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IT is a well-established principle of English law, formulated in Dicey, Morris and Collins, The Conflict of Laws (15th ed., 2012) as Rule 3 (changed to Rule 20 in 16th ed., 2022) that English courts will not enforce foreign revenue, penal or other public laws (“Rule 3”). In Skatteforvaltningen v Solo Capital Partners [2022] EWCA Civ 234 (“Solo Capital Partners”) the Court of Appeal sought to clarify when a claim involves the enforcement of a foreign revenue, penal or other public law. It also sought to clarify the relationship between Rule 3 and the Brussels Regulation (Recast) (1215/2012), which applied because the proceedings were commenced before the end of the UK–EU transition period. The Court of Appeal correctly held that Rule 3 cannot apply to a private law claim made by a foreign tax authority when no tax is owed to that authority. However, the Court of Appeal was on less firm ground in holding that Rule 3 and the Brussels Regulation were mutually exclusive. This note will conclude by suggesting that disputes involving Rule 3 would be better dealt with by the doctrine of forum non conveniens.
Skatteforvaltningen (“SKAT”), the Danish tax authority, made several mistaken tax refunds under the Danish withholding tax regime. Under the Danish Withholding Tax Act, legal persons who are shareholders of Danish companies, but not tax resident in Denmark, are liable to pay 27 per cent tax in respect of dividends paid to them by Danish companies. This sum is withheld by the Danish companies when the dividends are paid. The Danish companies then pay the withheld sum to SKAT directly. Where the tax withheld exceeds the final tax due under a double taxation treaty, the taxpayer can apply to SKAT for a refund of the excess withheld. SKAT is then under an obligation to refund that excess within six months.
The multiple defendants were not shareholders of Danish companies and did not receive any dividends out of which excess tax was withheld. Nonetheless, they applied for refunds from SKAT, falsely representing that they were such shareholders. SKAT issued refunds amounting to £1.44 billion to the defendants based on these misrepresentations. It brought claims in England, where the defendants were domiciled, to recover that sum on...