The Supreme Court has dismissed an appeal against the Court of Appeal decision that Skatteforvaltningen (the Danish Customs and Tax Administration – SKAT) could bring fraud proceedings in the English Courts against UK parties who it alleges had fraudulently claimed tax refunds to which they were not entitled (Skatteforvaltningen (the Danish Customs and Tax Administration) (Respondent) v Solo Capital Partners LLP (in special administration) and others (Appellants) [2023] UKSC 40).
From the Supreme Court’s Press Summary:
“When SKAT brought proceedings in the Commercial Court in England and Wales, the appellants defended the claims on the basis that they were protected by a principle of private international law, under which claims which seek to enforce the tax law of a foreign state, whether directly or indirectly, are inadmissible before courts in this jurisdiction. This principle is known as the revenue rule. …
The Supreme Court unanimously rejects the appellants’ appeal. It holds that the revenue rule does not apply to SKAT’s claims. This means that SKAT’s claims against the appellants can proceed to a trial in the Commercial Court. …
The Court accepts the argument made by SKAT that the revenue rule only applies to proceedings where there is an unsatisfied demand for tax which the foreign tax authority seeks to recover directly or indirectly. … SKAT’s claim is not for unpaid tax nor is it a claim that the appellants are liable to SKAT because they have cheated SKAT out of tax which was due to it. SKAT’s case is that the appellants have never been liable to pay any tax in Denmark. Instead, the substance of its claims is that the appellants defrauded SKAT to obtain refunds to which they were never entitled, and SKAT has brought its claims as a victim of fraud. Accordingly, SKAT’s claims fall outside the revenue rule. The fact that there are no taxes due from the appellants is a complete answer to their argument that the revenue rule applies. …
The appellants also argued that SKAT was barred from bringing a claim by virtue of the “sovereign authority rule”. This rule holds that the enforcement of a public law of a foreign state, whether directly or indirectly, is also inadmissible. The Court also rejects the argument that SKAT’s claims involve acts of a sovereign or governmental character and that they should be dismissed for that reason … The substance of the claims does not involve any act of a sovereign character, any exercise or enforcement of a sovereign right, or any vindication of sovereign power. SKAT, in seeking to recover money of which it alleges it has been defrauded, is following a course that would be open to any private individual who has been similarly defrauded.”
https://www.bailii.org/uk/cases/UKSC/2023/40.html