£400M penalty hangs over Denmark after losing major UK tax fraud case

Denmark is facing one of the heaviest legal penalties in English history after losing a major tax fraud case in the United Kingdom. The country’s tax authority is liable for approximately £400 million

Reports have pointed out that the country’s tax agency is responsible for most of the legal charges resulting from its unsuccessful “cum-ex” lawsuit. 

The £400M set as legal charges includes tens of millions of pounds to cover the expenses associated with British hedge fund trader Sanjay Shah, who was sentenced to 12 years in prison after a Danish court found him guilty of tax fraud in 2024, and corporate entities connected to him that are known as the “Shah defendants” in the case. 

Denmark in trouble after losing crucial tax fraud case in London

The Danish tax authority made public its intention to appeal this court decision. According to the tax authority, they will reclaim the legal expenses if this appeal goes through. However, sources pointed out that the Court of Appeal has not yet decided whether to consider this appeal.

Regarding this legal lawsuit, the High Court concluded last month that the Danish tax agency had failed to prove its case that Shah and his UK-based hedge fund, Solo Capital, had defrauded Denmark of approximately £1.4 billion through a dividend tax refund scheme. 

The “cum-ex” scandal affected several European nations, and governments were reportedly tricked into refunding billions of euros in dividend taxes that had never been paid in the first place. These countries include Denmark, Germany, Italy, and France.

English courts admitted that this London case is one of history’s most complex and valuable. To illustrate this, sources highlighted that the main trial, which concluded in April, consisted of 26 barristers and lasted 138 days. Interestingly, the written closing arguments alone had approximately 5,350 pages. 

Meanwhile, the agency argued that Shah and key executives from his hedge fund misled them into making payments via “cum-ex” trades. However, Mr. Justice Andrew Baker acknowledged that while some defendants, such as Shah, acted unethically in various ways, the authority ultimately failed to prove their case. 

After considering several factors, the judge handling this “cum-ex” lawsuit noted that the Danish authority employed very weak methods, which were nearly non-existent for reviewing and processing claims for dividend tax refunds.

According to court documents, the authority has been instructed to cover a significant portion of the defendants’ legal expenses, which will be thoroughly analyzed.

Jas Bains says Denmark’s long legal battle has greatly impacted his life 

Concerning the case’s progress, sources close to the situation mentioned that the “Shah defendants” would be entitled to recover 85% of their costs from September 1, 2023, to April 30, 2025. Additionally, court documents stated they will receive a full refund for any costs incurred outside this time frame.

When reporters contacted a representative from the law firm Meaby & Co., which represents Shah for comments, the spokesperson declined to respond.

In the meantime, other defendants who can claim back their costs include Jas Bains, the ex-legal boss at Solo. Bains dismissed the charges brought by the authority. He said he felt relieved when the court ruled in his favor, saying he was not responsible. Looking back on the long legal battle, he expressed dissatisfaction with how it affected his life. 

The costs involved in the case, Mr. Bains said, demonstrate how much damage can be done when bureaucrats are left to pursue ill-conceived legal actions. He also stated that there was no commercial logic or fairness in the authority’s decision-making.

At a hearing last month, the judge stated, “according to the numbers that I have received… the estimated total costs for both sides in this case seem to be about £400 million.”  At the time, the Danish tax authority was represented by 13 barristers, including 3 King’s Counsel (KCs) and lawyers from the firm Pinsent Masons.

If you're reading this, you’re already ahead. Stay there with our newsletter.