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On 31 March 2015 the VAT Expert Group adopted an Opinion on the Cross-Border Rulings, welcoming the extension of the EU pilot project until September 2018.

The VAT Cross Border Rulings (CBR) is a project to allow taxable persons to obtain advance rulings on the VAT treatment of complex cross-border transactions. 15 EU Member States have agreed to participate in a test case for private VAT ruling requests relating to such transactions. The relevant tax authorities will then consult each other with a view to delivering a common view of how the VAT rules apply to the transaction. The current list of cross-border rulings is available here.

The initiative is regarded as a first step towards better cooperation and discussion between Member States at tax administration level on real life cross-border VAT technical issues. The aim is to improve the coordination of the application and interpretation of the common EU VAT System, so that situations of double taxation can be eliminated.

The High Court has held that it has no discretion to extend the time for appealing the registration of a Cypriot judgment for enforcement in England.

Cypriot proceedings against the appellant had been compromised by a consent order made by the Cypriot Court holding that the appellant should pay certain sums to the respondent bank. The appellant claimed that she first learned of the proceedings when she was served with notice of registration of the order for enforcement in England. She appealled the registration of the order, contending that the English court should not have recognised it pursuant to Article 34(2) of the Judgments Regulation (44/2001). She served the appeal 22 days outside the two-month limit in Article 43(5) of the Judgments Regulation and CPR 74.8(4)(a)(ii).

Andrews J held as follows:

• The court could not extend the two-month limit for appealing, which, according to the language of the Judgments Regulation, was intended to be mandatory. The Regulation “established an autonomous and complete system for the recognition and enforcement of judgments, including for appeals, which excludes the possibility of any separate challenges to an enforcement order under domestic law”. For defendants domiciled in an EU state outside the state of enforcement (as the appellant was) the time limit was two months (as opposed to one month for those domiciled in the state of enforcement). Moreover, time did not start to run until there had been actual service of the order for enforcement. The extended time limit and the service rule struck the balance between giving the appellant fair opportunity to prepare the appeal and the need for uniformity and expeditious enforcement.
• Whether CPR 74.8 gave the court power to extend time otherwise than on account of distance did not have to be decided here, as that rule only applied to persons domiciled in a non-EU state. Citibank v Rafidian Bank and another [2003] EWHC 1950 (QB) was not authority for the proposition that the time limits for EU defendants in the Regulation were not mandatory, as this question did not have to be decided in the case.
• Even if the court had power to extend the two-month limit, it would not have exercised it here. The delay was serious, and there was no good excuse for it. The justice of the case did not require an extension. Guidance given in cases concerning the normal rules pertaining to appeals in English law could not be applied in the context of a complex international treaty or directly effective EU regulation, which involved policy considerations going beyond case management.

Christofi v National Bank of Greece (Cyprus) Ltd [2015] EWHC 986 (QB), 14 April 2015

The Commission has announced that it has opened a formal investigation against Google regarding its Android mobile operating system, and that it has sent Google a statement of objections on comparison shopping services.

First, the Commission intends to investigate whether Google’s conduct in relation to its Android mobile operating system and applications and services for smartphones and tablets has breached EU competition rules, namely Articles 101 (anticompetitive agreements) and 102 (abuse of a dominant position) TFEU. In particular, the investigation will examine the following allegations:
Second, the Commission has sent a statement of objections to Google alleging that in its general search results pages Google treats more favourably its own comparison shopping service (“Google Shopping”) and its predecessor service (“Google Product Search”) compared to rival comparison shopping services. Google’s conduct may therefore artificially divert traffic from rival comparison shopping services and hinder their ability to compete, to the detriment of consumers, as well as stifling innovation. The Commission’s key preliminary conclusions are as follows:

• whether Google has illegally hindered the development and market access of rival mobile applications or services by requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services;
• whether Google has prevented smartphone and tablet manufacturers wishing to install Google’s applications and services on some of their Android devices from developing and marketing modified and potentially competing versions of Android on other devices, thereby illegally hindering the development and market access of rival mobile operating systems and mobile applications or services;
• whether Google has illegally hindered the development and market access of rival applications and services by tying or bundling certain Google applications and services distributed on Android devices with other Google applications, services and/or application programming interfaces of Google.

• Google systematically positions and prominently displays its comparison shopping service in its general search results pages, irrespective of its merits.
• Google does not apply to its own comparison shopping service the system of penalties, which it applies to other comparison shopping services on the basis of defined parameters, and which can lead to the lowering of the rank in which they appear in Google’s general search results pages.
• As a result of Google’s systematic favouring of its subsequent comparison shopping services (“Google Product Search” and “Google Shopping”), both experienced higher rates of growth, to the detriment of rival comparison shopping services.
• Google’s conduct has a negative impact on consumers and innovation. Users do not necessarily see the most relevant comparison shopping results in response to their queries. Rivals’ incentives to innovate are lowered as they know that however good their product, they will not benefit from the same prominence as Google’s product.

The Organisation for Economic Co-operation and Development (OECD) has published a discussion draft on mandatory disclosure rules in instances of tax avoidance.

In particular, the draft deals with Action 12 (Mandatory Disclosure Rules) of the Base Erosion and Profit Shifting (BEPS) Action Plan. Action 12 of the BEPS Action Plan recognises the benefits of tools designed to increase the information flow on tax risks to tax policy makers and tax administrations and identifies three key outputs:
The OECD draft addresses the first two of the outputs. The design of enhanced models of information sharing will need to take into account other elements of the Action Plan that also involve the sharing of information between tax authorities.

• recommendations for the modular design of mandatory disclosure rules to provide flexibility for country specific needs;
• a focus on international tax schemes and consideration of a wide definition of tax benefit to capture relevant transactions; and
• designing and putting in place enhanced models of information sharing for international tax schemes.

The draft provides an overview of the key features of a mandatory disclosure regime and considers the effectiveness based on available data from those countries with such regimes (Chapter II). It sets out a modular framework and options for the design of a mandatory disclosure regime (Chapter III) and considers how international transactions could best be captured by a mandatory disclosure regime (Chapter IV).

The Action Plan calls for the OECD’s project to be completed by September 2015. Comments on the draft should be submitted to the OECD by 30 April 2015.

The Commercial Court has ordered that the claimants should give advance notice to the defendant if they proposed to make collateral use of documents already disclosed.

The proceedings in question had been settled in July 2014. The Serious Fraud Office (“SFO”) subsequently applied for an order pursuant to CPR 31.22(2) restricting or prohibiting the use of certain documents previously disclosed in the proceedings. CPR 31.22(1) provides that a party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where the document has been read to or by the court, or referred to, at a public hearing which has been held in public. No party had indicated an intention to use the documents for any collateral purpose. However, the SFO wanted the claimants to notify it of any such intention, arguing that this was due to the strong public interest against collateral use of the documents, which were part of the SFO’s criminal investigation.

Eder J held as follows:

• The present situation was unusual, since none of the parties had indicated an intention to use the documents for a collateral purpose, and the documents did not fall within the “read to or by the court, or referred to, at a public hearing” exception in CPR 31.22(1).
• However, under CPR 31.22(2) the court could make make an order restricting or prohibiting the use of a document which had been disclosed, even where the document had been read to or by the court, or referred to, at a hearing which has been held in public. “CPR 31.22(2) is in wide terms. In particular, the only pre-condition to the making of an Order restricting or prohibiting the use of a document is that such document “has been disclosed”. As it seems to me, there is no requirement on any applicant under that rule to show that any such document has been read to or by the Court, or referred to, at a hearing which has been held in public”.
• If the court did not make the order, and the claimants wanted to obtain the benefit of the exception in CPR 31.22(1), they would themselves have to carry out the exercise of identifying what particular documents had been read to or by the court, or referred to, at a hearing which had been held in public. The SFO would take the risk of such exercise being carried out properly by the claimants, as the exception in CPR 31.22(1) did not depend on the court’s permission, but operated automatically.
• If the court did not make the order, the SFO would have to incur substantial and unnecessary costs. In view of the overriding objective (CPR 1.1: dealing with cases justly and at proportionate cost), this was to be avoided.
• The court would make the order subject to the requirement that, once the claimants had given notice to the SFO of their intention to use the documents for a collateral purpose, the SFO should not notify any relevant third parties about such intended use.

Rawlinson and Hunter Trustees SA v Tchenguiz and others [2015] EWHC 937 (Comm), 01 April 2015

Amnesty International, Liberty and Privacy International have made an application to the European Court of Human Rights alleging that the UK’s mass surveillance practices are in breach of human rights.

The application follows a decision by the Investigatory Powers Tribunal (IPT) on 6 February 2015 whereby it was found that British intelligence services had acted unlawfully in accessing personal communications collected by the US National Security Agency (NSA). Prior to December 2014, the practice of intelligence sharing between the UK and the US was held to be in breach of Articles 8 (right to respect for private and family life) and 10 (freedom of expression) of the European Convention on Human Rights. The practice was unlawful because the rules governing the UK’s access to NSA information were secret. The IPT further ruled that post-December 2014 the UK’s access to NSA data was lawful. Previously, on 5 December 2014, the IPT had held that as of the date of the judgment there had been no breach of Articles 8 and 10 (because some of the UK-US intelligence sharing arrangements had been made public), but left open the question whether such breach had taken place before than date.

The applicant organisations disagree with the IPT’s finding of legality and argue that the UK’s bulk surveillance practices continue to breach Articles 8 and 10, as well as Articles 6 (the proceedings before the IPT breached the applicants’ right to a fair hearing) and 14 (the statutory framework governing bulk interception is indirectly discriminatory on grounds of nationality and national origin because it grants additional safeguards to people known to be in the British islands, but denies them to people abroad).

The European Court of Human Rights application: 10 Human rights organisations v United Kingdom: Additional submissions on the facts and complaints, 8 April 2015

In a case involving the sinking of a vessel, the Court of Appeal upheld the enforcement of two arbitration awards and denied France and Spain’s applications resisting enforcement on grounds of jurisdiction and state immunity.

Following the sinking of the vessel “Prestige”, France and Spain made claims for pollution damages against the vessel owners’ protection and indemnity insurers, The London Steamship Owners’ Mutual Insurance Association Limited. The association started arbitration proceedings in London seeking declarations that Spain and France were bound by the arbitration clause in its rules. The association applied under section 66 of the Arbitration Act 1996 for permission to enforce the subsequently obtained awards as judgments of the High Court. France and Spain opposed those applications on the grounds that as states they were immune from proceedings under the State Immunity Act 1978. However, in the course of those proceedings they issued application notices seeking declarations under sections 67 and 72 of the Arbitration Act that the awards had been made without jurisdiction.

The Court of Appeal held as follows:

• “[T]he court must ultimately determine whether the right conferred on the claimant is in substance one to enforce the obligation created by the contract of insurance or one to enforce a liability which is independent of the contract”. In the present case, the the right to recover against the insurer was largely defined by the terms of the contract. Moreover, Spanish law conferred on the third party a right to recover damages from the insurer, but only to the extent permitted by the contract of insurance.
• Consequently, the appellants’ right to seek compensation from the association related to an obligation in contract, and so it was to be determined in accordance with English law as the proper law of the obligation. Claims against the association would thus have to be pursued in arbitration in accordance with the terms of the contract of insurance.
• “A state is not entitled to claim immunity in relation to proceedings which it has itself commenced: section 2(3)(a) of the State Immunity Act; by doing so it has clearly consented to the court’s determining the claim and so has elected to waive any right to immunity”. France and Spain sought a declaration that the arbitrator did not have substantive jurisdiction; this was a step in the proceedings otherwise than for the sole purpose of claiming immunity.
• This made it unnecessary to decide whether the appellants had also submitted to the jurisdiction under either or both of sections 9(1) or 3(1)(b) of the State Immunity Act 1978, but the court would nonetheless state its views thereon. The court did not reach a conclusion on section 3(1)(b) (no state immunity for proceedings relating to an obligation of the state which by virtue of a contract (whether a commercial transaction or not) fell to be performed wholly or partly in the UK). Notably, the court held that under section 9(1) a state party to an arbitration agreement had agreed in writing to submit a dispute to arbitration. When a third party claimed under an insurance policy with an arbitration clause, it claimed under or through a party to the arbitration agreement and thus became a party to the arbitration agreement for the purposes of the Arbitration Act 1996.

The London Steamship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain & Anor [2015] EWCA Civ 333, 01 April 2015

The Council has re-listed a number of Iranian entities (namely Bank Tejarat and 32 shipping companies) and has extended sanctions against certain Iranian persons until 13 April 2016.

Council Implementing Regulation 2015/548 renews the restrictive measures in view of the situation in Iran until 13 April 2016. The Regulation also makes some amendments to the listings (namely the deletion of some persons).

Council Implementing Regulation 2015/549 relists Bank Tejarat and 32 shipping companies alleged to be owned by Islamic Republic of Iran Shipping Lines (IRISL). The relisting follows the judgments of the General Court in Joined Cases T-420/11 and T-56/12 and Case T-176/12 (all of 22 January 2015). The relisting is based on new statements of reasons, being the alleged ownership of the shipping companies and, for Bank Tejarat, as follows:

Bank Tejarat provides significant support to the Government of Iran by offering financial resources and financing services for oil and gas development projects. The oil and gas sector constitutes a significant source of funding for the Government of Iran and several projects financed by Bank Tejarat are carried out by subsidiaries of entities owned and controlled by the Government of Iran. In addition, Bank Tejarat remains partly owned by and closely linked to the Government of Iran which is therefore in a position to influence Bank Tejarat’s decisions, including its involvement in the financing of projects regarded by the Iranian Government as a high priority. Furthermore, as Bank Tejarat provides financing to various crude oil productions and refining projects which necessarily require the acquisition of key equipment and technology for those sectors whose supply for use in Iran is prohibited, Bank Tejarat can be identified as being involved in the procurement of prohibited goods and technology.

The Court of Appeal has referred to the CJEU the question of whether a derogation from the EU Emissions Trading System (EU ETS) for certain non-EEA flights infringes the equal treatment principle.

Swiss International Airlines (“Swiss”) challenged Decision 377/2013/EU (the “Decision”), which temporarily exempted flights to non-EEA countries from the application of the EU ETS. Rather than directly challenging the Decision, Swiss argued for the invalidity of the regulations implementing the Decision in the UK. Since the regulations simply implemented the Decision, Swiss sought a reference to the CJEU (the only court that can declare an EU measure invalid).

Under the EU ETS, aircraft operators in EEA states had to apply for a permit and allowances permitting them to emit certain amounts of carbon dioxide during a specified period. Such allowances had to be surrendered annually according to how much carbon dioxide had been emitted. The EU ETS applied originally to all operators flying within the EEA or between EEA countries and third countries. Several third countries objected to this as an infringement of their sovereignty. For political reasons, the EU decided retrospectively to suspend the operation of the ETS for 2012 in relation to certain third countries. Some countries were excluded from this suspension, including Switzerland. The partial suspension of the EU ETS meant that it applied to flights within the EEA and to flights from the EEA to certain third countries including Switzerland, but not to most other third countries.

Swiss argued that the Decision was a breach of the EU law principle of equal treatment. Swiss brought proceedings in the UK because the UK was Swiss’s “administering Member State” under the EU ETS Directive, as Swiss’s greatest estimated attributed aviation emissions in the relevant period were in relation to UK flights.

The Court of Appeal held as follows:

• “Was the judge right to say that the principle of equal treatment was inapplicable?” In view of the relevant EU case law (some of which had been decided in the 1970s and 1980s, in a very different EU landscape), the extent of the exception to the equal treatment principle remained unclear. This exception was that there existed “no general principle obliging the [EU], in its external relations, to accord to third countries equal treatment in all respects”. “It would be logical to suppose that the qualification relating to the EU’s external relations should apply as much to internal EU legislation affecting external relations as to agreements or treaties made directly with third countries. But there is no decision of the CJEU which directly decides that question”.
• “Was the judge right to hold that the principle of equal treatment would not anyway have been breached in this case?” To show a breach of the equal treatment principle, Swiss would have to show that the EU legislature manifestly exceeded the bounds of its discretion. The Commission and the EU legislature had not yet properly justified Switzerland’s exclusion from the EU ETS suspension. In the absence of a reasoned explanation, it was at least arguable that, if the principle of equal treatment applied here, the EU exceeded the bounds of its discretion by singling out Switzerland for special treatment.
• As regards remedies, in addition to the substantive question of the validity of the Decision being referred to the CJEU, additional questions would be referred. These were: whether the register of emission allowances should be rectified; whether Swiss would have a right to claim damages under article 340 of the TFEU against the European Parliament and the Council for its loss; what (if any) other relief should be granted; and what (if any) action the Environment Agency should take to procure that additional allowances surrendered be restored to Swiss.

Swiss International Airlines AG v Secretary of State for Energy and Climate Change and the Environment Agency [2015] EWCA Civ 331

The Commercial Court (Burton J) has dismissed a claim that Baker & McKenzie acted negligently in providing advice to Symrise, a German food flavourings maker, in relation to tax affairs in Mexico.

The law firm had been retained to advise on various acquisitions and post-acquisition restructuring plans (notably debt pushdown) involving Symrise’s predecessor in title in a number of countries, including Mexico. Symrise was formed by way of a merger between two companies coordinated by a private equity firm. C. €125m of debt were then pushed down to the Mexican arm of the Symrise business. Following a challenge to the pushdown scheme by the Mexican tax authorities, Symrise paid £11.2m in tax by way of settlement. Symrise argued, inter alia, that Baker & McKenzie had been negligent with regard to its tax advice.

Burton J held as follows:

• Whether Baker & McKenzie was negligent in its tax advice had two elements: whether the advice that the pushdown did not contravene Mexican tax law was incorrect, or alternatively whether a warning that it might so contravene should have been given. Symrise ran the first case. The evidence before the court showed that the pushdown did not contravene the relevant tax statute provision. In any case, the particular provision of the Mexican tax statute was not applicable here.
• On whether the tax settlement entered into by Symrise had been reasonable, the steps taken by the company had not been in reasonable mitigation. “Symrise acted unreasonably in abandoning the proceedings [in the Mexican tax courts] which they had a very good chance of winning (and in the event would have won), and giving up the very good prospect of a recovery which would have avoided the tax losses. The Claimant’s tax recovery claim therefore fails”. Symrise was ordered to pay Baker & McKenzie’s costs.

Symrise A.G. and another v. Baker & McKenzie and another [2015] EWHC 912 (Comm), 31 March 2015