The first round of Denmark’s 1.5 billion-pound ($2 billion) Cum-Ex case against hedge-fund trader Sanjay Shah and his associates kicked off in London, just one week after he was charged in Germany.
The UK civil case is one avenue that Denmark’s tax authority is pursuing in a bid to claw back massive tax rebates it says it unwittingly handed to Shah and others. The nation has also charged Shah, who lives in Dubai.
The initial trial will examine whether the London court has jurisdiction to hear the case, since the tax agency is a foreign entity.
While it’s only set to last a week, the ruling has the potential to throw out the entire suit. But if the judge determines that the UK does have jurisdiction, a second preliminary trial lasting six weeks would begin in October. The main event would follow in 2023 and is expected to last for one year, the longest trial in High Court history.
In an indictment, released in January, the Danes allege Shah received at least 80 percent of around 9 billion kroner in taxes illegally refunded as a result of trades on behalf of pension funds that were either fictitious or didn’t entitle the companies to refunds. Shah and six others were also charged with money-laundering linked to Cum-Ex trades by Hamburg prosecutors last week.
The Cum-Ex practice, named for the Latin term for “With-Without, took advantage of tax laws that seemed to allow multiple investors to claim refunds on a dividend that was paid only once.
“The key issue for the court is whether a claim to recover property extracted by fraud is admissible in this court where the victim of a fraud is a foreign tax authority, the tax agency’s lawyer, Michael Fealy, said on Monday. It “was fraudulently induced to make payments by way of mistake.
Nigel Jones, who represents Shah and some of his associates, said that this was “the first known litigation brought directly by the foreign revenue agency of a sovereign state in this jurisdiction.
Shah’s representative declined to comment until after the trial. The Danish tax agency didn’t immediately respond to requests for further comment on the underlying dispute.