On 16th August 2016, the Jersey Court of Appeal rejected the latest round of legal challenges brought by Larsen and Volaw in respect of this high profile Tax Information Exchange Agreement case.
The background in briefest detail is as follows: On 4th October 2013, the Bergen District Court in Norway convicted Mr Larsen of serious tax fraud that is directly linked to an offshore group of trusts and companies administered in Jersey by local trust company Volaw [the Larsen Group]. The Norwegian criminal court made a number of findings of fact that suggest that the Larsen Group was, in reality, controlled by Larsen and not by its appointed trustees and directors. These findings triggered a further criminal investigation in Norway that resulted in the Comptroller of Income Tax in Jersey being asked to obtain further evidence to assist pursuant to the relevant TIEA. The Comptroller duly served Notices on Volaw requiring the production of relevant evidence.
Both Larsen and Volaw challenged the Comptroller’s decision to serve these Notices on a number of grounds. Volaw has also refused to provide the requested information on human rights grounds citing the privilege against self-incrimination. The Royal Court rejected all these challenges to the Notices in a detailed judgment dated 27th November 2015 that followed a seven-day hearing.
Larsen and Volaw appealed to the Jersey Court of Appeal and a three-day hearing took place in July 2016. However, the appellants faced an obvious difficulty in bringing these appeals. The Taxation (Exchange of Information with Third Countries) Regulations 2008 expressly removes the right to appeal to Jersey Court of Appeal in a TIEA case. According to the Regulations, any further appeal from the Royal Court has to be made direct to the Privy Council.
Larsen and Volaw argued before the Jersey Court of Appeal that it should find jurisdiction to hear the substantive appeal notwithstanding the wording of the Regulations. In particular, it was argued with considerable force that the parts of Regulations that excluded the Court of Appeal’s jurisdiction were in fact unlawful and should be held to have no legal effect. In a careful judgment published on 16th August 2016, the Court of Appeal firmly disagreed, concluding that the Regulations were lawful and that it had no jurisdiction to hear the substantive appeal.
The Jersey Court of Appeal also heard a related application for judicial review brought by Volaw against Jersey’s Attorney General. The Attorney General had served a Notice on Volaw pursuant to Article 2 of the Investigation of Fraud (Jersey) Law 1991 requiring the trust company to produce documents relevant to the activities of the Larsen Group. The Court of Appeal rejected Volaw’s claim that their asserted right to claim the privilege against self-incrimination should be allowed to frustrate the Article 2 Notice and dismissed the application.
This litigation is a timely warning to Jersey resident trustees and directors as the international community moves towards a greater exchange of information and transparency. This case demonstrates the extent of the problems that a trustee and/or company director can quickly face if there are issues concerning the management and control of a trust or company.
The Privy Council is now likely to consider this case in the autumn and their Lordships will decide if the Volaw and Larsen arguments merit a full hearing or should be dismissed on the papers.
Howard Sharp QC successfully represented the Comptroller of Income Tax and the Attorney General in both the Royal Court and the Jersey Court of Appeal. Howard represents both governments and private individuals in respect of TIEA cases and relating legal matters including CRS.