Huge Commercial Court claim thrown out for being inadmissable

Andrew Baker J: Dicey Rule 3 applies

A judge has dismissed a claim against 114 defendants that was scheduled to last the whole of 2023 and likely to become the costliest Commercial Court trial ever.

Mr Justice Andrew Baker ruled that SKAT, the Danish customs and tax administration, was trying to enforce Danish revenue law overseas, in a way that was not admissible in the English courts.

SKAT claimed to have been induced by misrepresentations, over a three-year period from August 2012 to July 2015, to pay out as tax refunds it was not liable to pay, over £1.5bn.

Five separate claims were consolidated into one action, naming 114 defendants in total. Some 74 of them were represented and at the time of the preliminary issue trial employed 21 separate legal teams from 18 firms of solicitors.

The lead defendant was Solo Capital Partners, a hedge fund placed into special administration five years ago. Its founder, Sanjay Shah, was accused of masterminding the fraud. He strenuously denied any wrongdoing.

The four-day preliminary trial heard last month concerned the application of Dicey Rule 3, from the textbook Dicey, Morris & Collins on the Conflict of Laws, which states: “English courts have no jurisdiction to entertain an action: (1) for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state; or (2) founded upon an act of state.”

SKAT argued that the claim was a civil and commercial matter and so the rule did not apply.

The judge said it was agreed that Dicey Rule 3 was “a substantive rule of English law leading to the dismissal of claims falling within it, on the ground that the court will not entertain them because they involve an attempt to have the court enforce extra-territorially the exercise of sovereign authority”.

Further, he said, it looked at the substance, rather than the form and here the Kingdom of Denmark’s “central interest” in bringing the claim was its “sovereign right to tax Danish company dividends”. Thus the rule applied.

Chris Waters, managing partner of London firm Meaby & Co, which acted for Mr Shah, said: “These proceedings have already used up a vast amount of valuable English court time to hear an international tax claim on behalf of the Kingdom of Denmark.

“The Sanjay Shah defendants have suffered three years of unnecessary litigation in the UK. As a consequence, our clients suffered very significant financial loss and damage which they will seek to recover from the Kingdom of Denmark.”

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