Denmark-UAE treaty seeks to deny refuge for Dubai cum-ex defendants
15 March 2022 Denmark
Image: AdobeStock/Nikolay N. Antonov
Denmark鈥檚 Minister of Justice Nick H忙kkerup will travel to the United Arab Emirates this week to sign an extradition treaty with the UAE, according to a statement by the Danish government.
This will potentially lay the foundations for the extradition of Sanjay Shah, a UK national resident in Dubai, that the Danish tax authorities are pursuing in connection with a US$1.5 billion cum-ex case.
The Danish State Prosecutor for Serious Economic and International Crime, Per Fiig, formally charged Sanjay Shah, founder of hedge fund Solo Capital, and another British national who is resident in the UK, with having defrauded the Danish state of more than DKK 9 billion.
Per Fiig alleges that the two defendants committed 鈥渃ynical and meticulously planned fraud鈥� in a 鈥渨ell-designed and organised fraud scheme鈥�, where it submitted more than 3000 applications to unlawfully receive more than US$1.5 billion in dividend tax refunds from the Danish exchequer.
The Danish government says that it has been working for a long time to establish a general extradition agreement between Denmark and the UAE and that discussions have now advanced to a point where the parties are ready to sign an agreement.
As background to this action, the Danish authorities indicate that, among other factors, Denmark has requested extradition from the UAE of persons accused in cum-ex tax violations and also a motorist who is accused of being responsible for the death of a police officer in a road traffic accident in Langebro in 2019.
Commenting on these developments, Danish Minister of Justice Nick H忙kkerup says:
鈥淲e have seen examples of suspected perpetrators hiding under warmer skies, and thus avoiding prosecution and being held accountable in this country for their actions. This applies both in the cause of fraud with dividend tax and in connection with the wreckless driving that cost a police officer his life in Langebro in 2019, where the suspected perpetrator later fled to Dubai.
鈥淎s Minister of Justice, I find that completely unacceptable. This agreement will hopefully enable us to get the suspected perpetrators to the country, so that they can be prosecuted in Denmark,鈥� he concludes.
The Danish government notes that a number of other EU countries have recently established similar agreements with the UAE, including The Netherlands and Belgium, which entered into extradition and mutual legal aid agreements with the UAE in 2021.
Last month, the Danish tax authority Skatteforvaltningen (or 鈥楽kat鈥�) reversed on appeal an earlier judgement by the UK High Court that claims against Sanjay Shah and other cum-ex defendants were inadmissible in an English court (Skatteforvaltningen v Solo Capital Partners LLP (in special administration) and others [2021] EWHC 974, Comm).
On reaching this ruling in an initial trial in April 2021, Justice Andrew Baker dismissed the case against all defendants on the grounds that the Danish state was not entitled to enforce its own tax laws in an English court.
The trial focused on the application of 鈥楧icey Rule 3鈥�, which states: 鈥淓nglish Courts have no jurisdiction to entertain an action [for] the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state or founded upon an act of state鈥�.
However, on 28 February Skat succeeded in its appeal before Sir Julian Flaux, chancellor of the High Court of England and Wales. In its appeal, Skat maintained that its claims were not an attempt to recover unpaid tax but, instead, were brought as a victim of fraud that was primarily orchestrated from, or conducted through, legal entities based in England.
In forming its argument that this was a case of fraud, Skat鈥檚 legal team noted that the defendants did not hold shares in any of the Danish companies, they had not received dividends from those companies and, therefore, there was no withholding tax (WHT) applied on dividend payments from those companies to the defendants.
With this in mind, the prosecutors argued that there was no WHT obligation to refund by the tax authorities to these persons.
In upholding Skat鈥檚 appeal in cases against a number of the defendants, Sir Julian Flaux judged that the claim by Skat against these defendants does not constitute a claim for unpaid taxes or a claim to recover tax. Rather, it is a claim to recover monies which had been abstracted from Skat鈥檚 general funds by fraud.
鈥淭he alleged fraud defendant鈥檚 submission that the claim to the refund is still a claim to tax is simply wrong as a matter of analysis and the judge fell into error in accepting that submission,鈥� said the February 2022 ruling.
This will potentially lay the foundations for the extradition of Sanjay Shah, a UK national resident in Dubai, that the Danish tax authorities are pursuing in connection with a US$1.5 billion cum-ex case.
The Danish State Prosecutor for Serious Economic and International Crime, Per Fiig, formally charged Sanjay Shah, founder of hedge fund Solo Capital, and another British national who is resident in the UK, with having defrauded the Danish state of more than DKK 9 billion.
Per Fiig alleges that the two defendants committed 鈥渃ynical and meticulously planned fraud鈥� in a 鈥渨ell-designed and organised fraud scheme鈥�, where it submitted more than 3000 applications to unlawfully receive more than US$1.5 billion in dividend tax refunds from the Danish exchequer.
The Danish government says that it has been working for a long time to establish a general extradition agreement between Denmark and the UAE and that discussions have now advanced to a point where the parties are ready to sign an agreement.
As background to this action, the Danish authorities indicate that, among other factors, Denmark has requested extradition from the UAE of persons accused in cum-ex tax violations and also a motorist who is accused of being responsible for the death of a police officer in a road traffic accident in Langebro in 2019.
Commenting on these developments, Danish Minister of Justice Nick H忙kkerup says:
鈥淲e have seen examples of suspected perpetrators hiding under warmer skies, and thus avoiding prosecution and being held accountable in this country for their actions. This applies both in the cause of fraud with dividend tax and in connection with the wreckless driving that cost a police officer his life in Langebro in 2019, where the suspected perpetrator later fled to Dubai.
鈥淎s Minister of Justice, I find that completely unacceptable. This agreement will hopefully enable us to get the suspected perpetrators to the country, so that they can be prosecuted in Denmark,鈥� he concludes.
The Danish government notes that a number of other EU countries have recently established similar agreements with the UAE, including The Netherlands and Belgium, which entered into extradition and mutual legal aid agreements with the UAE in 2021.
Last month, the Danish tax authority Skatteforvaltningen (or 鈥楽kat鈥�) reversed on appeal an earlier judgement by the UK High Court that claims against Sanjay Shah and other cum-ex defendants were inadmissible in an English court (Skatteforvaltningen v Solo Capital Partners LLP (in special administration) and others [2021] EWHC 974, Comm).
On reaching this ruling in an initial trial in April 2021, Justice Andrew Baker dismissed the case against all defendants on the grounds that the Danish state was not entitled to enforce its own tax laws in an English court.
The trial focused on the application of 鈥楧icey Rule 3鈥�, which states: 鈥淓nglish Courts have no jurisdiction to entertain an action [for] the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign state or founded upon an act of state鈥�.
However, on 28 February Skat succeeded in its appeal before Sir Julian Flaux, chancellor of the High Court of England and Wales. In its appeal, Skat maintained that its claims were not an attempt to recover unpaid tax but, instead, were brought as a victim of fraud that was primarily orchestrated from, or conducted through, legal entities based in England.
In forming its argument that this was a case of fraud, Skat鈥檚 legal team noted that the defendants did not hold shares in any of the Danish companies, they had not received dividends from those companies and, therefore, there was no withholding tax (WHT) applied on dividend payments from those companies to the defendants.
With this in mind, the prosecutors argued that there was no WHT obligation to refund by the tax authorities to these persons.
In upholding Skat鈥檚 appeal in cases against a number of the defendants, Sir Julian Flaux judged that the claim by Skat against these defendants does not constitute a claim for unpaid taxes or a claim to recover tax. Rather, it is a claim to recover monies which had been abstracted from Skat鈥檚 general funds by fraud.
鈥淭he alleged fraud defendant鈥檚 submission that the claim to the refund is still a claim to tax is simply wrong as a matter of analysis and the judge fell into error in accepting that submission,鈥� said the February 2022 ruling.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to 色花堂Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to 色花堂Finance Times
