2014
COURT OF APPEAL (CRIMINAL DIVISION)
United Kingdom
CORAM
AI Generated Summary
The court dismissed HMRC's appeal to re-amend their defense in the FII Group Litigation. The core issue was whether HMRC could rely on Article 64(1) TFEU to deny claims for the time value of advance corporation tax (ACT) on third country foreign income dividends (FIDs). Both the High Court and Court of Appeal held that the FID regime breached Article 56 EC and wasn't protected by Article 64(1) TFEU, establishing issue estoppel, and deeming HMRC's attempt to re-litigate the issue an abuse of process.
Judgment
Lady Justice Gloster :
Introduction
On 27 March 2014 this court gave permission to the applicants, now The Commissioners for Her Majesty's Revenue and Customs ("HMRC"), to appeal against part of the order of Henderson J made on 29 November 2013 ("the November 2013 Order"), consequent upon his judgment of the same date, [2013] EWHC 3757 (Ch) (“the judgment”), by which the judge declined to allow HMRC to make certain re-amendments to their defence in ongoing litigation with the respondents, who are Test Claimants in the Franked Investment Income ("FII") Group Litigation ("the Claimants"): see paragraphs 31 to 39 of the judgment and paragraph 1 of the November 2013 Order .
Having heard full argument on the substantive appeal in the course of HMRC’s application for permission, we dismissed the appeal on the same date.
This judgment sets out the reasons why I considered it appropriate to dismiss the appeal.
The issue which was the subject of the appeal
The decision on the proposed re-amendments, relevant to this appeal, depended on the following issue: namely, whether it was open to HMRC to plead in their defence that they were entitled to rely on the standstill provision in Article 64(1) of The Treaty on the Functioning of the European Union ("TFEU") (formerly Article 57(1) of the EC Treaty) to deny claims by the Claimants for the time value of advance corporation tax (“ACT”) on third country foreign income dividends (“FIDs”), to which the Claimants were otherwise entitled by reason of breach of Article 63 of TFEU, pursuant to the European Court of Justice's ("ECJ") decision in C-446/04 Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue [2006] ECR I-11753 (“FII ECJ1”) .
Article 64(1) provides as follows:
“The provisions of Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment — including in real estate — establishment, the provision of financial services or the admission of securities to capital markets. In respect of restrictions existing under national law in Bulgaria, Estonia and Hungary, the relevant date shall be 31 December 1999.”
The background to the proceedings and the FID regime
The application arises out of the FII Group Litigation which was established by a group litigation order dated 8 October 2003