In QRS I Aps v Fransden the plaintiffs were Danish companies in liquidation. The defendant was a UK resident who owned the companies until 1992. He claimed he engaged in a lawful tax avoidance scheme; they claimed he engaged in asset stripping and owed Danish corporation tax and interest.
The Court of Appeal held that the action was against rule 3 of "Dicey and Morris on the Conflict of Laws" which says that the UK courts will not enforce the penal, tax or other public laws of another country. The UK`s accession in 1972 to the European Community Treaty and the implementation of the Brussels Convention in 1968 on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters. The Court also held that it was irrelevant whether or not the claim was brought by a sovereign state or a representative of that state.
The Court did not consider it necessary to refer the matter to the European Court of Justice as suggested by the respondent. The appeal was dismissed.
The national tax regimes have sovereignty in their own states but they cannot go beyond their own frontiers. This would change if the European Community enacted legislation introducing an EC cross-community tax regime.