Denmark’s state tax authority, Skatteforvaltningen (Skat), has been ordered to pay around £400 million in legal costs following its unsuccessful attempt to reclaim billions of pounds in what it alleged was one of Europe’s largest tax fraud schemes. The case marks one of the most expensive defeats ever faced by a sovereign state in the UK High Court and has sparked debate about the risks governments face when litigating abroad. 

Background: The “Cum Ex” Scandal 

The case stems from the so called “cum ex” dividend trading schemes, a complex tax arrangement in which multiple parties claimed refunds for taxes that had only been paid once. Skat alleged that hedge fund manager Sanjay Shah and numerous financial entities fraudulently secured approximately £1.4 billion in dividend tax refunds from Denmark between 2012 and 2015. 

Skat brought civil proceedings in London against more than 100 defendants, arguing that the English courts should compel repayment. However, after a multi year legal battle, the High Court dismissed Denmark’s claims in 2024, finding that the tax authority’s case lacked sufficient evidence and failed to meet the necessary procedural standards. 

The High Court’s Decision on Costs 

In its latest ruling, the Court ordered Skat to pay roughly £400 million to cover the defendants’ legal fees, reflecting the immense scale and complexity of the litigation. The decision underscores the principle that losing parties, even sovereign states, are not exempt from adverse cost orders in English civil proceedings. 

Legal commentators note that the outcome demonstrates the stringent evidentiary and procedural burdens faced by foreign claimants in UK courts, especially when pursuing cases rooted in alleged fraud or tax evasion across multiple jurisdictions. 

Implications for International Litigation 

The ruling raises important questions about the use of English courts as a forum for cross border financial disputes. England remains a leading centre for complex commercial litigation due to its robust judicial system, but the Skat defeat illustrates the cost risks of large scale international claims. 

For states and public bodies, the case serves as a cautionary tale: sovereign immunity does not protect governments from paying substantial costs when acting as claimants. It also highlights the need for rigorous internal controls and thorough evidentiary preparation before commencing proceedings abroad. 

Broader Legal and Policy Significance 

The defeat could influence how other nations handle international tax recovery efforts and shape the strategy of firms involved in sovereign litigation. For law firms, the case represents both a warning and an opportunity: a warning of the immense resource drain such cases entail, and an opportunity for those specialising in cross border financial litigation, arbitration, and regulatory risk. 

The case may also prompt closer scrutiny of tax enforcement practices across Europe and renewed discussions about international cooperation to prevent similar schemes in future. 

Conclusion 

The Skat litigation stands as one of the most consequential and expensive legal defeats in recent years, highlighting the intersection of tax law, international finance, and cross jurisdictional litigation strategy. As Denmark absorbs the cost and reputational fallout, the case will likely become a reference point for governments, law firms, and financial institutions navigating the complex terrain of transnational disputes in English courts.