Danish authorities Skatteforvaltningen (Skat) £1.5bn trial kicks off on Monday after a three-year delay which saw parties reach the highest court in the UK over jurisdiction issues.
Once described by Mr Justice Andrew Baker as “litigation on a massive scale”, the Kingdom of Denmark via their national tax authority issued a mammoth case to the English court. The authority is seeking to recover over £1.5bn from over 100 individual and corporate defendants.
Skat claimed to have been induced by fraudulent misrepresentations between 2012 and 2015 to pay out around DKK12.5bn in dividend withholding tax refunds in circumstances where, it claimed, such refunds were not in fact due. This claim is one of many resulting from the Cum-Ex trading scandal.
The Cum-Ex scandal is the name given to a huge volume of transactions prior to 2012 that involved exploiting a loophole on dividend payments that enabled a number of parties to claim the same tax refund. Germany, which abolished the practice in 2012, has seen more than a dozen convictions related to the scandal, with taxpayers estimated to be on the hook for nearly £10bn.
The Danish authority is pursuing this civil claim in England alongside proceedings in a range of other jurisdictions, including the US. Skat filed five separate claims in the Commercial Court, which were consolidated into one large case, with at least 12 legal teams on for defence.
One of the defendants is British trader Sanjay Shah, who founded the hedge fund firm, Solo Capital. He is in prison in Dubai, awaiting extradition to Denmark. There are two other defendants being prosecuted in Denmark and a number of key defendants have international arrest warrants issued against them.
Another defendant is ED&F Man Capital Markets, which was hit with a record £17.2m fine last June by the Financial Conduct Authority for “serious failings” in its oversight of a murky cum-ex trading strategy.
The case initially went to the High Court in 2021. Still, the Danish authorities hit a considerable hurdle when Mr Justice Andrew Baker ruled that its claim was inadmissible in the English jurisdiction on the basis that it involved the enforcement of Denmark’s sovereign right to tax.
Skat’s legal team at Pinsent Mason of partners Stuart McNeill and Alan Sheeley went on to appeal the judge’s decision. The parties were at the Court of Appeal in early 2022, where the court sided with Skat and overturned the High Court’s decision.
The defendants appealed the Court of Appeal decision to the Supreme Court, which held a hearing last July. In another win for the Danish authority, the highest count in the UK unanimously upheld the decision of the Court of Appeal.
This is why the parties are back to start, and the mammoth case can proceed to trial. The case will open on Monday, and the trial is set to run until April 2025.
According to the trial timetable as seen by City A.M., the case has been broken into ‘chapters’ to which there are seven. All of April and most of May will consist of Skat’s opening arguments and its evidence for the court. While in mid-May, chapter one starts, which runs into mid-June when chapter two starts.
Up until the end of July, the trial will finish up to chapter five before the Summer court term starts. The courts will be closed from 31 July and are set to re-open on 1 October for the new term. The trial is set to conclude the seven chapters and expert evidence before Christmas break in mid-December. Between prep and closing arguments, the trial is set to conclude on 4 April 2025.
Elsewhere in the UK, the Financial Conduct Authority has recently slapped a so-called cum-ex trader with a £5.95m fine and banned him from working in financial services today for his role orchestrating a “sham” trading scheme.
Nailesh Teraiya was fined and banned for a “fake” tax scheme run through his firm Indigo Global Partners limited, in which the company obtained “repayment” of €91.2m from Skat.
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