Decision of the District Court in Amsterdam

[Before the District Court in Amsterdam we argued that UK citizens were entitled to keep their EU citizenship rights after Brexit.

What follows is a professional translation of the Decision of the District Court in to referring that question to the Court of Justice of the European Union.

To enable that question to be argued before the Court of Justice we are crowdfunding for our legal costs here. Please support this litigation with a donation and by sharing a link. It may be our best chance for you and your children to live and work throughout the EU. https://www.crowdjustice.com/case/eu-citizenship/%5D.

In the name of the King

Ruling

DISTRICT COURT OF AMSTERDAM

Private law division, civil law presiding judge

Case number/session number: C/13/640244/KG ZA 17-1327 FB/AA

Ruling in interlocutory proceedings of 7 February 2018

In the case of

  1. DEBRA JOY WILLIAMS,

residing in The Hague,

  1. VICTORIA LOUISE HAMPTON,

residing in Amsterdam,

  1. STEPHEN STANLEY HUYTON,

residing in Muiden,

  1. NICHOLAS NUGENT,

residing in Amsterdam,

  1. MICHAEL ANDREW WATERS,

residing in Voorschoten,

  1. the foundation

BREXPATS – HEAR OUR VOICE,

Registered in Amsterdam,

  1. the association

COMMERCIAL ANGLO DUTCH SOCIETY,

registered in Voorschoten,

plaintiffs,

legal representatives Mr. Chr. A. Alberdingk Thijm and Mr. E.H. Janssen of Amsterdam

versus

  1. THE STATE OF THE NETHERLANDS

Registered in The Hague,

  1. the legal entity governed by public law

THE MUNICIPALITY OF AMSTERDAM,

registered in Amsterdam

Defendants,

Legal representatives Mr. E.H. Pijnacker Hordijk and Mr. G.A. Dictus of The Hague

 

The plaintiffs shall be referred to hereinafter respectively as plaintiffs 1 to 5, Brexpats and CADS. They shall be designated jointly as plaintiffs. The defendants shall be referred to hereinafter as the State and the Municipality, and also designated as defendants.

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  1. The proceedings

At the hearing of 17 January 2018, the plaintiffs submitted and claimed in accordance with the summons, a copy of which is attached to this ruling. The defendants submitted their defence, with conclusions relating to the claims submitted by Brexpats and CADS for declaration of inadmissibility and relating and relating to plaintiffs 1 to 5 for the rejection of the requested provisions.

Both parties submitted exhibits and pleading notes to the proceedings.

Plaintiffs 1, 2, 4 and 5 attended the hearing in person. The plaintiffs in section 1 appeared jointly on behalf of Brexpats and plaintiff 5 jointly on behalf of CADS. The plaintiffs were represented by Mr. Chr. A. Alberdingk Thijm, Mr. E.H. Janssen of Amsterdam and Mr. S.C. van Velze.

  1. de Gans and H. van Eijken attended on behalf of the Satate. M. van Genugten attended on behalf of the Municipality. The defendants were jointly represented by Mr. E.H. Pijnacker Hordijk and Mr. G.A. Dictus.

 

  1. The Facts

 

2.1.     On 23 June 2016, during the so-called Brexit referendum, the British population voted by a small majority for the United Kingdom to leave the European Union (hereinafter: EU). On 29 March 2017, the United Kingdom, in accordance with article 50, paragraph 2 of the Treaty on European Union (hereinafter: TEU), notified the European Council of its intention to leave the EU.

 

2.2.     In accordance with article 50, paragraph 2 in association with article 218 of the Treaty on the Functioning of the European Union (hereinafter: TFEU), the European Council and the United Kingdom commenced negotiations on the conditions for the withdrawal of the United Kingdom from the EU on 19 June 2017. At this point in time, no comprehensive agreement has been reached between the negotiating parties. A progress report was however presented on 8 December 2017 whereby the first phase of the negotiations has been concluded. It is evident from that report that the negotiating parties have formulated a common principle concerning, amongst other things, the rights of British subjects residing in other EU member states, however subject to the condition that “nothing is agreed until everything is agreed”.

 

2.3.     According to the progress report, at the time the United Kingdom leaves the EU, the principle of reciprocity must be accepted regarding the protection of the rights of British subjects currently residing in other EU states on the one hand and the subjects of other EU states currently residing in the United Kingdom on the other hand. This protection must also extend to their family members, as defined in Directive 2004/38/EC of the European Parliament and the Council of 29 April 2004 concerning the right of free movement and residence on the territory of member states for the citizens of the Union and their family members (hereinafter: EU Citizenship Directive). The scope of the protection is described as follows in paragraphs 12, 13 and 14 of the progress report:

  1. Irrespective of their nationality, the following categories of family members who were not residing in the host State on the specified date will be entitled to join a Union citizen or UK national right holder after the specified date for the life time of the right holder, on the same conditions as under current Union law:
  2. all family members as referred to in Article 2 of Directive 2004 38 EC, provided they were related to the right holder on the specified date and they continue to be so related at the point they wish to join the right holder; and

 

 

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  1. children born, or legally adopted, after the specified date, whether inside or outside the host State, where:
  2. the child is born to. or legally adopted by, parents who are both protected by the Withdrawal Agreement or where one parent is protected by the Withdrawal Agreement and the other is a national of the host State; or
  3. the child is born to, or legally adopted by a parent who is protected by the Withdrawal Agreement and who has sole or joint custody of the child under the applicable family law of an EU27 Member State or the UK and without prejudging the normal operation of that law, in particular as regards the best interests of the child;
  4. The UK and EU27 Member States will facilitate entry and residence of partners in a durable relationship (Article 3(2)(b) of Directive 2004 38EC) after the UK’s withdrawal in accordance with national legislation if the partners did not reside in the host state on the specified date, the relationship existed and was durable on the specified date and continues to exist at the point they wish to join the right holder;
  5. The right to be joined by family members not covered by paragraphs 12 and 13 after the specified date will be subject to national law (…).

Paragraph 15 states in conclusion that cross-border workers will also be covered by the scope of the protection of the withdrawal agreement.

2.4.     Plaintiffs 1 to 5 are subjects of the United Kingdom. They are all residents of the Netherlands.

Brexpats is a foundation in Dutch law established on 13 September 2017. According to an extract from the Commercial Register which relates to it, the aim of Brexpats is to promote the interests of all citizens of the European Union of British nationality whose rights or interests will be affected by Brexit. At the time of the foundation of Brexpats and at the time of the issuing of the injunction, the plaintiff in section 1 was, according to the extract from the Commercial Register, the chairman, secretary and treasurer of its board and the advisory board consisted of one person, namely B.R. Robinson.                             CADS is an Amsterdam network association of business owners with the aim of promoting English-Dutch trade relations. The board of CADS consists of the plaintiff in section 5 and four others. CADS has approximately a hundred members. These originate from the U.K., other countries of the Commonwealth and the Netherlands.

 

  1. The dispute

 

3.1.     The plaintiffs claim – in summary – the following:

Primary

I         in the event that EU citizenship is retained following Brexit:

  1. that the State and the Municipality respects, protects and guarantees the rights arising from EU citizenship of plaintiffs 1 to 5, their spouse and children and other British citizens remaining in the Netherlands;

 

 

 

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  1. that the State and the Municipality refrain from any measures which lead to the situation in which the rights arising from EU citizenship of plaintiffs 1 to 5, their spouses and children and other British citizens remaining in the Netherlands are infringed, specifically that the State and Municipality do not agree to or implement, a withdrawal agreement or any other agreement in which the aforementioned rights cannot be guaranteed;

II                  in the event that the withdrawal of the United Kingdom leads to the citizens of the United Kingdom losing EU citizenship and the rights associated with it:

  1. to order that the State does not restrict the rights arising from the EU citizenship of plaintiffs 1 to 5, their spouses and children and other British citizens remaining in the Netherlands, without an individual assessment of the proportionality principle first being carried out;
  2. in particular in respect of plaintiff 2, to prohibit the State from insisting that plaintiff 2 must relinquish her British nationality;
  • to order the Municipality to respect the individual assessment referred to in section (i) and, insofar as it is bound, to implement it;
  1. to order the Municipality to insist to the State that multiple nationality be facilitated for a person who applies for Dutch nationality, within a term of two weeks following the issue of this ruling;

subsidiary

III       to order the State and the Municipality to take such measures which the Presiding Judge considers to be judicially appropriate, in line with the above, to ensure that the rights associated with EU citizenship of British people remaining in the Netherlands are respected, protected and guaranteed;

primary and subsidiary

IV       to order the defendants to pay the costs of the proceedings, plus subsequent costs.

The plaintiffs state that in their opinion, the assessment of these claims focuses on the interpretation article 20 of the TFEU. In consideration of this case, they have submitted prejudicial questions to the European Union Court of Justice (hereinafter: CJEU).

3.2.     The State of the Netherlands et al have submitted a defence.

3.3.     The statements by the parties will be examined, where relevant, in further detail.

  1. The admissibility of Brexpats and CADs

4.1.     The State and the Municipality contend that the Brexpats foundation and the CADS association must be declared inadmissible in the claims submitted by them. The basis of their claim is that Brexpats and CADS do not fulfil the conditions laid down in article 3:305a of the Dutch Civil Code for the submission of a collective claim.

 

 

 

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Admissibility of Brexpats

4.2.     Regarding Brexpats, the State and the Municipality argue that the interests of persons on behalf of whom the claim has been submitted are not sufficiently guaranteed. They refer to the fact that Brexpats does not comply with the Claimcode (nor even with its own articles of association) as the functions of chairman, secretary and treasurer are one and the same person, i.e. plaintiff no.1. Insufficient guarantees therefore exist that plaintiff 1 will not allow her own interests to prevail over the interests of the persons on behalf of whom Brexpats has submitted the claims.

4.3.     In the assessment of defence of inadmissibility, the following is of interest. As it is disputed that a foundation as defined in article 3:305a of the Dutch Civil Code complies with condition that the interests of persons on behalf of whom the foundation has been established are insufficiently protected, the extent to which the parties concerned can benefit from the collective action in the event that the claim is awarded must be determined, and to what extent it may be relied upon that the claiming organisation possesses sufficient knowledge and expertise to carry out the proceedings. According to parliamentary history, it is also important what other activities the organisation has undertaken to apply itself to the interests of the disadvantaged parties, or whether the organisation has apparently been able to achieve its own objectives in the past, the number of disadvantaged parties affiliated to it or a member of the organisation, and the response to the question of to what extent the disadvantaged parties actually support the collective action. Whether the claiming organisation complies with the principles laid down in the Claimcode may also be significant. In the case of an ad hoc established foundation, whether it was established by existing organisations who have successfully represented the interests of those involved in the past may also be important (Parliamentary Papers II, 2011-2012, 33 126. No. 3 pp.12-13).

4.4.     In the light of this, the inadmissibility defence is successful in relation to Brexpats. In the assessment of the admissibility of a legal claim submitted by a foundation established on the basis of article 3:305a of the Dutch Civil Code, whether it is evident, or sufficiently credible, that it (seriously) promotes the interests of those on behalf of whom it has been established, must be examined. Although the Claimcode and the benchmarks contained within it is not decisive in this respect, it is evident from the legislative history of article 3:305a of the Dutch Civil Code that legislator wishes to attribute certain weight to it (as a soft law). In the case of Brexpats, all of its board functions are united in one person and the advisory board is also composed solely of one person. The balanced composition of the board required by the Claimcode, which according to this code can be guaranteed in principle by the appointment of 3 board members, is therefore also inadequately guaranteed. The State and the Municipality have correctly argued that as a result, there is a risk that Brexpats has been established to solely or principally promote the interests of plaintiff 1. Even if the factual situation were to deviate from that which is evident from the Commercial Register in the meantime, it does not change the above situation, as the State and the Municipality must rely on the information published in that register and it is up to Brexpats to update the publication of its relevant details as and when necessary. It is also even less evident that Brexpats has sufficient support among its group of interested parties it says it represents, namely the British subjects currently staying or residing in another EU country.

The claims submitted by Brexpats cannot therefore be admissible.

Admissibility of CADS

4.5.     In relation to CADS, the State and the Municipality argue that it has not fulfilled its obligation to furnish facts, in the sense that it has not adequately explained how and why it complies with the conditions laid down in article 3:305a of the Dutch Civil Code. Insofar as that may not be the case, the defendants also argue that CADS has not fulfilled the condition of article 3:305a, section 2, of the Dutch Civil Code, that it must have adequately attempted to achieve the claim by the means of consultation. The defendants state that CADS only approached them with a request to provide cooperation to a prejudicial reference to the CJEU and not with the subject of the current claim.

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4.6.     This defence is rejected. CADS has adequately demonstrated by the means of the evidence it has submitted that it complies with the conditions laid down in article 3:305a of the Dutch Civil Code. It is evident from its website that its objective is to promote commercial and cultural relations between the Netherlands and the United Kingdom, it has been in existence since 1972 and was therefore not founded solely for the purpose of these proceedings and its membership and composition adequately represent the group of interested parties on behalf of whom it has submitted its current claims.

4.7.     The fact that CADS has requested that the State and the Municipality to support it in its wish to submit prejudicial questions to the CJEU, does not mean that the condition laid down in section 4.5 has not been fulfilled. CADS still adopts the position that the submission of such prejudicial questions is necessary for the assessment of the jointly submitted claims. Partly in view of the essential cross-border nature of the current dispute and the (legal) position adopted by the State and the Municipality, central to which is that at this point in time they see no legal grounds or reason to offer the plaintiffs protection against the (threatened) harm to their rights they allege is embedded, any discussion under those circumstances is meaningless.

4.8.     The claims jointly submitted on behalf of CADS can therefore be declared admissible.

  1. The assessment

5.1.     The plaintiffs put forward three grounds for their claims, namely i) the doctrine of acquired rights, ii) the EU citizenship of article 20 of the TFEU and iii) article 8 of the ECHR.

5.2.     The State and the Municipality have put forward the most far-reaching defence that the proceedings constitute an undesirable breach of the political negotiation process on Brexit and that the plaintiffs have set up a notional dispute which is exclusively intended to get the case put forward to the CJEU. These defences will now be examined.

Political question?

5.3.     The first defence relates to the doctrine of the political question and concerns the distribution of tasks between the court and management and/or politics. In this doctrine, in answering the question of whether the court is authorised to rule on a dispute submitted to it, whether this concerns a subject that is constitutionally within the jurisdiction of another state power authority or sufficiently clear and objective criteria can be assigned   to enable the dispute to be assessed in court, and/or a legal ruling would thwart the possibility for another competent state power to form a political opinion on the subject, is decisive.

5.4.     In general, the assessment that a dispute is not suitable for assessment by the court is not made swiftly. The simple fact that proceedings are surrounded by political sensitivity, is insufficient in this context.

5.5.     This is even more exceptional in the Dutch constitution. It contains a carefully calculated balance of power between the legislative, implementing and legal powers and there is no clear separation of competences. The mutual relationship between the organs of the trias politica [separation of powers] can in the Netherlands (to a certain extent) be typified as a model based on partnership, whilst respecting each individual specific responsibility. Inherent to the task of the civil courts is the provision of legal protection at an individual level, if necessary against other state powers. This is not necessarily different in cases which also have a political dimension.

 

 

 

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5.6.     The current dispute concerns the question of whether citizens of the UK residing in the Netherlands will lose their fundamental freedoms – derived from the UK’s membership of the EU – due to the single fact that the UK is leaving the EU. In this hearing, that question is tailored to their fundamental right to remain, to reside and to work in another EU member state and to be able to move freely throughout the countries of the EU.Plaintiffs 1 to 5, together with the interested parties represented by CADS, have made use of their fundamental freedom to reside and work in another EU member state. They have specifically stated that they not only fear that those rights and freedoms will be harmed in the event of a Brexit, but that they are already suffering harm from the uncertainty of their legal position in that case. This (threat of) harm has partly arisen because the progress report – cited previously in sections 2.2 and 2.3 – states that the negotiating states are currently operating on the assumption that the existing rights and freedoms of British people residing in other EU countries will cease to exist if the negotiating parties do not agree otherwise.

5.7.     The consequent harm which currently exists consists of the fact that all of the plaintiffs (also including the interested parties bundled together under the representation by CADS), must, in organising their lives, take serious account of the fact that the State here will urge British people residing here following Brexit (once again: unless the negotiating parties do not agree otherwise) to leave its territories, without individual assessment, as third country nationals. This genuine threat means that, in view of the seriousness of this situation, they must already make the decision now to become a Dutch citizen. That potential nationalisation may have consequences for the retention of their British nationality and therefore for the possibilities for them to visit their home country and to maintain sustainable contacts with the family members there. Moreover, there are considerable costs associated with the acquisition of Dutch nationality. Furthermore, decisions must now already be taken concerning the legal position of partners residing in Amsterdam/The Netherlands, of whom one is a British subject and the other is a national of a third country. In addition, parents who themselves are British nationals, but have children who were born in the Netherlands, are now faced with difficult choices (more of which in section 5.24). Yet another plaintiff is now experiencing uncertainty as to whether he will be able to (continue to) do his job or profession as in order to do so it is essential that he be able to (continue to) travel freely throughout the countries of the EU.

5.8.     The plaintiffs are seeking protection from the civil courts against these threats and partially against the infringement of their fundamental rights which in their opinion already exists at this point in time. The granting of such protection is a uniquely legal task. It is part of the existence of a democratic legal state that, at an individual level, those who belong to a social or political minority are entitled in law to a certain degree of protection against the will of the majority.

5.9.     Against this background is the circumstance that the expiry or retention of these rights is also currently the subject of a political negotiation process (see above in sections 2.2. and 2.3). This not however a good reason not to rule on the claims submitted by the plaintiffs. The current defence is therefore rejected.

Notional dispute?

5.10.   The second defence involves the fact that this is a hypothetical or notional dispute, which is only designed to obtain a reference to the CJEU. This defence fails on the grounds stated above in sections 5.6 to 5.8. There is no question of a hypothetical or notional dispute. The plaintiffs have credibly demonstrated that the case relates in part to a very real threat and in part to exiting infringements of their fundamental rights and freedoms at an individual level. As already deliberated above in section 4.7, central to the (legal) position adopted by the State and the Municipality, is that at this point in time they see no legal grounds or reason to offer the plaintiffs protection against the (threatened) harm to their rights.

The Vienna convention on the law of treaties and article 20 of the TFEU

 

 

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5.11.   We now come to the assessment of the claims and the ground(s) on which they are based. These grounds lie in the core of the acquired rights and freedoms which the plaintiffs derive from their EU citizenship as defined in article 20 of the TFEU. Insofar as this is relevant to the current dispute, it concerns the right to the free movement of people and the right to continue to freely remain, reside and work in other EU member states. Article 20, paragraph 1 of the TFEU, grants these rights to citizens of the Union, that is to say, anyone who has the nationality of a member state, as is currently the case with the United Kingdom. The plaintiffs have actually exercised those rights and freedoms.

5.12.   The consequences of the termination of international treaties is covered in general by the 1969 Vienna Convention on the Law of Treaties (Treaty Series 1985/79, hereinafter referred to as the Vienna Treaty Convention). Amongst other things, this treaty contains clauses on the establishment, interpretation, fulfilment and termination of treaties. If matters progress to the termination of a treaty, article 70 of the Vienna Treaty Convention stipulates the legal consequences of such a termination. The parties are then released from the obligation to continue to implement the treaty, but that termination does not affect any obligation whatsoever or any legal position whatsoever of the parties which arose due to (the implementation of) the treaty prior to its termination.

5.13.   The Vienna Treaty Convention deals with the legal consequences which a treaty creates between states. The TEU and the TFEU vary from this to the extent that they not only create rights and obligations between states, they also create rights and obligations for the citizens of the Union. In contrast to other bilateral and multilateral treaties, the TEU and the TFEU create an individual, autonomous legal order, which is separate from national legal order and for the purpose of which the member states of the EU have limited their sovereignty (ECJ 5 February 1963, C-26/62, Jur. 1963, p.3, ECLI:EU:C:1963:1 (Van Gend & Loos)). The Vienna Treaty Convention however offers no definitive indication of the consequences of termination of the TEU and the TFEU. Correspondingly, the TEU gives its own rule for the procedure to be followed in the event that a member state notifies its wish to leave the EU.                                                                                                  It therefore follows on from the above that the question of the legal position of citizens of the UK residing in another member state, thereby having made use of their rights and freedoms derived from article 20 of the TFEU, following the withdrawal of the UK from the EU, must be answered on the basis of EU law itself.

5.14.   Article 20 of the TFEU awards EU citizens the right to free movement and residence in other member states. The construction of this provision implies a link between the citizenship of a member state and EU citizenship. As a consequence, the acquisition of EU citizenship, with its associated rights and freedoms, is reserved for subjects of the member states of the EU. In this light, it is defensible that, as a downside of this, the loss of the status of a citizen of an EU member state leads to the loss of EU citizenship. In view of the following however, this conclusion is not necessarily compelling.

Acquired rights                                                                                                                              5.15.  The CJEU has already repeatedly ruled on the doctrine of acquired rights. Its jurisprudence can be summarised as follows. In principle, acquired rights cannot be withdrawn by subsequent decisions. This follows on specifically from the general legal principles which form the basis of EU law, such as the principle of legal certainty and the principle of protection of legitimate expectations. However, as the required legal basis was lacking at the time of the granting of those rights, seen objectively, the withdrawal of those rights may be implemented (ECJ 12 July 1957, C-3-7/56, Jur. 1957, p.87; ECJ 22 March 1961, C-42 and 49/59, Jur. 1961, p.103, para 10; ECJ 26 April 2005, C-376/02, Jur. 2005, p. 1-3445, para. 32).

5.16.   In the above it is noted that the CJEU is very reserved in answering the question of whether an acquired right exists as defined above. Rights holders may still not rely on the fact that a particular situation is not liable to change and that they therefore possess an acquired, inalienable right. The answer to the question of whether rights from which EU citizens derive claims and which they actually exercise may be infringed and if so, to what extent (in brief), depends upon what legitimate expectations those citizens may foster in relation to (the continued existence of) those rights. The degree of predictability of the infringement of those rights plays a major role in this.

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The less probable it is that the right will be infringed, the interest (of the protection of rights) of the individual citizen in the event of continuity of his claim, gains greater weight compared to the general interest, even if that serves to infringe the right. And assuming that the infringement is justified, the effect of the new decree still only extends to future situations in such cases. (Please refer to CJEU 19 July 2012, C-522/10, ECLI:EU:C:2012:475 (Albert Reichel); ECJ 5 October 1994, C-133, 300 and 362/93, Jur. 1994, p-1-04863; ECJ 27 September 1979, C-230/78, Jur. 1979, p.2749.)

5.17.   From an abstract point of view, the possibility of a member state to withdraw from the EU, as specifically regulated in article 50 of the TEU, however unlikely it might have initially appeared that use would ever be made of that possibility, means that subjects of an EU member state (and therefore those of the UK) would have had to take account of the fact that the member state of which they possess nationality, may leave the EU.        From a definitive point of view, in recent years the plaintiffs would have had to increasingly take account of the – initially unlikely – realisation of that possibility as former Prime Minister Cameron had announced years earlier that a referendum on the UK’s membership was to be held in 2016.

5.18.   However, the above does not automatically mean that plaintiffs could also foresee that this could lead to the loss of, among other things, their right to live and work in other EU member states. Before the UK expressed its wish, no other Member State had made use of the possibility of withdrawing from the EU under Article 50 TEU. Only when this wish was made known, at least after the outcome of the referendum had become known, could the claimants take into account the possibility that their rights and freedoms as nationals of an EU Member State as referred to in Article 20 TFEU, as the result of that exit, would be lost. That moment is only a short time ago. In these circumstances, it cannot be ruled out that the rights and freedoms that UK citizens living in another EU country derived from Article 20 TFEU should be regarded as acquired rights in the sense referred to above in 5.15 and 5.16.

Broad interpretation of EU citizenship and rights deriving therefrom
5.19.   The CJEU has broadly interpreted both EU citizenship and the resulting rights. While Article 20 TFEU states that citizenship of the Union comes alongside national citizenship, the CJEU has ruled that citizenship of the Union should be the primary status of nationals of the EU Member States and that, on that basis, subject to explicit legal exceptions, are entitled to equal treatment in law. (See ECJ 20 September 2001, C-184/99, ECLI: EU: C: 2001: 458 (Grzelczyk), ECJ 11 July 2002, C-224/98, ECLI: EU: C: 2002: 432 (D’Hoop), CJEU 22 December 2010, C-208/09, ECLI: EU: C: 2010: 806 (Wittgenstein), CJEU 12 May 2011, C-391/09, ECLI: EU: C: 2011: 291 (Runevič Vardyn and Wardyn)).

5.20.   Once lawfully acquired, EU citizenship is an independent source of rights and obligations that cannot be simply reduced or affected by national government action (see AG Maduro’s conclusion of 30 September 2009 in case C-135/08 (Rottman), under 23 and the recent judgment of the CJEU 14 November 2017, C-165/16, ECLI: EU: C: 2017: 862 (Toufik Lounes)). In the former procedure, the CJEU considered, with regard to the withdrawal of the nationality of a citizen of an EU Member State, that an assessment of the principle of proportionality should take place. Whether the proportionality test must always be carried out individually or can also take place in abstracto, as the basis for a statutory regulation, is the subject of a Dutch question currently pending before the CJEU (ABRvS 19 April 2017, ECLI: NL: RVS: 2017: 1098).

5.21.   It is admitted that the cited case law of the CJEU relates to national measures that brought the loss of nationality of a Member State and thereby EU citizenship. Thus, that case-law does not automatically apply to the present case, in which a Member State intends to leave the EU, as a result of which all citizens of that Member State, including those who voted against that intention, are threatened with losing the status of EU citizen. Nevertheless, it is arguable that that case-law, and the principles on which it is based, applies in the same way to the present question, or at least influences the answer to that question.

 

 

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Protection of the minority against the majority
5.22.   The notification referred to in 2.1 above and the negotiations mentioned in 2.2 have taken place as a result of the wish of the majority of those who participated in the Brexit referendum referred to in 2.1. That is in itself entirely in accordance with the way in which a democratic constitutional state functions. But as considered in 5.8 above, the essence of a democratic constitutional state is that the rights and interests of minorities are protected as much as possible. The same applies to the functioning of the EU as a whole which forms a democratic community of (member) states governed by the rule of law.

Solidarity between EU citizens and between them and the Member States
5.23.   In view of the case law mentioned above in 5.19, the EU citizenship acquired through the operation of Article 20 TFEU – a new, transnational form of citizenship – aims to unite the (citizens of the) EU Member States and increase their mutual solidarity. Taking into account what has been considered above in 5.21, it can then be argued that this solidarity means that (the citizens of) other EU Member States cannot leave the claimants who, against their will are threatened with losing fundamental rights and freedoms that are derived from that EU, should not be left out in the cold.

Complications in the case of young children who are EU citizens
5.24.   In the above it should be borne in mind that the status of EU citizen not only affects the fundamental rights of the relevant EU citizens, but is also important in some circumstances for the right of residence of third-country nationals, provided that is a dependency relationship between the EU citizen and the third-country national and the non-granting of a right of residence to the third-country national would effectively lead to the EU citizen not enjoying effective enjoyment of the rights conferred on him by Article 20 paragraph 2 of the TFEU. According to the CJEU, in any event, that is the case if a third-country national – as in the opinion of the UK after Brexit, if the negotiating parties do not agree otherwise – is denied the right to reside in the Member State in which are his/her young children who are EU citizens. The consequence of a refusal to grant a right of residence to a third-country national would then actually lead to the obligation that EU minor citizens would also be forced to leave the EU (CJEU 8 March 2011, C-34/09, ECLI).: EU: C: 2011: 124 (Ruiz Zambrano) and CJEU 10 May 2017, C-133/15, ECLI: EU: C: 2017: 354 (Chavez-Vilchez)). In addition, it should be noted that, where the dependency relationship does not force the acceptance of a derived right of residence, it cannot be claimed on the basis of the importance that the unity of the family must be preserved as much as possible, the CJEU has repeatedly ruled (see CJEU 15 November 2011, C-256/11, ECLI: EU: C: 2011: 734 (Dereci), CJEU 6 December 2012, C-356 and 357/11, ECLI: EU: C: 2012: 776 (O e.a.) and CJEU May 8, 2013, C-87/12, ECLI: EU: C: 2013: 291 (Ymeraga)).

Result
5.25.   What has been considered above in 5.15-5.24 entails that there is reason to doubt the correctness of the interpretation of Article 20 TFEU that the loss of the status of citizen of an EU Member State leads to loss of EU citizenship as well (see for this in 5.14). The answer to the question which explanation is the right one is essential for the assessment of these claims.

Intention to submit prejudicial questions

5.26.   On these grounds, prejudicial questions will be submitted to the CJEU. The plaintiffs have submitted a long list of very detailed questions. They will not be examined in further detail. Some of the questions are not relevant to the assessment of the current dispute. Furthermore, that detail may hamper the CJEU in approaching the current question (which in essence affects all the citizens of the UK living in another EU country at the time of Brexit) in the most meaningful way.

5.27.   Against this background, the intention exists to submit the following questions to the CJEU:

  1. Does the withdrawal of the United Kingdom from the EU automatically lead to the loss of the EU citizenship of British nationals and thus to the elimination of the rights and freedoms deriving

C/13/640244/KG ZA 17-1327                                                                                                        11

7 February 2018

 

from EU citizenship, if and in so far as the negotiations between the European Council and the United Kingdom are not otherwise agreed?

  1. If the answer to the first question is in the negative, should conditions or restrictions be imposed on the maintenance of the rights and freedoms to be derived from EU citizenship?

5.28.   The parties are granted the opportunity of a period of one week to express an opinion on these proposed prejudicial questions. The parties are not granted the opportunity to comment in any other way on this ruling or the intention to submit prejudicial questions.

 

The ruling

The presiding judge

Grants the parties the opportunity to respond to the proposed prejudicial questions outlined in section 5.27. above in writing by 14 February at the latest;

observes any further ruling.

This ruling is issued by Mr. F.B. Bakels, presiding judge, assisted by Mr. A.G.F. Ancery as clerk of the court, and has been declared publicly on 7 February 2018.

 

Issued by S. Sterrenburg

[Please share and support the crowdfunding to enable the point to be argued before Court of Justice of the European Union: https://www.crowdjustice.com/case/eu-citizenship/]

 

 

 

 

 

 

A summary – in English – of the decision of the District Court in Amsterdam.

5.18. However, the above does not automatically mean that plaintiffs could also foresee that this could lead to the loss of, among other things, their right to live and work in other EU member states. Before the UK expressed its wish, no other Member State had made use of the possibility of withdrawing from the EU under Article 50 TEU. Only when this wish was made known, at least after the outcome of the referendum had become known, could the claimants take into account the possibility that their rights and freedoms as nationals of an EU Member State as referred to in Article 20 TFEU, as a the result of that exit, would be lost. That moment is only a short time ago. In these circumstances, it can not be ruled out that the rights and freedoms that UK citizens living in another EU country derived from Article 20 TFEU should be regarded as acquired rights in the sense referred to above in 5.15 and 5.16.

Broad interpretation of EU citizenship and rights deriving therefrom
5.19. The CJEU has broadly interpreted both EU citizenship and the resulting rights. While Article 20 TFEU states that citizenship of the Union comes alongside national citizenship, the CJEU has ruled that citizenship of the Union should be the primary status of nationals of the EU Member States and that, on that basis, subject to explicit legal exceptions, are entitled to equal treatment in law. (See ECJ 20 September 2001, C-184/99, ECLI: EU: C: 2001: 458 (Grzelczyk), ECJ 11 July 2002, C-224/98, ECLI: EU: C: 2002: 432 (D’Hoop ), CJEU 22 December 2010, C-208/09, ECLI: EU: C: 2010: 806 (Wittgenstein), CJEU 12 May 2011, C-391/09, ECLI: EU: C: 2011: 291 (Runevič Vardyn and Wardyn)).

5.20. Once lawfully acquired, EU citizenship is an independent source of rights and obligations that can not be simply reduced or affected by national government action (see AG Maduro’s conclusion of 30 September 2009 in case C-135/08 (Rottman), under 23 and the recent judgment of the CJEU 14 November 2017, C-165/16, ECLI: EU: C: 2017: 862 (Toufik Lounes)). In the former procedure, the CJEU considered, with regard to the withdrawal of the nationality of a citizen of an EU Member State, that an assessment of the principle of proportionality should take place. Whether the proportionality test must always be carried out individually or can also take place in abstracto, as the basis for a statutory regulation, is the subject of a Dutch question currently pending before the CJEU (ABRvS 19 April 2017, ECLI: NL: RVS : 2017: 1098).

5.21. It is admitted that the cited case law of the CJEU relates to national measures that brought the loss of nationality of a Member State and thereby EU citizenship. Thus, that case-law does not automatically apply to the present case, in which a Member State intends to leave the EU, as a result of which all citizens of that Member State, including those who voted against that intention, are threatened with losing the status of EU citizen. Nevertheless, it is arguable that that case-law, and the principles on which it is based, applies in the same way to the present question, or at least influences the answer to that question.

Protection of the minority against the majority
5.22. The notification referred to in 2.1 above and the negotiations mentioned in 2.2 have taken place as a result of the wish of the majority of those who participated in the Brexit referendum referred to in 2.1. That is in itself entirely in accordance with the way in which a democratic constitutional state functions. But as considered in 5.8 above, the essence of a democratic constitutional state is that the rights and interests of minorities are protected as much as possible. The same applies to the functioning of the EU as a whole which forms a democratic community of (member) states governed by the rule of law.

Solidarity between EU citizens and between them and the Member States
5.23. In view of the case law mentioned above in 5.19, the EU citizenship acquired through the operation of Article 20 TFEU – a new, transnational form of citizenship – aims to unite the (citizens of the) EU Member States and increase their mutual solidarity. Taking into account what has been considered above in 5.21, it can then be argued that this solidarity means that (the citizens of) other EU Member States cannot leave the claimants who, against their will are threatened with losing fundamental rights and freedoms that are derived from that EU, should not be left out in the cold.

Complications in the case of young children who are EU citizens
5.24. In the above it should be borne in mind that the status of EU citizen not only affects the fundamental rights of the relevant EU citizens, but is also important in some circumstances for the right of residence of third-country nationals, provided that is a dependency relationship between the EU citizen and the third-country national and the non-granting of a right of residence to the third-country national would effectively lead to the EU citizen not enjoying effective enjoyment of the rights conferred on him by Article 20 paragraph 2 of the TFEU. According to the CJEU, in any event, that is the case if a third-country national – as in the opinion of the UK after Brexit, if the negotiating parties do not agree otherwise – is denied the right to reside in the Member State in which are his/her young children who are EU citizens. The consequence of a refusal to grant a right of residence to a third-country national would then actually lead to the obligation that EU minor citizens would also be forced to leave the EU (CJEU 8 March 2011, C-34/09, ECLI). : EU: C: 2011: 124 (Ruiz Zambrano) and CJEU 10 May 2017, C-133/15, ECLI: EU: C: 2017: 354 (Chavez-Vilchez)). In addition, it should be noted that, where the dependency relationship does not force the acceptance of a derived right of residence, it can not be claimed on the basis of the importance that the unity of the family must be preserved as much as possible, the CJEU has repeatedly ruled (see CJEU 15 November 2011, C-256/11, ECLI: EU: C: 2011: 734 (Dereci), CJEU 6 December 2012, C-356 and 357/11, ECLI: EU: C: 2012: 776 (O ea) and CJEU May 8, 2013, C-87/12, ECLI: EU: C: 2013: 291 (Ymeraga)).

Result
5.25. What has been considered above in 5.15-5.24 entails that there is reason to doubt the correctness of the interpretation of Article 20 TFEU that the loss of the status of citizen of an EU Member State leads to loss of EU citizenship as well (see for this in 5.14). The answer to the question which explanation is the right one is essential for the assessment of these claims.

Questions referred
1. Does the withdrawal of the United Kingdom from the EU automatically lead to the loss of the EU citizenship of British nationals and thus to the elimination of the rights and freedoms deriving from EU citizenship, if and in so far as the negotiations between the European Council and the United Kingdom are not otherwise agreed?

2. If the answer to the first question is in the negative, should conditions or restrictions be imposed on the maintenance of the rights and freedoms to be derived from EU citizenship?

[This short unofficial summary has been prepared by Bureau Brandeis, the law firm acting for the Claimants]

Why we need to know about Article 50

There is no doubt there is a political route to revocability: if the other 27 agree, we can remain. But to improve the bargaining position of the UK, to ensure we retain the opt-outs and rebates that we presently enjoy, and to place the decision entirely in the hands of the UK’s Parliament and – if it chooses – its people we must seek to establish a legal route to revocability. We must seek to secure a right for Parliament to withdraw the Article 50 notice – if it chooses.

The permission decision of the Court of Session will be handed down on Tuesday at 9.30am. I was warned before the hearing – once the judge was known – that we were likely to have a bumpy ride and so it proved. But we have a right to appeal to the Inner House and, should we need it, there is an appeal to the Supreme Court.

I believe we are right and the question should be referred. There are a number of reasons why I say this. But the main argument is this.

You cannot sensibly pretend that Parliament is not considering whether to revoke the Article 50 notice. The only amendment to the Repeal Bill that passed in the Commons opened the door to exactly that possibility. But don’t accept my characterisation: it’s exactly how (for example) Sir Oliver Letwin (speaking against it) put it. So did others.

In those circumstances it is vital that the UK Parliament knows whether it possesses that power. Indeed, it is vital that the EU27 knows whether Parliament possesses that power. And both need to know before the question whether to exercise it arises. If Parliament doesn’t know then – should Parliament come to exercise the power – there will be chaos for the UK and the r27. There will be a period of many months in which we and they may not know whether the UK is inside or outside the EU. So it is not practical and it is not sensible to wait and see. When decisions of this magnitude are being contemplated the rules must be known in advance.

And there is no good argument to the contrary. None at all.

Stripped of legal niceties, all the Government can say is, ‘we do not plan to revoke’. But (see that Oliver Letwin quote again) it is not for Government to decide. It is for Parliament to decide. (And, of course, both Governments and their positions can change.)

That is why I think it is important that we know the answer. And if, as I expect, Lord Doherty in the Court of Session disagrees and refuses to refer the matter to the CJEU it will be my advice to the seven petitioners that we should appeal to the Inner House of the Court of Session and, if necessary, the Supreme Court. (We have a right to appeal to the Inner House; we would need permission for a further appeal to the Supreme Court).

To do this we will need further funds.

As matters stand (in this case as in many others that I and the Good Law Project am and have been involved with) I am personally indemnifying the petitioners against the risk of costs falling upon them. I have no money other than what I have earned in a relatively short career at the Bar. That is a difficult financial burden to sustain in one piece of litigation; it is impossible across many.

So, if we lose on Tuesday, I will launch a further fundraising on Crowdjustice to protect us against adverse costs. You will have the opportunity to decide.

In the meantime, you can see our claim here.

You can see the Government’s answers here.

You can see the affidavit of Joanna Cherry QC here.

And you can see the affidavit of Andy Wightman here.

And you can see the speaking note of Aidan O’Neill QC here.

 

Don’t be too hard on US multinational: Treasury to HMRC

The link below is to an extract from a covertly recorded 70 minute conversation between Guy Westhead, a senior member of HMRC’s team dealing with VAT policy, and a Mr Richard Allen that took place in late 2015.

At the time of the conversation, Guy Westhead was a senior HMRC officer. During the conversation he described himself as being one level below the Director of Indirect Tax at HMRC. Below is a photo, taken several months after the covertly recorded conversation, of him sitting behind the then Financial Secretary to the Treasury, David Gauke. Mr Gauke was, at the time, appearing in a debate before the Backbench Business Committee on VAT Evasion and Internet Retailers.

Guy Westhead

Richard Allen is an individual who has lobbied HMRC for better enforcement of VAT law. The unusual circumstances in which Mr Allen came to have and record that conversation are set out in this document: Signed Statement. The Appendices mentioned in that Statement are the photo shown above (Appendix Two) and the handwritten letter and private email posted at the bottom of this blog post.

The whole recording is remarkable. It was recorded covertly and so I have not published it in its entirety. However, there seems to me to be a compelling public interest in the publication of the extract linked to above because it contains this exchange:

RA: What worries me is that ministers have some kind of agenda to basically not annoy Amazon. If Amazon does something illegal Amazon has to be punished in my view.  In America they tried things like “that’s it we are not building a warehouse in your State” and all this sort of stuff…

GW: I’ve heard of that. I’ve heard from the Treasury; the Treasury didn’t want us to be too hard on Amazon. But I think that was a brackets “yet” close brackets.

In the past, writing posts like this, I have looked at the evidence in the public domain concerned how HMRC behaves towards multinationals and I have concluded that it does not make sense.

Something, I have said, is impeding HMRC’s inclination to apply the law against large US tech companies (in that post, Uber). As I put it:

I can see no good reason why HMRC should adopt this stance. None at all. It is inexplicable to me – unless HMRC’s conduct is motivated by factors otherwise than collecting the tax demanded by the law. I do not know what those factors might be. But this smells very bad.

Elsewhere, I speculated:

Both that blog post and that tweet were written before I had met Mr Allen or was aware of this exchange. However my speculations now seem well founded. This exchange is direct evidence from a senior HMRC official, speaking in his field.

The issue, for me at least, is not what did or did not happen to Amazon. The issue is that the powerful and highly politicised Treasury thought it appropriate to seek to influence how HMRC exercised its statutory functions to cause it to go easy on one large and powerful US tech company (here, one accused of facilitating tax evasion).

And if one why not others?

 

[I wrote to Guy Westhead on Friday to give him an opportunity to respond and received no reply].

Appendix One

HandwrittenLetter

Appendix Three

Appendix Three

Six reasons why a referendum on the deal won’t hurt our bargaining position

Both Barry Gardiner on the closed Left of British politics and Daniel Hannan on the buccaneering Right have warned against talk of a referendum on the outcome of negotiations. Both contend it weakens the UK’s negotiating position.

This is how their argument goes.

The EU would rather we stayed – we are significant net contributors to its budget after all – and so they will offer us a bad deal if a referendum is on offer. By doing so – by giving the electorate a choice between a bad deal and remaining – they hope to persuade the electorate to choose to Remain. And to get what they want.

But is this analysis right? Does it bear examination?

Here are six reasons why it seems to me it does not.

1. The real negotiations will happen after any referendum

We are contemplating a referendum before we leave the EU. Barring some change in direction, we will leave the EU at the end of March 2019. What we presently envisage is that, by that date, we will have agreed, at most, the broad outlines of a deal. This is why we need a transitional period.

The consequence of this is that the actual negotiating will take place after the referendum. It can’t sensibly be argued that the EU would change its negotiating stance to influence the result of a referendum that had already taken place.

2. The EU has already made its position clear

The contours of the outcome of the negotiations are already clear. They flow from the choices that Theresa May has already made – to leave the customs union and the single market. And from the EU’s position that the four freedoms are indivisible and that (as is logically self-evident) a country outside the EU, which does not contribute to the EU’s budget, and which is not bound by EU rules, will not enjoy the advantages of EU membership.

This matters because the logic of the argument that the referendum would influence the EU’s negotiating stance is that the EU would offer a worse deal so that voters rejected it and the UK remained in the EU. But voters are likely already to know enough about the shape of our future relationship with the EU to know whether they want it or not.

They now, already, for example, that Brexit will mean an end to EU citizens having the right to live and work in the UK. But they also know that it will mean an end to UK citizens having the right to live and work in the EU. And that it will mean a worse trading relationship with the EU. And that there is no sign of significant extra spending for the NHS.

As to the detail that remains to be negotiated, it is precisely that: detail. Very few voters will be influenced by the precise nature of the non-tariff barriers between the UK and EU for widgets. And the EU’s stance on this detail is unlikely to influence voters one way or another. So why would the EU change it?

3. The EU is not stupid. It already knows where the country is.

The argument is that by calling for a second referendum you are somehow letting the EU into a secret – that a substantial part of the United Kingdom still wants to remain in the EU.

Here’s how Barry Gardiner put it (see link above):

“What that would indicate is, to our negotiating partners in the European Union is, ‘give the UK the worst possible deal and they’re more likely to stay in.’ So you would be undermining your own country’s negotiations. That’s what people who are calling for a second referendum are doing.”

But this assumes that the EU will learn something new and profoundly important – important enough to change its negotiating position – from the suggestion that we have a referendum on the final deal.

But the state of political debate in the UK is no great secret. The EU already knows a referendum is a possibility. It reads the opinion polls that show consistent majorities for remain. It knows MPs voted to amend the Repeal Bill so that Parliament must approve the deal. It knows that if Parliament is not minded to approve that deal it may well take the opportunity to put the question back to the people.

None of this is a secret to the EU. If the EU was willing and able to adjust its position to give the UK a worse deal to make it more likely for people to choose to remain it would have done that already.

4. The EU has very little room to change its negotiating position

If you’re the EU, this is already a rather complex negotiation.

It has forged a consensus between member states of what the broad parameters of what a deal will look like. And now it must maintain this consensus between the remaining member states. This is no easy task in a world in which Brexit will create, as between those member states, winners and losers. And in which, even within each member state, there are different interests to be traded off.

The EU must have regard to the interests of those who are significant exporters to the UK – and who may wish to continue trading on similar terms. And it must protect the unity of the European Union by securing that the populations of member states see a better future for themselves inside the EU than out.

It must look to the coherence of the trade agreements the EU has entered into already. And it must have regard to the precedent an agreement with the UK might set for trade agreements with bigger and prospectively more important trading partners than the UK – such as the US and China.

So the EU doesn’t actually have much room to manoeuvre to try and persuade people to vote to Remain in any subsequent negotiation.

5. The EU has little incentive to change its negotiating position

Those who support Brexit already contend that the EU is “punishing” the UK – presumably believing this will turn the electorate against the EU. By this logic, the EU, should it toughen its negotiating stance, would make a Remain vote in a referendum less likely. Indeed, by this logic, the best way for the EU to cause the electorate to vote Remain would be to soften its negotiating stance: such that calling for a referendum would strengthen our negotiating position.

Of course the force of this argument – contending that the UK is being punished for leaving the EU is a good way to persuade people we should leave the EU – is open to question. But it does demonstrate that, even were the EU considering ‘toughening’ its negotiating stance, it could not be certain that would have the effect of causing people to opt for Remain.

6. The evidence suggests the EU will not toughen its stance

There is no sign that the EU might change its position to try and persuade voters in the UK to support Remain.

Back in March 2016, Boris Johnson argued that by voting leave we might get the change to the EU we want. He said:

There is only one way to get the change we need, and that is to vote to go, because all EU history shows that they only really listen to a population when it says No.

But the EU has had ample opportunity since the Referendum to try and influence leave voters in the UK to change their minds. It could, for example, have offered some revised deal on free movement, for example, to seek to persuade leave voters to recant. But it has not.

So why would the EU toughen its stance now? If anything, as even Boris Johnson recognised, a referendum is likely to cause the EU to seek to offer concessions to the UK should we remain to cause it to do so.

We might get a better deal than is presently on the table.

 

Ideology – for those on the closed Left and the buccaneering right – is an easy sell. In a complex world it offers straightforward slogans. For detailed analysis it substitutes broad assertion. What use logic when you can play to prejudice.

But if you actually analyse the contention – if you really think about whether talk of a referendum weakens the prospects of a good deal – it vanishes into thin air.

 

Here’s what Brexit means: illegal bungs for the wealthy

For two days in a row the Telegraph – owned by two hugely wealthy men living in a tax haven – has given over its front page to demands for other hugely wealthy men to escape an apparent inheritance tax liability: Lord Edmiston, Arron Banks and Peter Cruddas.

But what’s the real story?

Inheritance tax isn’t quite a tax on inheritances. It’s a tax on gifts – transactions the immediate effect of which is to diminish how much you’re worth – made by individuals whether in life or on death. It’s subject to various exemptions including one for charities and another for recognised political parties.

But there is no general exemption for politically motivated spending.

The rule in question – section 24 of the Inheritance Tax Act 1984 – has been around since at least the Finance Act 1975. It was adopted by our Parliament – by our democratically elected MPs – and has nothing to do with EU law. (Ironically, back in December 2016 Arron Banks claimed to have legal advice that the European Convention of Human Rights rendered section 24 unlawful. I asked him for a copy of that advice and he promised to provide it to me but then broke his promise.)

So the law made by our own Parliament is clear. Parliament has said that if you give large sums – there are various exemptions for small donations – of money to political campaigns you will make a gift and have to pay inheritance tax on that gift.

And HMRC’s obligation is also clear. It is to apply that law and collect the tax that is due. If HMRC does not HMRC breaks the law. If they sought to let Edmiston, Cruddas or Banks off their proper tax liabilities they could (and no doubt they would) be judicially reviewed.

What of the affected individuals?

Each of the three leave voters affected is immensely wealthy and each has a chequered attitude to tax.

Lord Edmiston first. The Mirror reported in 2015 that he was worth £440m and that his initial attempts to become a peer had been blocked because of a dispute with HMRC. The Mail reported that he had received an accelerated payment notice, a notice designed to force those who have engaged in tax avoidance to pay the tax they sought to avoid.

Peter Cruddas was estimated by the Sunday Times rich list to be worth £750m. The Guardian reports that he lived in the tax haven, Monaco, and commuted to work in the City.

Arron Banks has a network of companies set up in tax havens according to this Guardian report. Concerns about his tax affairs have been raised by Charlie Elphicke MP. And his name appeared in the Panama Papers.

In an interview with the New Statesman he said this:

Capture

I read this as him saying he is unembarrassed about seeking to minimise his or his businesses’ tax liabilities through the use of offshore tax havens. Despite this evidence he has threatened to sue me for calling him a tax dodger. In that same New Statesman article he also claimed to have been worth, in 2014, more than £100m.

So all three are or claim to be immensely wealthy. And all three are reported to have engaged in behaviour consistent with a rather unpatriotic disinclination to pay their share to the nation.

So what is the objection to the law?

Yesterday the Telegraph reported Jacob Rees-Moggs’ complaint:

Capture

And today it reports Boris Johnson and Michael Gove as attacking HMRC for enforcing that rule.

Capture

 

 

 

But as I have shown, HMRC is doing no more than acting as Parliament and the law compel it to.

The sums involved are – for you and I – enormous. Yesterday’s Telegraph reported that the demands were for up to £2m.

Nevertheless, Rees-Mogg, Johnson and Gove are suggesting that the law should be disapplied to give these immensely wealthy men huge bungs; bungs against the will of Parliament; bungs that are unlawful; bungs that would increase the deficit; bungs that would increase the amounts teachers and nurses and bus-drivers will have to pay in tax.

That’s what the leaders of Brexit are saying. That you should fund unlawful bungs of money to immensely wealthy Brexiters. That’s how much they care about normal working people.

That’s Brexit for you.

Uber: HMRC and the Public Accounts Committee

In October, I wrote this post. It made five points.

(1) I explained why I believed Uber was supplying transportation services.

(2) I set out what that meant in tax terms – Uber was liable to pay, but was failing to pay, hundreds of millions of pounds in VAT every year.

(3) I explained that HMRC’s ability to collect that unpaid VAT was time-limited – as time passed, HMRC lost the ability to collect those hundreds of millions of pounds for the rest of us.

(4) I argued that HMRC should raise assessments to protect its position in case the various cases before the courts confirmed Uber was supplying transportation services.

(5) And I said that HMRC’s failure to do so was remarkable – it indicated serious wrongdoing at HMRC.

Points (1) and (4) were, shortly thereafter, put to HMRC by the Public Accounts Committee (see, from Question 88, here). But what did HMRC say by way of response? And does that response hold water?

(1) Is Uber supplying transportation services?

The basis for arguing Uber is liable to VAT is that the economic reality is that it is supplying transportation services as principal not as agent for the drivers.

Explaining why HMRC is not pursuing Uber for VAT, here is what Jon Thompson, Chief Executive and Permanent Secretary of HMRC, said to the Public Accounts Committee:

Capture

But as the Employment Appeal Tribunal in the Uber case pointed out:

Which side of the divide an individual falls will inevitably be case- and fact-sensitive. That, indeed, is the message I take from the various “mini-cab” cases I was referred to in the VAT context. Most are first instance decisions and not binding on this Tribunal, but, in any event, what they show is an attempt to determine in each case whether the drivers were providing their services as such to or as part of another entity (the taxi firm) or directly to the passengers as their clients or customers.

(And earlier, at para 81, the Employment Appeal Tribunal had observed that in agent/principal VAT cases involving taxi services “the decisions went both ways.”)

What is remarkable and unique about Uber’s arrangements is the degree of control it exercises over the drivers and the arrangements with customers. These are the factors that led the Employment Tribunal to conclude (and the Employment Appeal Tribunal to agree) that drivers were workers supplying services to Uber, the principal. These are the factors I consider would cause a Tax Tribunal, too, to conclude that Uber was a principal for VAT purposes. In other words, it is clear that there is a line in agent/principal VAT cases involving taxi services and if any case falls on the principal side of the line – and we know that some do – you Uber’s should.

Jim Harra, Second Permanent Secretary to HMRC, went on to make a further point about the Uber Employment Tribunal decision, as it then was. He said:

Capture

But this, I am afraid, is simply wrong.

It is true that the Employment Tribunal decision is about worker status. And it is also true that the VAT question is not identical to the worker status question (it may very well be as a matter of law that the threshold for VAT is lower than the threshold whether the drivers are “workers”). But it is quite wrong to say the Uber case is not about principals and agents: if workers are supplying their services to Uber it follows that Uber is not an agent vis-a-vis the customers.

You can see this very clearly from the Employment Appeal Tribunal decision:

Capture

(4) Should HMRC make a protective assessment?

The Public Accounts Committee also put to Jim Harra, Second Permanent Secretary to HMRC, that he should raise a protective assessment to protect the position of taxpayers generally whilst the matter was resolved. To this he said:

Capture

The power to make protective assessments arises under section 73 of the Value Added Tax Act 1994 “where it appears to the Commissioners that [here, Uber’s VAT returns] are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment…”

But does HMRC really have no power to make a protective assessment where they wish to protect their position whilst they wait and see what the law is? Is Jim Harra right that HMRC can only make an assessment if it believes the sum in that assessment is due and that if this leads to hundreds of millions of pounds of tax being lost then so be it?

This is a striking contention, and one which flies in the face of common sense. Why should the law require that HMRC sit on their hands doing nothing whilst other cases roll through the courts and hundreds of millions of pounds of tax owed to the general body of taxpayers are lost?

It flies in the face of common sense. And it is also, as it seems to me at least, wrong.

When confronted with facts which give rise to two possible tax treaments – X and Y – it is HMRC’s routine practice to make assessments in the alternative: one for X and one for Y. HMRC then argues those assessments in the alternative: it says ‘we think that X is right but if we are wrong then we say the liability is as described in Y’.

This practice has been blessed by the courts on numerous occasions: see, to take an example from the Court of Appeal, Courts plc, approving the decision of the Court of Session in Glasgow which concerned alternative assessments made under section 73. But if Jim Harra is right then the Court of Appeal and Court of Session are wrong: HMRC has no power to make assessment Y because it believes that it is sum X which is due.

Indeed, the Courts plc case itself concerned a protective assessment raised precisely because HMRC was concerned that the slow progress of other litigation jeopardised their ability to raise assessments within a statutory time limit

There is also a profound tension between what Jim Harra told the Public Accounts Committee and HMRC’s own published Litigation and Settlement Strategy which states:

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In other words, there are circumstances where HMRC will take a case to litigation even where it believes it is unlikely to succeed.

Summing up, neither of the answers given by HMRC to the questions put by the Public Accounts Committee seem to me to bear examination. They look to be answers driven by a desire to explain away their failure to act. I expect to release, shortly, direct and good quality evidence that is in my possession that HMRC is motivated by improper reasons in failing to act against at least one large multinational tech company.

In the circumstances, I remain of the view that, as I put the matter in my blog post of October:

I can see no good reason why HMRC should adopt this stance. None at all. It is inexplicable to me – unless HMRC’s conduct is motivated by factors otherwise than collecting the tax demanded by the law. I do not know what those factors might be. But this smells very bad.

HMRC said one last thing to the Public Accounts Committee:

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Since that oral evidence was given, Uber has lost its appeal against the Employment Tribunal decision. And yesterday it lost the case in the Court of Justice of the European Union that Jim Harra referred to. Both the Employment Appeal Tribunal and the CJEU held that Uber was supplying transportation services.

We must hope that HMRC now takes the steps it has indicated it will to ensure Uber is subject to the same tax law as the rest of us. In the meantime I will continue to pursue my action against Uber and my actions against HMRC (see here and here) to establish Uber’s liability to pay Value Added Tax.