendations.'

In April, 2003, the Mauritius Financial Services Commission (FSC) issued three Codes
on the prevention of money laundering and terrorist financing, namely:
Code on the Prevention of Money Laundering and Terrorist Financing intended for
Management Companies;
Code on the Prevention of Money Laundering and Terrorist Financing intended for
Investment Businesses; and
Code on the Prevention of Money Laundering and Terrorist Financing intended for
Insurance Entities.

Said the FSC at the time:

'These Codes aim to preserve high standards of practice and the integrity of Mauritius as
a reputable financial services center. Mauritius is fully supportive of international
initiatives to combat money laundering and terrorist financing and so the Codes take
account of international standards.

'These Codes state minima criteria to be followed by companies and market

intermediaries to prevent the exploitation of the financial services industry in Mauritius
by money launderers and terrorist financiers.

'Economies with emerging financial centers and inadequate controls are particularly
vulnerable. Money laundering poses a serious threat to the integrity and soundness of the
financial system of all countries. It affects economic development, and foreign investors'
perception that the financial services industry functions within a framework of high legal,
professional and ethical standards.

'It is therefore vital that all operators in the financial industry in Mauritius avoid exposure
to the risk of involvement in relationships concerning money laundering or terrorist
financing.

'The Codes issued by FSC describe the regulatory anti money laundering practices that
operators involved in these three disciplines are expected to consistently follow and
include:

The "Know Your Customer" procedures;

The obligation for operators to check the identity of clients;
The need to retain records; and above all
The need to comply with the legal provisions of the Financial Intelligence and Anti
Money Laundering Act 2002, particularly as regards Suspicious Transaction Reporting.'

The Codes came into force on 2nd May 2003.

The Information Exchange Agreement With India

In December, 2002, Mauritius and India signed a Memorandum of Understanding laying

down rules for information exchange between the two countries.
Discussions began in April, 2002, when the Deputy Prime Minister and Minister of
Finance of Mauritius, on a visit to India, suggested the signing of an MoU, and in June
the Mauritian Financial Services Development Act was amended to give wider powers to
the FSC for investigation and exchange of information with other regulators.

The MOU provides for the two signatory Authorities to assist each other in the detection
of fraudulent market practices, including insider dealing and market manipulation in the
areas of securities transactions and derivative dealings. Its principal objective is to
support the sound development of the securities markets in both countries by encouraging
legitimate best practices. Structures have been established for effective implementation of
exchange of information, both on request and on a voluntary basis, about suspicious
securities dealings between the two countries. The intention behind the MOU is to track
down transactions tainted by fraud and financial crime, not to target bona fide legitimate
transactions.

It was expected that the MOU would go a long way towards dispelling doubts about the
unwillingness of the two Authorities to engage in the effective exchange of information
in accord with standing international best practices.

Indian Government officials said the agreement would deter traders from routing money
with doubtful origins through Mauritius.

The Indian government had recently introduced the SEBI Act 2002 to give the market
regulator greater powers to deal with market abuse. The agreement with Mauritius was
one of a series that SEBI has signed with major trading partners.

The Financial Intelligence Unit

In 2003 Mauritius's Financial Intelligence Unit (FIU) was admitted to the Egmont Group,
an informal coalition which provides a forum for FIUs to improve support to their
respective national anti-money laundering programmes.

The Mauritian FIU, which was sponsored for entry into the group by its US counterpart,
FinCEN, was admitted prior to the Egmont Group's 5-day plenary meeting of that year,
which was held in Australia.

In March, 2005, Indian Prime Minister Manmohan Singh signed a Free Trade Agreement
with Mauritius. Entitled the Comprehensive Economic Cooperation Partnership
Agreement, the pact is aimed at strengthening the existing economic cooperation between
the two countries. While it will liberalise trade in goods and services and facilitate joint
ventures, the most important aspect of the agreement is that it will encompass the existing
double taxation avoidance agreement between the two countries.

This DTAA had been the focus of much worry for Mauritius over the years, as the Indian
tax authorities have sought to strengthen the standards of proof for tax residency in
Mauritius, and had attempted to disallow tax exemptions granted by Mauritius to
investors using the island as a conduit for Indian investment (see above). Mauritius is the
second largest source of FDI for India.

In October, 2004, the Indian Supreme Court upheld the validity of a circular issued by the
Indian Central Board of Direct Taxes, which stated that a certificate of residence issued
by the Mauritian authorities constituted sufficient evidence of residence in the
jurisdiction to allow a firm or investor to take advantage of the provisions of the bilateral
DTA between India and Mauritius. And earlier in the year the Supreme Court threw out a
'curative petition' which would have reversed the situation.

However, the issue of Indian resident entities 'round-tripping' investments via Mauritius
is, as previously mentioned, still a concern.

Mutual Assistance Treaties

In October, 2005, India and Mauritius, which has an Indian community of more than
800,000, signed a batch of agreements including a Legal Mutual Assistance Treaty aimed
at limiting the scope for money-laundering between the two countries.

The agreements were signed in the presence of Indian Prime Minister Manmohan Singh
and his Mauritian counterpart Navinchandra Ramgoolam after the two leaders held talks
on a wide array of bilateral issues.

Indian Home Affairs Minister Shivraj Patil and Mauritian Foreign Minister Madan
Murlidhar Dulloo signed the agreement which will promote better co-operation among
police and investigative agencies in both countries and envisages sharing of information
and data relating to crimes and criminals.

India has signed similar Treaties on mutual legal assistance in criminal matters with
around 21 countries, including the United Kingdom, Canada, Russian Federation, France,
Kyrgyzstan, Kazakhstan, United Arab Emitrates, Uzbekistan, Mongolia, Tajikistan,
United States of America, Turkey, Switzerland, Ukraine, South Africa, Baharain,
Thailand, Kuwait, South Korea, Singapore and Belarus.

Salient features of the Agreement are:

• To improve the effectiveness of both counties in the suppression, investigation

and prosecution of crime, including crime relating to terrorism, and tracing,
restraint, forfeiture or confiscation of the proceeds and instruments of crime
through cooperation and mutual legal assistance in criminal matters.
• 'Criminal matters' means, for India, investigations, inquiries, trials and other
proceedings relating to an offence created by Parliament or by the legislature of
State; and, for the Republic of Mauritius, subject to the laws of the Republic of
Mauritius, investigations, inquiries or other proceedings relating to a statutory
offence.
 • Mutual legal assistance includes: locating and identifying persons and objects;
serving documents, including documents seeking the attendance of persons;
providing information, documents and records; providing objects, including
lending exhibits; search and seizure; taking evidence and obtaining statements;
authorizing the presence of persons from Requesting State at the execution of
requests; making detailed persons available to give evidence or assist
investigations; facilitating appearance of witnesses or the assistance of persons in
investigations; taking measure to locate, restrain or forfeit the proceeds of crime
and other form of assistance not prohibited by the law of the Requested State.
• Mutual legal assistance is to be granted irrespective of whether the assistance is
sought or to be provided by a court or some other competent authority.
• Assistance may be refused if the execution of the request would impair
sovereignty, security, public order or other essential interest, or prejudice the
safety of any persons; if the execution of the request would be contrary to the
domestic law of the Requested State; or if the request relates to an offence in
respect of which the accused person had been acquitted or pardoned.

In January, 2006, the Mauritius Financial Services Commission and the Jersey Financial
Services Commission signed a Memorandum of Understanding effective from 26
December 2005 covering mutual assistance and the exchange of information.

The Memorandum establishes a formal framework for mutual assistance and the
exchange of information between the two regulators to facilitate the enforcement of, and
compliance with, the laws of each jurisdiction. Such collaboration, say the two FSCs,
should help to protect investors and depositors and to promote the integrity of financial
services markets in the two jurisdictions.

The Memorandum of Understanding commits both regulators to providing help within

the limits of each jurisdictions’ laws, and establishes procedures and liaison points so that
requests for information needed for tackling financial regulatory offences can be handled
rapidly and efficiently.

Milan Meetarbhan, Chief Executive of FSC Mauritius, said:

“Mauritius is keen to establish itself as a reputable International Financial Centre and in

addition to our wide Double Taxation Treaty network which already provides for
extensive exchange of information, we now have a number of agreements on exchange of
information with regulators across the world. We are pleased to have an MOU with
Jersey Financial Services Commission as this will further enhance the cooperation
between our two jurisdictions.”

David Carse, Director General of the Jersey Financial Services Commission, said:

“I am delighted to sign this Memorandum of Understanding with FSC Mauritius. It is the

latest in a number established between the Commission and other regulators around the
world and reflects the Commission’s commitment to cross-border regulatory co-
operation.”

In February 2007, around six months after the Trade and Investment Framework
Agreement (TIFA) between the United States and Mauritius was signed (in September
2006), the first TIFA Council meeting between the two countries took place.

The US delegation was led by Florizelle Liser, Assistant US Trade Representative for
Africa.

The TIFA was established as a vehicle for strengthening and expanding bilateral trade
ties between Mauritius and the United States. It provides an opportunity to work more
closely on a broad range of trade-related issues, including the moving of the WTO Doha
Development Round forward and the implementing of the AGOA. The Agreement is
considered as a first step towards the creation of a Free Trade Area.

The TIFA also includes provisions for the establishment of a bilateral Trade and
Investment Council that will monitor trade and investment relations and identify
opportunities for expanding trade and investment, as well as important issues and
challenges that both Mauritius and the United States need to address.

Commenting following the conclusion of the first Council meeting, Deputy US Trade
Representative Karan Bhatia announced that:

“I’m pleased that, within six months of its signing, we are using our TIFA agreement
with Mauritius to deepen and strengthen our engagement with that country and to
stimulate our relationship with key African trading partners.”

She continued:

“Our TIFA Council is an important part of our continuing effort to improve the US-
Mauritian trade and investment relationship.”

The meeting allowed the two governments to set priorities, identify objectives, establish
benchmarks, outline impediments, and chart the way forward for work under the TIFA.

During the TIFA Council meeting, officials from the United States and Mauritius
explored common objectives – including cooperation in the World Trade Organization,
implementation of the African Growth and Opportunity Act, export diversification, trade
and investment promotion, and economic development. They also examined
opportunities for a more comprehensive trade and investment relationship.

The TIFA Council reviewed a common workplan that the United States and Mauritius
will jointly undertake in order to implement the TIFA, including a wide-range of
programs and activities to support, facilitate, and ensure progress and success in
strengthening the US-Mauritian trade and investment relationship.
In August 2009, US Trade Representative Ron Kirk and Secretary of State Hillary
Clinton announced that the United States and Mauritius will begin formal negotiations
toward a Bilateral Investment Treaty (BIT).

Kirk and Clinton announced the launch of the BIT negotiations during the African
Growth and Opportunity Act Forum in Nairobi, Kenya. The principle aims of the treaty
would be to strengthen investor protections and encourage the continuation of market-
oriented economic reforms in Mauritius.