Where appropriate, the formal rules of service can be dispensed with for the enforcement of arbitration awards against a foreign state
General Dynamics United Kingdom Limited v. The State of Libya  EWCA Civ 1110
In a recent decision, the Court of Appeal has held that the Courts may order that the formal rules of service can, where appropriate, be dispensed with when a party is seeking to enforce an arbitration award against a State. The decision also comes as a warning to States that they will not necessarily enjoy some of the protections to enforcement proceedings that they may once have had if they have already participated in, or indeed have refused to participate in, the initial proceedings or if there are special circumstances at play: the decision shows the English Court’s willingness to bypass at least some of the usually required formalities of service where effecting proper service would be in a real way overly problematic, risky or lengthy
In 2016 the Claimant obtained an ICC arbitration award against Libya in the amount of £16 million. Following Libya’s failure to pay and following an unsuccessful attempt to enforce the award in the USA, the Claimant sought instead to seek enforcement in England.
In 2018, the Claimant obtained an Order from the Commercial Court permitting it to enforce the Award in England and, due to the serious internal conflict in Libya and issues relating to its proper and rightful government, permitting it to dispense with formal service. Instead, the Order was required to be brought to the attention of Libya by the sending of it to three specific addresses – which it was.
Within time, Libya applied to set aside the parts of the order that dispensed with service, arguing that service of court proceedings is governed by S.12(1) of the State Immunity Act 1978 (the “SIA”), which provides that "Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign & Commonwealth Office to the Ministry of Foreign Affairs of the State".
Males LJ agreed with Libya and concluded that the court has no power to dispense with service in a case such as this and that arbitration enforcement proceedings (and all other documents relating to instituting proceedings against a state) must be served in the manner provided for in s.12(1) SIA (i.e. through the Foreign and Commonwealth Office (the “FCO”)).
The Claimant appealed the decision to the Court of Appeal, arguing that neither the Order nor the Claim Form initiating the enforcement proceedings were documents to which s.12(1) SIA applied.
The Court of Appeal allowed the appeal in part, restoring the earlier Order of the Commercial Court and holding that, despite the earlier decision of Males LJ, the Claimant could dispense with formal service against Libya.
In making its decision, the Court of Appeal considered that when a State is first sued, it is natural that the document “instituting proceedings” should be served through the FCO, as required by s.12 SIA. However, if the State then fully participates in the subsequent arbitration or litigation (as Libya did in this case), or even if it deliberately refuses to participate, it no longer requires the protection of enforcement proceedings being transmitted through the FCO. In the Court’s view, neither the Order nor the Claim Form initiating enforcement proceedings was analogous to a document “instituting proceedings.”
The Court of Appeal went on to find that while an order permitting enforcement of an arbitral award must still be served on a State, service does not need to follow s.12 SIA and thus, in appropriate cases, an English court may dispense with the normal rules of service. For example, when the order permitting enforcement of an award is to be the first time that the State receives notice of an attempt to enforce, an English court can dispense with formal service where there are “exceptional circumstances” (under Civil Procedure Rule 6.16). Given the internal conflict and danger within Libya, and the considerable length of time any such formal service might take, the Court of Appeal held that exactly such exceptional circumstances existed in this case.
However, protection remains in place for States even where formal service may be ordered to be dispensed with: the Court of Appeal concluded that even where the court permits a relaxation of the rules of service, as it did in this case, States will still be given a period of time (usually two months) in which to challenge an order permitting enforcement of an arbitral award, with no risk of execution against its assets in the meantime.
Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Tax-Related Measures in the Autumn Statement 2022
On 17 November 2022, the Rt Hon Jeremy Hunt MP, the Chancellor of the Exchequer, unveiled the contents of the Autumn Budget 2022. This comes after the International Monetary Fund (IMF) published its world economic forecast on 11 October 2022. The IMF expects the British economy to grow 3.6% in 2022 and 0.3% in 2023. Other major developed economies are also expected to stagnate next year, namely Spain (1.2%), the US (1.0%), France (0.7%), Italy (-0.2%) and Germany (-0.3%).
This note focuses on tax measures included as part of that statement.
Offshore Structures and Onward Gifts
The so-called “onward gift” tax anti-avoidance rules were introduced by the Finance Act 2018 to complement the changes brought in the previous year aimed at restricting the UK tax privileges afforded to non-UK domiciled individuals. The rules were designed to close some perceived loopholes in relation to the taxation of non-UK resident structures (including but not limited to non-UK trusts). With effect from 6 April 2018, it would no longer be possible for an individual to receive a gift without questioning its providence, particularly where family trusts are involved.
The rules were designed to prevent non-UK structures from using non-chargeable beneficiaries as conduits through which to pass payments in order to avoid tax charges. Gone are the days of “washing out” any trust gains that could be matched to offshore income or gains by prefacing a payment to a UK-resident taxable beneficiary with a non-taxable primary payment to a non-UK resident beneficiary.
“It is notoriously challenging to prove a negative (especially to HMRC) and even more tricky where the taxpayer must speak to someone’s intention other than their own.”
Note that the new rules will apply where funds are received from non-UK resident structures before 6 April 2018 to the extent that they are subsequently gifted after that date.
Increased Investment in Personal Tax Compliance in the UK
Changes in public opinion, advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. In addition, the Russian invasion of Ukraine and the corresponding economic fallout have prompted governments to increase transparency in relation to investments by wealthy foreign individuals in their countries.
The UK’s HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work.
It should therefore be well placed to take advantage of new international efforts to increase tax compliance, particularly against the backdrop of the already extensive network of bilateral tax treaties in the UK, and not forgetting that the UK was a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
Case note: Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC)
As HMRC continue to apply the Kittel principle to increasing numbers of industries and businesses, taxpayers need to be vigilant about evidential requirements that HMRC must fulfil in order to discharge their burden of proof. Read JHA’s latest insight into the First-tier Tribunal’s decision in Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners  UKFTT 00224 (TC).
If you require any further information about the Kittel, Mecsek, and Ablessio principles, or any other allegations by HMRC of fraud or fraudulent abuse, please contact Iain MacWhannell (email@example.com).