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Denmark is facing one of the largest legal bills in English legal history, running into hundreds of millions of pounds, after the country lost a high-stakes tax fraud case in London.
The Nordic country’s tax authority is on the hook for the majority of legal costs stemming from its failed “cum-ex” lawsuit and these are estimated to total about £400mn, according to court documents.
The tally includes tens of millions of pounds to cover legal costs of British hedge fund trader Sanjay Shah — who is serving a prison sentence in Denmark — and corporate entities controlled by him, known in the proceedings as the “Shah defendants”.
The Danish tax agency said it is seeking to appeal against the ruling and that if it wins “we will recover the legal costs”. The Court of Appeal is yet to determine whether to hear the appeal.
The High Court found last month that the Danish tax authority had failed to demonstrate its case that defendants including Shah and his UK-based hedge fund Solo Capital defrauded Denmark of about £1.4bn in a dividend tax refund scheme.
Denmark, Germany, Italy and France are among the European countries hardest hit by the “cum-ex” scandal, in which governments were allegedly duped into refunding billions of euros of dividend taxes that had never been paid.
The London case was among the most complex and highest value ever to be heard by the English courts. The main trial, which concluded in April, featured 26 barristers and ran for 138 days. Written closing materials alone came to about 5,350 pages.
The agency accused Shah and senior people working for his hedge fund of tricking it into making the payments through the use of “cum-ex” trades.
But Mr Justice Andrew Baker found that while some defendants, including Shah, were dishonest in various ways, the authority ultimately failed to establish its case.
The Danish authority’s controls for assessing and paying dividend tax refund claims were “so flimsy as to be almost non-existent”, the judge found.
Court documents show that the authority has been ordered to pay a substantial proportion of the defendants’ legal costs, which are subject to detailed assessment.
The “Shah defendants” are entitled to recoup 85 per cent of their costs incurred between 1 September 2023 and 30 April 2025, as well as 100 per cent outside this period, according to court papers.
Law firm Meaby & Co, which represents Shah, declined to comment.
Other defendants entitled to recover their costs include Jas Bains, former legal chief at Solo. Baker dismissed the authority’s claims against him.
Bains said the costs of the case were “a prime example of the damage that is done when bureaucrats . . . are allowed to pursue ill-conceived legal actions”.
He added: “There was no commerciality or proportionality in the [authority’s] decision-making process.”
At a hearing last month, the judge said that “on the figures I’ve been told . . . the total aggregate costs of this case on both sides of the courtroom sound as if they may have been something of the order of £400mn”.
The Danish tax authority was represented by 13 barristers, including 3 KCs, as well as law firm Pinsent Masons.
In a statement, Kim Tolstrup, the authority’s deputy director-general of its anti-fraud team, said the agency “has been assigned to recover as much as possible of the estimated 12.7bn Danish kroner [$2bn] lost through alleged fraud against the Danish government”.
“So far, we have recovered almost DKr4.1bn” through legal action around the world.
He added: “I can’t comment on the High Court judge’s statement, but we estimate that our total legal costs in England will amount to approximately DKr1.3bn over a 10-year period.”
In the criminal case in Denmark, Shah was found to be the mastermind behind a scheme to defraud the country of DKr9bn. He was handed a 12-year sentence last December.
Shah denied any wrongdoing, arguing that he had merely exploited loopholes in Danish law. His appeal against the sentence is due to be heard in November next year.
