On 8 November 2023, the Supreme Court handed down judgment finding, unanimously, that claims brought by the Danish Customs and Tax Administration (SKAT) in the Commercial Court did not infringe the common law rule against the enforcement of foreign revenue and public law.
In February 2022, the Court of Appeal had also held (reversing the Commercial Court’s decision) that SKAT’s claims were not barred by this common law rule. Lord Lloyd-Jones (with whom Lord Hodge, Lord Briggs, Lord Hamblen and Lord Richards agreed) dismissed the appeal from the Court of Appeal’s decision.
SKAT’s claims in the Commercial Court seek to recover around £1.44 billion that, SKAT says, it was induced to part with by a sophisticated fraud between 2012 and 2015. SKAT alleges that it paid out these sums in response to false representations by foreign entities that they were shareholders in Danish companies, which had withheld tax in respect of dividends paid to them, and of which they sought a “refund” from SKAT.
The Supreme Court accepted SKAT’s submission that the revenue rule only applies to proceedings in which there is an unsatisfied demand for tax, which the foreign tax authority seeks to recover: [36]. On SKAT’s pleaded case, no tax is (or was ever) due from the Defendants or the refund applicants: [38]–[39]. The Court held that this is a “complete answer” to the Defendants’ contention that SKAT’s claim was barred by the revenue rule and that SKAT’s claim “clearly is not a claim for the direct or indirect enforcement of foreign tax laws”: [37], [39].
The Supreme Court also concluded that SKAT’s claims were not inadmissible under the broader common law rule against enforcement of foreign public law. The substance of SKAT’s claims does not involve any act of a sovereign character, any exercise or enforcement of sovereign right, or any vindication of sovereign power. SKAT was “simply bringing restitutionary claims to recover monies of which it has been defrauded, a course open to any private citizen who had been similarly defrauded”: [58]. Therefore, SKAT’s “claim… is clearly not of a sovereign character”: [54].
The Supreme Court’s judgment arises from the first preliminary issues trial in these proceedings. In March 2023, Mr Justice Andrew Baker had handed down judgment following a second preliminary issues trial. SKAT’s claims are due to be heard by the Commercial Court in a trial listed for four terms, which is due to commence in April 2024.
Jamie Goldsmith KC, Abra Bompas, James Ruddell and KV Krishnaprasad acted for SKAT, the successful respondent (in a team led by Lord Pannick KC, together also with Andrew Scott KC of Blackstone Chambers and Jonathan Schwarz of Temple Tax Chambers), instructed by Pinsent Masons LLP.
The Supreme Court’s judgment is available below.
View Judgment