SPEECH given by Avv Antonio Distaso at the BILA Annual Dinner on 25 January 2019

The kidnapping and assassination of Aldo Moro

Avv. Antonio Distaso[1]

1. Introduction

Mr. President Roy Campbell,

Mr Diego Solinas, in representation of the Consulate General of Italy,

Mr. Vice President of the Law Society Simon Davis,

Kind members and guests,

Ladies and Gentlemen,

I‘m very grateful to the British Italian Law Association for the opportunity given to me this evening, in particular for the possibility to address such a qualified audience and, above all, to be able to talk about a subject to which I feel particularly attached, both because of my personal history and also for the commitment that I have dedicated during most of the ten years of my parliamentary experience at the Chamber of Deputies of Italy.

I would also like to extend a special thanks to my Dear Friend and Colleague, Ugo Palazzo, for the esteem, which I reciprocate, and confidence that he has placed in me. I sincerely hope I am up to the task.

I hope so, sincerely for you too, Dear Ugo!

The political history and the personal story of Aldo Moro, I think are fundamental for those who want to understand and deepen the political dynamics of Italian history, from the period following the second world war and for about half a century later.

Born in Maglie (Lecce) in 1916, a university professor, member of the Constituent Assembly, Minister, Secretary of the Christian Democracy party and Prime Minister, Aldo Moro, equal only to Alcide de Gasperi, was, in my view, one of the very few Italian statesmen of the past century.

Especially marked in him is the ability to see in advance, the ability to understand contemporary phenomena, but, at the same time, the consequences that those phenomena would have produced in the political field and in society.

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[1] Avv. Distaso, in his capacity as an Italian MP, was on the parliamentary inquiry committee which investigated the kidnapping and assassination of Aldo Moro. The results of the parliamentary inquiry can be found at http://www.camera.it/_dati/leg17/lavori/documentiparlamentari/IndiceETesti/023/029/INTERO.pdf

2. A) Chronology

Aldo Moro was born in Maglie (province of Lecce) on 23 September 1916.

He was one of the youngest Prime Ministers that Italy has ever had.

When he took part in the works of the Constitutional Assembly, for the drafting of the Constitution of the new born Italian Republic, he was not 30 years old yet.

He was always very aware, even as a University Professor, of the changes and transformations in Italian society and he was convinced of the necessity to expand the basis of democracy in his Country, or rather to reinforce the democratic system by widening its base.

This is why he is considered the theorist and advocate of the first Centre-Left Government after WW2, which saw the participation of the socialist party (1963).

In 1978 he supported the Government’s policy of “national solidarity” and, therefore, the inclusion of the Italian Communist Party in the parliamentary majority. This position of his, probably, was the reason behind his kidnapping and killing.

When the Red Brigades kidnapped and killed him, he was 61 years old.

Pope Paul VI, who was one of Mr Moro’s closest friends, defined him “a good, mild, wise, innocent man and a friend”.

 2.B) Method

When analysing Aldo Moro’s works, it feels like facing a mission on the verges of the political archaeology of the so-called First Republic.

His style is characterised by long sentences, dense subparagraphs, which recall a system and a vision which was dated already at the time of his writing.

Having said this, it is from an adequate and thorough reading of his works and speeches that one can deduce the reasons why Aldo Moro was kidnapped and killed.

Indeed, among the recurring topics of his works, was an obsession (of sorts) for the widening of the base of Italian democracy, which he thought to be alive though very fragile, especially considering the recent experience of fascism.

This need of inclusiveness was matched by the need to balance, i.e. to limit, politics’ invasion of society, on the one side supporting its drive and, on the other, trying to govern it. This was the attitude of somebody who considered politics as having an indisputable leading position but, precisely for this reason, as having to be respectful of everything happening outside the political parties’ life.

The leading position of the individual had to come before the leading position of politics.

Aldo Moro represented, at the highest levels, a political force able to listen and understand what was happening in the remotest areas of the Country. He was fully aware of international allegiances and the obligations, as well as opportunities, that this entailed.

In order to understand the historical and political conditions in which his kidnapping and, after 55 days, killing, occurred, it is necessary to carry out an analysis of his political view as it developed over the 30-year period between the entering into force of the Italian Constitution (1 January 1948) and the day of his death (9 May 1978).

3. Political view [PLEASE NOTE THIS IS JUST A SUMMARY OF THIS SECTION OF THE SPEECH]

The works and political view of Aldo Moro acquire a particular significance, in the context of the political framework of the second half of last century, as they are closely linked to the crisis of the parliamentary government system (which came about in a particularly evident way during the XX century). Aldo Moro’s attempt, essentially, was to widen the base of the parliamentary government system, and thus of Italian democracy, with the aim to include the needs of the new mass politics.

At the end of WW2, in most parts of western Europe there was a rise in the Christian sentiment, due to the fact that the Catholic Church had overcome the war almost unscathed. In particular, in Italy together with the rise of the Christian sentiment, the Country witnessed a rise in the liberal doctrines; all parties (with the exception of the Communist party) tried to occupy this new “liberal territory”. Everyone was in favour of a parliamentary government system, so as everyone (again, except the Communist party) were in favour of a system of liberal economy, as well as of freedom of thought and of conscience.

It was, without a doubt, a reaction to the 20 years of fascism as it was, without a doubt, one of the most important consequences – in a positive sense – of the second world war.

In this sense, Aldo Moro persuaded himself that in Italy the Socialist party – between the end of the 1950s and the early 1960s – was ready to become one of the supporters not just of the parliamentary democracy system but also of the government and leadership of the Country.

Indeed, even the Communist party, which at the end of the 1950s (but even more so during the 1970s under the leadership of Enrico Berlinguer) had started a process of gradual detachment and autonomy from Moscow, started looking with interest at freedom policies and at working classes. During the 1970s, with Aldo Moro as the leader of the Christian-Democratic party and Enrico Berlinguer as the leader of the Communist party, there was talk of “attention strategy” between the two parties.

The above political framework is useful to better understand Aldo Moro’s attempts and efforts to lead the Christian-Democratic party in a wider political space and to give the party a new and enhanced dynamism.

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The THREE PHASES of Aldo Moro’s political view.

The Italian Constitution came into force on 1 January 1948. The first real elections after the end of the second world war took place on 18 April 1948, in a situation of strong conflict between the Christian Democracy and its allies on the one side and the “Popular Front” (i.e. the Communist party and the Socialist party) on the other. The Christian Democratic party prevailed (led by Alcide de Gasperi) with a majority of 48% and strong of the support of other homogeneous political parties.

This is the first phase, which would last approximately 10 years (1948-1958), during which there was a political and governmental cooperation between essentially homogeneous parties.

At the end of the 1950s (in 1959) Aldo Moro became the leader of the Christian Democratic party. That same year, during a political meeting in Milan, he stated that “the role of Christian Democracy is to build the democratic State”, which was happening 12 years after the entering into force of the Constitution! At the basis of such statement of Aldo Moro, one can perceive his constant care of the changes in society, so that the political system could adapt accordingly.

In Italy more than in any other European Country there was a problem of lack of integration of the so-called alienated masses. One of the possible solutions was the attempt to widen the area of consensus towards liberal views and ideas. In this context, it was crucial to maintain alive the parliamentary government system, so the system itself had to put in place reforms that would allow it to adapt to the changes of the Italian society, thus involving an increasing number of people.

Moro’s intention was to create the conditions for the various groups in society to focus their energies and needs in the democratic process. He believed that, to that end, the Socialist party needed to be involved.

The second phase takes place with the Moro-Nanni joint government (Mr Nanni being the then leader of the Socialist party), in 1963. Soon afterwards, however, political and social circumstances would change dramatically the political framework.

More specifically, I refer to:

-          the students’ movement and the organisation of a new working-class movement at the end of the 1960s (more clearly in 1968);

-          the referendum which aimed to repeal the 1974 Divorce Act: the referendum resulted in the NOs winning and in the Act in question remaining in force (Christian Democracy and the catholic world that this represented, who had advocated the repeal of the Act, lost);

-          the local elections in 1975, which saw the Communist party reaching 31% of consensus (Christian Democracy 35%), followed by the general elections in 1976 where the Communist party reached a 34% consensus (Christian Democracy 38%).

It is important to remember that, during these years, Italy was still a “blocked” democracy, especially for international reasons: I refer to the relationship with the United States and other Countries of the western block on the one side, and the Soviet Union on the other.

The relationship with the Soviet Union was particularly important for the Communist party, though, as I mentioned before, the Communist party had started a process of gradual distancing from Moscow, thanks to its leader Enrico Berlinguer, who developed a policy of attention to the middle and working class and of acceptance and recognition of NATO.

Moro followed closely these changes, and this is why, since the late 1960s, he started a strategy of dialogue and attention towards the Communist party. His aim was not simply to include the Communist party in the government base, but to widen the base of democracy itself, by legitimising the Communist party..

The third phase is certainly the most interesting one, but unfortunately it is destined to end with Aldo Moro’s kidnapping and killing.

For reasons that we can describe as “similar and at the same time opposed”, both the United States and the Soviet Union were very sceptical towards Aldo Moro’s and Enrico Berlinguer’s attempts to establish a dialogue between their respective parties.

The United States, and in particular the Home Department (in the person of Henry Kissinger), in the context of the cold war, could not accept that an ally such as Italy – in a geographically strategic position – could even imagine starting a political cooperation with a political party close to Moscow, even though purely at a parliamentary debate level.

The Soviet Union feared that it could lose its influence on a party that it considered its direct offspring as well as for Italy’s geographically and geopolitically strategic position.

Personally, I believe that the Red Brigades’ armed action, which led to Aldo Moro’s kidnapping and killing, cannot be fully understood if you do not consider the abovementioned international framework.

4. The kidnapping and assassination of Aldo Moro – The works of the parliamentary inquiry commission.

Background

More than 40 years have passed since the kidnapping and killing of Aldo Moro.

The Parliamentary inquiry commission, created by Law 82 of 30 May 2014, worked on the case for three years (2015, 2016 and 2017).

The commission heard politicians, priests, judges, police officers, ex members of the red brigades, etc.

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According to one of the judges who oversaw one of the five proceedings concerning the death of Aldo Moro, the whole sequence of events of his kidnapping and killing did not start the morning of 16 March 1978, in Rome, in via Mario Fani [where Mr Moro was kidnapped], but 15 years earlier when, in July 1963, the President of the United States, JFK arrived in Italy for a State visit.

Apparently, the American President was a strong supporter of the leader of the Christian-Democratic party (i.e. Mr Moro) and of his approach of open dialogue with socialist and communist politicians, openly against the opinion of the American conservatives and the big oil tycoons.

This shared view of the two statesmen concerning the new frontiers of the western world, eventually made them the target of the same enemies, in America and in Italy: people hostile to any kind of dialogue with the progressive forces.

John Kennedy and Aldo Moro, despite being strongly anti-communism (due to their catholic background) did not share with others the demonization of communism: they both paid attention to the fact that this ideology involved millions of people around the world and that these people could not be ignored.

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Let’s go back to the morning of 16 March 1978, in Rome, in via Mario Fani.

It’s two minutes past 9am.

The leader of the Christian-Democratic party is going to Parliament to discuss the vote of confidence in Mr Andreotti’s government. The car where Aldo Moro is travelling, followed by the security detail car, is intercepted by a commando of men of the Red brigades who, in only a few minutes, kill two carabinieri aboard Mr Moro’s car and three police officers who were following him in the security detail car.

Aldo Moro, who was not provided with a bullet-proof car (despite the multiple requests by the head of his security detail, Maresciallo Leonardi) is taken away by the commando men.

His security men (all five of them) have been slaughtered: four of them die immediately, whilst the fifth, Francesco Zizzi, will die soon afterwards.

That morning the 55 darkest days of the Italian Republic begin.

This is history to be written with a lower case h, because the few certainties we can today look at, after 40 years of investigations, show a scenario of intrigues, red herrings, deviated secret services, etc. That is, a State and a Government strongly permeable of infiltrations of any kind.

Tonight, I would start from the end, this is to say from the conclusions I – and others – have drawn.

On Aldo Moro’s incident (and, in particular, on his 55 days in captivity) dozens of books have been written. “He had to die” is one of them, written by a judge, Ferdinando Imposimato (the judge mentioned above) and by a journalist.

From this book a very bleak picture emerges: Italy was a chronically fragile Country in relation to the strength of its democracy, so fragile and corrupt that it would never be truly transparent (and to be honest, I do not think that nowadays the aspects of such fragility have been overcome).

From the book it emerges that the “Crisis Committee” [Comitato di crisi], created by the then Home Secretary Francesco Cossiga a few hours after the kidnapping of Mr Moro, never really carried out its duties, and was largely infiltrated by the members of the masonic lodge P2.

It emerges that the Red Brigades’ dens in via Gradioli and via Montalcini, in Rome, have purposefully never been found.

There also emerges the shocking episode of the alleged spiritualist séance - which took place in a small town on the outskirts of Bologna and in which Romano Prodi (who later became Prime Minister) and other famous University professors participated – where the name GRADIOLI allegedly emerged; police officers then raided the municipality of Gradioli (near Viterbo), instead of raiding no. 96 Via Gradioli in Rome – an actual hideout of the red Brigades.

That indication, far from being somehow connected with supernatural activities, apparently was given by prof. Franco Piperno (one of the leaders of “Autonomia Operaia” [labouring autonomy]) to prof. Beniamino Andreatta – both of them were university professors in Cosenza – who would later become a Minister of the Christian-Democratic party.

It is worth pointing out that the hideout in via Gradioli had been subjected, on 18 March (i.e. just 2 days after Mr Moro’s kidnapping), to a police search. The police officers, once at the apartment’s threshold, instead of breaking down the door to get in, somehow persuaded themselves that the place was abandoned and left.

It emerges that there had been undeniable foreign interferences: most of all from the American State Department, through the CIA, and the Soviet KGB, both very interested – for different but converging reasons – in stopping Moro’s attempt to dialogue with the Communist party.

It is important to stress the following:

Since 1969 the political environment in the US had dramatically changed.

In 1968 Bob Kennedy had been killed, just five years after JFK’s killing.

In 1969 the new US President was Richard Nixon, followed by Gerald Ford in 1974.

In September 1974 a symptomatic episode occurred: during a State Visit to the US of the Italian President Giovanni Leone, who was accompanied by the then Foreign Secretary Aldo Moro, Mr Moro was harshly criticised by the then Home Department Secretary, Henry Kissinger who openly “warned” Mr Moro that, unless he ceased his attempts to promote a dialogue between all Italian political forces, including the communists, he would “… personally pay the price for it”. Apparently at the end of this meeting Aldo Moro fell ill and had to cut short his visit and go back to Italy, where he intended to stay out of politics for about two/three years (something that never happened).

He had to die”.

He was a troublesome character, he knew too many truths, he had gone too far in the attempt to make the communists “jump on the train of democracy”, so as to allow in Italy a democracy of political variation, so as to create a system of complete democracy, like in all other western countries.

5. Conclusions

These are, therefore, my conclusions.

He had to die!

He must not be saved.

Those who truly tried to do so had no chance of success against a force of which the red brigades were just the vanguard. The real force was the State apparatus itself, the influences of foreign powers, the deviated secret services (in Italy, SISDE and SISMI).

Why, then, Aldo Moro’s political views and actions have influenced so deeply the events in Italy in those years and in the years to come?

As mentioned in my forewords, Aldo Moro could see in advance, like only few true statesmen can, how events would unfold, could foresee scenarios, could shape them. His idea of making Italy a complete democracy, of making possible a democracy of political variation, will become reality only in the mid-90s’.

His premature demise was a blow to the Christian-Democratic party but most of all was a blow to the whole Country.

In 1992 the so-called First Republic came ingloriously to an end, due to the numerous judicial inquiries from which no political party was spared (not even the Communist party).

But that’s not all.

The First Republic, which started after WW2, fell also due to a ruling class and a government that had remained unchanged since Aldo Moro’s times. Nobody, of the Christian-Democratic leaders or of the leaders of other political parties had made an attempt to grow a ruling class up to the task of bearing the most important political and governmental responsibilities.

As Giulio Andreotti once said, “power wears out those who do not have it”. But most of all it can be a corrupting factor, particularly when there is no chance of variation (turnover). And this is one of the risks that Aldo Moro had already foreseen.

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Finally, I wish to add a personal note.

My father, Walter Distaso, a lawyer, immediately after graduating was an assistant to Aldo Moro and Renato Dell’Andro, at the University of Bari (Criminal law).

Mr Moro supported his political engagement, since the late 60s’ (engagement that ended in 1985, when he prematurely died at the age of 52).

When Aldo Moro died in 1978, he was 61. I was 12 at the time and the memory of those days never left me.

As a matter of character, my father was very different from Aldo Moro. He was cheerful, open, gifted with a rare intelligence.

At the same time, I am sure that his moral rigour, honesty, respect of the democratic institutions partly derived from his relationship with Aldo Moro.

 

 

This “education”, as far as I am concerned, was passed on to me through blood, I believe, as well as through his example.

My political action, way humbler, started 25 years ago, cannot ignore what I learned and lived. This is my commitment, a commitment that is part of my own life.

This is my experience, which I have tried to convey to you tonight in the straightest way possible.

Thank you very much.

Avv. Antonio Distaso

London, 25 January 2019

Brexit: legal and constitutional implications

When we hear about Brexit, one of the most heard (and abused) expressions is: “in the old days we knew where we were, nowadays we are where we are”. Perhaps it may be useful to examine how we got where we are.

“We wouldn’t have had a referendum at all had it not been for the Conservative Party – and had not been for David Cameron” *

During the 2015 general election campaign, David Cameron, then leader of the Conservative Party and Prime Minister, included in his manifesto commitment that he and the Conservative Party would introduce legislation for a referendum on the UK's membership of the European Union. Cameron and the Conservative Party won the general election and Cameron was appointed for the second consecutive term in sequence as Prime Minister.

 The planned referendum was included in the Queen's Speech on 27 May 2015.  The European Union Referendum Bill 2015, which authorised it, went before the House of Commons just three weeks after the election.  The Scottish National Party voted against it. In contrast to the Labour Party's position prior to the 2015 general election under Miliband, acting Labour leader Harriet Harman committed her party to support a EU referendum by 2017.

To enable the referendum to finally take place, the European Union Referendum Act 2015 was voted and passed by Parliament in Westminster and received Royal Assent on 17 December 2015.

The question that appeared on ballot papers in the referendum before the electorate under the act were:

Should the United Kingdom remain a member of the European Union or leave the European Union?

with the responses to the question being (to be marked with a single (X)):

Remain a member of the European Union           

Leave the European Union                                 

The referendum was held on Thursday 23 June 2016. Leave won by 52% to 48%. The referendum turnout was 71.8%, with more than 30 million people voting.

England voted strongly for Brexit as did Wales. Scotland and Northern Ireland both backed remaining in the EU. Scotland backed Remain by 62% to 38%, while 55.8% in Northern Ireland voted Remain and 44.2% Leave.

Shortly after the referendum, David Cameron (a Remain campaigner) resigned from his office and Theresa May was appointed as Prime Minister in his place.

“There is no opt-out from Brexit”*

From a strictly legal point of view, the referendum did not repeal or abolish any existing legislation. It has only firmly advisory value under the EU Referendum Act 2015. Therefore, although politically the Government is taking into account the results of the referendum, the legal position grants the Government the freedom to ignore them.

Theresa May in relation to the EU referendum was also part of the “Remain” camp. The political agenda of Theresa May shortly after her appointment became: “Brexit means Brexit”.

“Brexit means Brexit”*

Theresa May has set up a new government department, to be headed by David Davis, a Leave campaigner, to take responsibility for Brexit. Liam Fox, who also campaigned to leave the EU, has been given the job of international trade secretary and Boris Johnson, who led the Leave campaign, is foreign secretary.

The “Three Brexiteers” have been empowered to conduct negotiations with the EU and seek out new international agreements, with Theresa May having the final say. It is now clear that the government had not carried out any emergency planning for Brexit ahead of the referendum to assist in the negotiations of the withdrawal from the EU and to assess the best possible outcome that Britain could negotiate.

“We will invoke Article 50 no later than the end of March next year”*

The process of severance from the EU will only start when a formal notice is given by the Prime Minister to the European Council in accordance with art. 50 of the Treaty on the Functioning of European Union (TFEU also known as the Lisbon Treaty) (“Notice”).

Once the Notice is given, the clock will start ticking and a maximum period of two years (“Notice Period”) will run during which the UK will remain a Member State and will have to negotiate the terms of a withdrawal agreement with the European Union.

Once the Notice is given it cannot be withdrawn (there is no provision to this effect in art. 50 TFEU).  Should the United Kingdom wish to change its mind, it needs to make a fresh application (pursuant to art. 49 TFEU) as any other applicant State wishing to join the EU.

Once the Notice is given the United Kingdom will remain full member of the EU during the course of the withdrawal negotiations – albeit its credibility as a member will be severely undermined - and it will no longer be a Member State of the EU in the following circumstances:

(a)        before the expiry of the Notice Period, if the withdrawal agreement has been entered into;

(b)        on the expiry of Notice Period (and the TFEU will cease to apply to it even if the terms of the withdrawal agreement have not yet been agreed); or

(c)        after the expiry of the Notice Period, if there is consent of the United Kingdom and unanimous vote the remaining 27 Member States accepting an extension of the Notice Period).

For the withdrawal agreement to be finalised, the draft has to be approved first by the European Parliament by simple majority vote and second by the European Council by qualified majority vote or unanimity depending on the nature of the provisions in the agreement.

Any withdrawal agreement reached by the Government will then necessarily have to be ratified by Parliament by legislation in order to be recognised and enforced in the domestic system of laws in force in the UK.

“It is not for the House of Commons to invoke Article 50 and it is Government alone”*

Article 50 (1) of the TFEU states:

“Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements” [emphasisadded].

In the United Kingdom, there is no written constitution which serves as a basis of the country’s legal system. The source of constitutional law is the legislation made by the Parliament, the judicial precedent (also known as common law) and constitutional conventions. 

A domestic constitutional conflict has now arisen between Government and Parliament.

The Government’s position expressed in the statement above is that, following the referendum, the Government has taken a decision to leave the European Union and the Government has the power and the authority using the royal prerogative to notify the European Council of that decision without seeking prior authorisation from Parliament; in other words, the Government enjoys complete discretion about as to serve the Notice.

For clarity, the royal prerogative is a collection of executive powers held by the Crown, since the Middle-Ages, and by the Government to enable them to perform their constitutional functions. Such powers are not set out in statute or written legislation.

Parliament has instead expressed the view that the Government should not trigger Article 50 without consulting Parliament and that it is constitutionally appropriate that Parliament should make the decision to act following the referendum. The Selected Committee on Constitution of the House of Lords expressly stated: “Parliament should play a central role in the decision to trigger the Article 50 process, in the subsequent negotiation process, and in approving or otherwise the final terms under which the UK leaves the EU”.

Proceedings for judicial review have been brought in the High Court of Justice in London before The Lord Chief Justice, The Master of the Rolls and Lord Justice Sales in order to obtain a declaration from the Court on whether, under UK constitutional laws, the Government can lawfully use prerogative powers to give notification to the EU under art. 50 of the Lisbon Treaty without the Parliament’s formal authorisation. The argument before the Court is that only Parliament has the power to invoke art. 50.

A judgment is expected in the following weeks and it is certain that the matter will be “leapfrogged” to the Supreme Court for a final decision in the event of an appeal.

A similar action in respect of the Brexit process was commenced in Northern Ireland in the High Court of Belfast and judgment has been reserved.

“Let’s get this plan for Brexit right”*

The negotiating process is certainly not straightforward and it is enormously complex. Any negotiation will have to be based on three fundamental issues: single market for goods and services, immigration and undertakings made by the UK to contribute to European budgets, which has been estimated in the region of €20 billion. The outcome will determine a “hard Brexit” or a “soft Brexit” in consideration of the level of agreement (or disagreement) reached with the EU.

The Government has suggested repealing the European Communities Act 1972 (which currently implements the rights and duties of the EU treaties into UK domestic law) with the Great Repeal Bill which would convert all existing EU law (estimated in the number of 12,295 regulations) into national law with one statute and perhaps with no proper debate in the House of Commons. It is suggested, however, that this will be insufficient.

Brexit has not been started yet and we are still a long way from it. It will only commence with the triggering of Art. 50 of the Lisbon Treaty and at moment we can only wait and see who will eventually decide on its exercise – Parliament or Government.

* The headings of this article are extracts from Theresa May’s speech to the Conservative Party conference on 2nd October 2016. 

 

Rocco Franco

Partner at Pini Franco LLP, 22-24 Ely Place, London EC1N 6TE

+ 44 20 7566 3140

rfranco@pinifranco.com

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

 

 

All Change - The charge to capital gains tax on non-UK residents disposing of UK residential property takes effect from 6th April 2015

Introduction

CGT is to be extended to all non-UK residents disposing of UK residential property, but only in relation to gains post-6th April 2015.  Together with this, the rules on Principal Private Residence (PPR) relief are also being amended in such a way that both UK residents and non-UK residents will be affected.  The following is an overview of the proposed changes.

Background

Historically disposals of residential property by non-resident individuals have not been subject to CGT.  Since April 2013, non-resident companies have been subject to CGT under the Annual Tax on Enveloped Dwellings (ATED) regime introduced to cover properties over a certain value.  The government has now extended CGT to all non-residents, whether an individual, company or other entity, disposing of UK residential property, regardless of its value.  The motive behind the legislation is to make the CGT rules fairer, so that the taxation of residents and non-residents is comparable

What property will be caught?

The charge will apply to disposals of UK residential property.  This is defined as “property used or suitable for use as a dwelling”.  Property that is rented out is included, but communal residential property is generally excluded from the charge.

Who will be liable?

The charge will apply to all non-resident persons, whether they are individuals, companies, trustees or executors.  In order not to discourage large-scale institutional investors, there are exemptions for diversely held institutional investors which are not a “narrowly controlled company” and meet a “genuine diversity of ownership” test.

How is the gain calculated?

The extended CGT charge will not apply to the amount of gains relating to periods pre-April 2015.  The government will allow either rebasing to 5 April 2015 or a time apportionment of the whole gain. 

PPR relief

Currently individuals who occupy a property as their main residence can use PPR to exempt the gains arising on that residence from CGT.  Where individuals occupy more than one property as their residence, they can elect which is to be treated as their main residence, and so qualify for PPR.  To avoid non-residents simply electing for their UK property to be treated as their main residence, the government proposes to restrict the relief.

PPR will also be available on the above terms for trusts where the beneficiary living in the property is non-UK resident.

Rates of charge

For individuals the rate of tax will be the same as the CGT rates for UK individuals, currently 18% or 28% depending on the person’s total UK income and chargeable gains.  Non-resident individuals will have access to the annual exempt amount of taxable gains, in line with UK residents.

Reporting the gain

It is proposed that where a person has an existing relationship with HMRC, they will be able to make a payment as part of their self-assessment tax return.  Otherwise a report together with the requisite payment to HMRC must be made within 30 days of the date of completion.

Co-written by Andrew Godfrey, Partner and Christopher Salomons, Associate at Russell Cooke LLP, 2 Putney Hill, Putney, London  SW15 6AB

 

April 2015

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

English Civil Litigation, Case Management & Sanctions

English Civil Litigation, Case Management & Sanctions

Sanctions for failure to comply with rules, practice direction and court orders on case management can be drastic or out and out catastrophic – a lively topic for Italians, involved in English litigation, to be informed about, as their own civil procedure culture is very different, and in which adjournments and an unfettered right to appeal make English norms quite alien.

An Italian litigant in England needs to absorb the following principles and accept them, otherwise he risks walking into a minefield.

The English court can strike out a party’s statement of case where that party is not compliant with a rule, practice, direction or order CPR r 3.4(2)(c).

There is a recently revised civil procedure rule CPR r 3.9 which provides

1.     On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –

(a)   for litigation to be conducted efficiently and at proportionate cost; and

(b)   to enforce compliance with rules, practice directions and orders.

2.     An application for relief must be supported by evidence.

English practitioners in contentious matters have been sobered by the hard decision in the case ofMitchell v News Group Newspapers Ltd [2013]EWCA Civ 1537.  This decision made in respect of a failure of lawyers to file a costs’ budget – the opportunity to claim costs was effectively lost at the outset of the litigation by the failure to submit the costs’ budget – is the touchstone for legal advisers and their clients in understanding the attitude of the courts to failure by a party to adhere strictly and accurately to the requirements of case management set out in the rules, practice directions, and the tailored orders of the court in the individual case.

To be in the position of needing to beg for the court’s mercy is something to be avoided, as indulgence is not to be presumed on.

Lord Justice Jackson who instigated the reform wants value for money, efficient litigation: effective case management is at the core of this aim. The merits of the case are not decided at the case management stage, and a party unseated from the judgment seat will find it most hard to persuade a court, that because it says it would have won that there should be relief.  Parties who underestimate the strict need to adhere to the purpose of the Jackson reforms will simply be annihilated, where their non-compliance with proper case management

(1)   is more than trivial – any non-compliance that is of substance rather than form e.g. filing and serving a document late is an omission of substance rather than form, if the non-compliance is anything worse than a narrow missing of a deadline to carry out a particular case management direction, where the party in default has otherwise been timeous and exact in carrying out its duties.

 (2)   unless, there is a good excuse e.g. ill-health of the party or its lawyer, or involvement in an accident.  In other words, a good excuse is likely to be one that demonstrates default was beyond the control of the non-compliant party; an excuse based on issues such as workload, other business commitments whether of the party or its lawyers is unlikely to cut much ice with the Court – parties to litigation must make the litigation their first priority, if they are intent on pursuing their case, and their lawyers must have a firm mastery of their professional diary;

 (3)   unless a case management direction turns out, in the course of the litigation, to have been unrealistic and unreasonable as to its timing or perhaps implementation, especially if a timely application to vary the direction before time for compliance expires is made, in which case the non-compliant party may attract the court’s mercy – however litigation is not supposed to be left to slide ineffectively out of close control, and timely applications to vary are essential.

 (4)   Deliberate ignoring of a case management obligation will usually be impossible to justify; an act of carelessness, which does not upset the Court timetable or the other side’s preparation of the case is less likely to be totally unamenable to a discretionary act of mercy on the part of the court, though Mitchelllimits the ambit of this mercy enormously. Carelessness can have grave consequences on other court users through loss of trial dates, cluttering of the judicial diary – NB every case is fact specific, in terms of the judicial perception of a party’s conduct; weak excuses of the type “I didn’t mean to become non-compliant” may be the subject of stringent criticism.  There is no place for nonchalance in dealing with case management issues, precision is required.

Where non-compliance is in relation to an Unless Order (which should only be made after a history of cavalier attitude on the part of one or other of the parties to the litigation has emerged) it will usually be most difficult to invoke circumstances that will gain relief from the Court.  An Unless Order is an order that tells a party in clear and certain terms that it must comply with specified directions or face the stated consequences.

In the light of the Mitchell case, the safer course is to comply with all case management obligations as though they were unless orders.

Legal Representatives need to be given timely instructions so that they can comply on their clients’ behalf with all case management obligations.  A lay party that does not take this on board risks catastrophe, and in that event no criticism attaches to their lawyers.

The failings of lawyers to understand case management directions will not usually excuse their clients from the duty to comply.  A party will not be excused usually for the failings of its lawyers.

A litigant in person may obtain relief from sanctions more readily than where lawyers are instructed.  But any litigant in person should actively consider whether he or she is up to the mark to conduct litigation, because should his inexperience lead him into “non-trivial” non-compliance with case management directions and the court nevertheless gives him relief – and this is no foregone conclusion – the terms of that relief may well be expensive. The justice of the case is always fact specific.

The Courts look at all the circumstances in deciding the question of relief from sanction, far better never to have to seek the court’s discretionary relief or mercy.

This article does not intend to be exhaustive but to be cautionary and give Italian litigant readers, and ideally others, a hint at the problems that the Jackson reforms can cause them, as the English litigation “climate” is so very different from the Italian.

Paul Dipré
Barrister
p.dipre@counselschambers.co.uk

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

Lessons from Intesa San Paolo v Regione Piemonte – Dexia Crediop Spa v Regione Piemonte – Message to Foreign Defendants: “Ignore the English Court at your peril!”

18th July 2013

Lessons from Intesa San Paolo v Regione Piemonte – Dexia Crediop Spa v Regione Piemonte – Message to Foreign Defendants: “Ignore the English Court at your peril!”

The recent decision in Intesa San Paolo v Regione Piemonte leaves no room for doubt that even if a party disputes the jurisdiction of the English Court, care must be taken to comply with its procedures and time limits. This is particularly the case in relation to a foreign public authority.

The case concerned claims brought by Intesa San Paolo S.p.A. and Dexia Crediop S.p.A. against the Defendant Regione Piemonte, an Italian local authority, in relation to certain derivative transactions connected with bonds issued by the above named Italian Region.

In the eyes of the English court, the fact that a Defendant is a public body in Italy with special privileges such as the self redress procedure within that state, carries an additional duty upon it, to adhere to English Civil Procedure Rules even more so than they would where an action would lie only before Italian courts.

In his decision to grant summary judgment in favour of the Claimants, in the above named conjoined matters, Mr Justice Eder leaves no room for doubt that judges in England take pre trial conduct very seriously indeed and will regard a “snub” by foreign parties, even public authorities, as a direct offence to the authority of the English court.

In his judgement, Mr Justice Eder regarded “any defendant who deliberately ignores proceedings duly instituted in this court and properly served does so at its peril particularly where the parties have expressly agreed English law and jurisdiction to govern their relationship; and whatever merits might exist in the self redress process instituted by Piedmont in Italy provide no justification whatsoever for the decision by Piedmont effectively to ignore” the English proceedings

Judgement as to Declaratory relief in this case was delivered to Piemonte over 12 months before the case for summary judgement was heard. Despite the fact that Piedmont had notice by September 2012 it did not proceed with an application to set aside the judgment before the end of June 2013. Further, it did so without at this time serving a defence following up its application even in draft form as envisaged in equity in the English jurisdiction. The court in its judgement regarded that delay as sufficient, of itself, to justify the dismissal of the application to set aside.

Moreover, an Italian public authority seeking to shield itself behind the authority of the Italian courts to shut out the jurisdiction of the English courts may indeed be very unpleasantly surprised as was the case here where the Italian Regional Administrative Court of Piedmont refused jurisdiction in the above named cases in favour of the English courts, a fact taken into account in the judgement of the English court in the application for summary judgement as further justification for its decision. .

As a result of the above conduct of the Regione Piemonte, any merits as to substance that its application might have had were not only looked upon in a negative light due to the delay in bringing the application before the court but were also not evidenced sufficiently due to the failure to serve a defence. Even a draft defence would have probably sufficed. Without any pleading, Piedmont lost the opportunity of putting its defence forward. The witness statement filed by the Region was also not sufficient to replace a defence.

It is interesting to note, that Mr Justice Eder would have probably found in favour of Piemonte in respect of its capacity to enter the transactions, if this issue was properly put forward in a defence. Clearly Piedmont lost a great opportunity.

This case should serve as a warning to foreign defendants and particularly local authorities to seek early advice whenever confronted with a claim involving the English Courts.

Co-written by:
Germana Lo Iacono-Smith, a partner at Seddons Solicitors,
germanal@seddons.co.uk 

Konstantinos Konofagos, a lawyer and partner
www.bankingcode.gr

 

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

European Harmony in Practice – Brussels IV

EUROPEAN HARMONY IN PRACTICE – BRUSSELS IV

For a client who owns property, or who has certain strong connections, in more than one country, the succession rules governing the inheritance of his or her estate can be very complicated.  The main question to be answered is which country’s succession law applies, and the answer can be found in the Private International Law (PIL) rules of the respective countries.  Unfortunately, two countries’ PIL often differ and do not provide the same answer.  For example, in some cases it is the law of the nationality of the individual that applies, whilst in others it is the law of where the person is resident.

In England, our PIL for succession matters looks to the law of where a person is domiciled, meaning where they consider to be their true home, and also to the law of where the assets are located.  That is, the distribution of moveable property on death is determined by the law of the owner’s domicile, but for immoveable property it is determined by the law of the location of the property.  English law allows the law of different countries to determine the succession of different parts of the same estate.

To make things more complicated, the reference by the law of one country to the law of another can sometimes include that country’s PIL, but on other occasions it does not include the PIL.

What does this all mean?   As one can imagine, these situations often lead to confusion, which in turn can lead to dispute, delay and expense.

An object of the European Union is to simplify cross border relations and movement of goods and persons between EU member countries.  In order to try and harmonise the rules regarding succession within the EU the European Commission has been considering this issue for a long time.  The result is an EU Regulation, known as Brussels IV (“the regulations”), which came into force on 17 August 2012.  Most of the provisions, however, do not become effective until 17 August 2015.

The regulations re-set and unify the PIL of almost all EU countries on the questions of which law applies, which Court has jurisdiction and the recognition of Court decisions on most succession matters.  There is also provision for a European Certificate of Succession which seeks to simplify the authority needed to administer EU wide estates by having one certificate which will be recognised in all the participating countries.   I refer to ‘almost all’ rather than ‘all’ the EU members as the UK, Denmark and Ireland have decided not to sign up (for reasons I do not propose to discuss here).

The regulations will still be of great significance, however, to those who are connected both to the UK and to any of the 24 EU members who have signed up.  And, furthermore, one of the provisions can be taken advantage of now.

The central theme of the regulations is that it will generally be the law of the place of the deceased’s habitual residence that will control the succession of the estate for deaths after 17 August 2015.  The relevance of this can best be seen with an example.  Giovanni has been living in London for several years.  At the moment Italy will look to the law of his nationality (Italy) to govern his succession (unless specific conditions apply, which we will presume is not the case).  Civil law countries, such as Italy, protect the rights of the deceased’s family members in succession by giving them entitlement to a set proportion of the estate.  England, on the other hand, has only very minor protective measures reserved for limited occasions, and individuals generally have complete freedom to leave their estates to whomsoever they wish.  After 17 August 2015, Italian law will instead look to the law of where Giovanni is habitually resident (England) to govern the succession.  This would seemingly allow Giovanni much more freedom for deciding his succession and remove the family’s entitlement.  It may, therefore, become desirable for someone from an EU civil law country to come and live in England if he or she does not want to be restricted in terms of the succession of their estate.

There is also provision for UK nationals living in EU countries to be able to elect that the law of their nationality controls the succession of their estate, and not the law of where they are resident.  Again, this may benefit those UK nationals who wish to completely control the succession of their estate but continue to live in a civil law EU country.   Such an election can be made now in a Will and becomes effective for deaths after 17 August 2015.

It is clear that, despite the UK not signing up to the regulations, the effect will be very important for some clients and they need to be understood now.  What we do not know is how the Courts of jurisdictions which have traditionally protected the family’s succession rights will respond if that protection is removed.  There is provision for certain effects of the regulations to be ruled out on public policy grounds, but opinion is divided as to whether the breach of a family member’s protected inheritance would be sufficient to invoke this.  It will certainly be an interesting aspect of the regulations to follow.

Andrew Godfrey
Penningtons Solicitors LLP,
Abacus House,
33 Gutter Lane,
London  EC2V 8AR

Andrew.godfrey@penningtons.co.uk
Tel: +44 (0)20 7457 3074

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

Procedure for dealing with the English Estate of an Italian National or Italian domiciliary having no English Will

Summary

In the event that the client dies resident in England but domiciled in Italy with an Italian Will which appoints no executors, an application to a District Judge or Registrar will be required to obtain a Grant of Probate in England.

The application would have to first be made by the person who is entrusted with the administration of the estate in Italy.  Where there is no such person, then the beneficiaries will be entitled to apply for the grant.

If the Will was written in English and appointed executors, or if the Will referred to someone and described their role in the capacity of an Executor, this would enable a Grant of Probate to be obtained without an application to the Court.  In addition, where the whole or substantially the whole of the English estate consists of immovable property, a Grant in respect of the whole estate may be made in accordance with law which would have been applicable if the deceased had died domiciled in England and Wales.

Details

By virtue of S.1 Wills Act 1967, “a will shall be treated as properly executed if its execution conformed to the internal law in force in the territory where it was executed, or in the territory where, at the time of its execution or of the testator’s death, he was domiciled or had his habitual residence, or in a state of which, at either of those times, he was a national.”

It is normally necessary that the will should dispose of an estate in England and Wales or contain a valid appointment of an executor.  This would suggest that providing the English estate is specifically disposed of in the Will itself, it is not essential that the Will appoints an executor.

The procedure for making grants where the deceased died domiciled out of England and Wales, is governed by the Non-Contentious Probate Rules 1987 – Rule 30.  This provision is copied out below.

Rule 30 sets out two main circumstances in which the Grant of Probate will be issued.

The first involves an application to the Court in which a District Judge or Registrar may order that a Grant be issued to a number of people.

The first eligible person is the person entrusted with the administration of the estate by the court having jurisdiction at the place where the deceased died domiciled.  A Grant in this capacity is made only where there is a Grant, Decree or other Order of a court clothing some person with authority substantially similar to that conferred upon an English Personal Representative, ie empowering him to collect in and administer the estate.  A decree or order merely declaring who are the heirs of the deceased is not normally accepted as sufficient to enable such persons to be treated as entrusted with administration.

An Order which simply declares who are the heirs may however be sufficient to show who are the persons beneficially entitled to the estate.

Under Rule 30(1)(b), where there is no person in authority, the Grant may be issued to the person beneficially entitled to the estate by the law of the place where the deceased died domiciled or, if there is more than one person so entitled, to such of them as the District Judge or Registrar may direct.  Therefore, the beneficiaries under the Will may well be in a position to apply for the Grant.

The alternative position under Rule 30 does not involve an application to the Court.  Instead, Probate of any will which is admissible in proof may be granted to the executor named if the will is in English.  However, Probate would still be granted “if the will describes the duties of a named person in terms sufficient to constitute him executor according to the tenor of the will, to that person” (Rule 30(3)(a)(ii).  Therefore, the provision of person in an executor-type role in the Italian will would make the application for a grant of probate on the client’s death an easier one.

As regards the procedure required for the Court application, the original Grant or Decree issued by the court of domicile, or an officially certified copy of it, including an official copy of the will, if any, should be lodged and this will be retained in the registry.  If the document is in a foreign language, a notarial or other sufficient translation is also required.  The translation must be identifiable with the document translated and usually is annexed to the foreign documents.  The translation should, if possible, be verified by the certificate of an English notary public or a British consul.

Please note that the Grant is in all cases one of letters of administration, with or without will as the case may be, and consequently the usual rule is that the Grant may not issue to a single individual if a life or minority interest arises under the law of the domicile.

Non Contentious Probate Rules

Rule 30 Grants where deceased died domiciled outside England and Wales

(1)        Subject to paragraph (3) below, where the deceased died domiciled outside England and Wales, a distribute judge or registrar may order that a grant, limited in such way as the distribute judge or registrar may direct, do issue to any of the following persons-

(a)        to the person entrusted with the administration of the estate by the court having jurisdiction at the place where the deceased died domiciled; or

(b)        where there is no person so entrusted, to the person beneficially entitled to the estate by the law of the place where the deceased died domiciled or, if there is more than one person so entitled, to such of them as the district judge or registrar may direct; or

(c)        if in the opinion of the district judge or registrar the circumstances so require, to such person as the district judge or registrar may direct.

(2)        A grant made under paragraph (1)(a) or (b) above may be issued jointly with such person as the distribute judge or registrar may direct if the grant is required to be made to not less than two administrators.

(3)        Without any order made under paragraph (1) above –

(a)        probate of any will which is admissible to proof may be granted -

(i)         if the will is in the English or Welsh language, to the executor named therein; or

(ii)        if the will describes the duties of a named person in terms sufficient to constitute him executor according to the tenor of the will, to that person; or

(b)        where the whole or substantially the whole of the estate in England and Wales consists of immovable property, a grant in respect of the whole estate may be made in accordance with the law which would have been applicable if the deceased had died domiciled in England and Wales.

Roy Campbell
Druces LLP  22.05.13
R.Campbell@druces.com

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

BILA Committee Member elected onto the Law Society’s Management Board

BILA Committee member and Law Society Council member, Maria Memoli, has been elected to the prestigious Management Board of the Law Society of England and Wales. Not only is she the first Italian national to be on the Law Society Council, but she is also the first Italian national to have been elected to this position.  The Board is a senior committee of the Society with members including Law Society President, Lucy Scott-Moncrieff, Vice-President, Nick Fluck, and the Society’s Chief Executive.

Maria has been a Law Society Council member since 2005.  Amongst her many roles, she has also been a member of the Law Society’s Gazette Editorial Board, on the Membership board for 3 years  and was the Chairman of the Council Members’ Conduct Committee for 4 years.

Promising in her election statement not only to ‘talk the talk’ but also to ‘walk the talk’, Maria says that her background and experience equip her to deal with a range of thorny issues including ‘business planning, governance, VFM, budgets, HR, financial controls and risk management to name but a few’.

Rocco Franco, President of BILA said that:

‘BILA is delighted that Law Society Council members have recognised Maria’s talents and personal qualities in this way. As an active BILA Committee member, Maria has strived to put Italian lawyers on the Law Society’s radar by inviting Law Society office holders to seminars in Italy to such cities as Rome, Venice, Padua and Genoa. Maria’s prestigious appointment is particularly welcome at a time of change for the legal profession across England and Wales, which is of much interest in Italy and may impact on the rest of the world”

Maria Memoli said that:

“I am absolutely thrilled to have been elected onto the Law Society’s Management Board and I am humbled by my fellow Council Members’ confidence in me. It certainly won’t be an easy ride running the Law Society, but to have an Italian flavour at the higher echelons of the Law Society is quite something – definitely a first !”.

That Swiss Account…

That Swiss Account …

On 6 October 2011 the UK Swiss Tax Agreement on Co-operation in Tax Matters (‘the UK Swiss Agreement’) was signed, and it is expected to come into force on 1st January 2013 (subject to the national legislation being in place in both countries before then).  It will have important implications for those who are within the UK tax net and have, directly or indirectly, a beneficial interest in financial assets or bank accounts in Switzerland.  Unless appropriate advice and action is taken those affected could be in for a nasty shock.

The Background

In recent times, UK taxpayers with offshore assets that have not been properly declared in their tax returns have been able to take advantage of offshore disclosure facilities made available by HMRC (‘the Revenue’).  The origin of the foreign assets may be earnings from a business that have been squirreled away without being declared, or an inheritance from a kind aunt.  The taxpayer has placed the funds in an offshore bank account or portfolio because they either do not know what to do about the situation or have chosen to do nothing. The offshore disclosure facilities offered the taxpayer the incentives of allowing these problems to be tidied up with the Revenue and only reduced penalties being charged.  Given that there are possible criminal sanctions for evading tax, and penalties can now reach a maximum of 200% of the unpaid tax, a lot of people have taken advantage of these facilities.  The Revenue, on the other hand, welcomed the collection of tax for past events and the fact that tax will be paid in the future on these assets as well.

The UK Swiss Agreement, however, seeks to attack the problem of those UK taxpayers with financial assets or bank accounts in Switzerland who have so far not made a disclosure to the Revenue.  From next year such taxpayers will be faced with some decisions to make.  Broadly there are two decisions, and for each decision there are two options.  The first decision concerns how to regularise the position to date (‘the one-off payment’), and the second concerns how to regularise the on-going position (‘the lifetime withholding tax’).

UK Resident and Domiciled

For those who are UK resident and domiciled, for each decision there will only be the options of:

1)             maintaining anonymity but paying away part of the capital of the assets or income/gains as they arise (the payments being made to the Revenue via the asset holder (e.g. bank) and Swiss authorities); or,

2)             allowing a disclosure to be made to the Revenue.

As regards regularising the position to date, if the first option is selected then a one-off payment of the capital value of the assets is taken by the asset holder.  The value of the payment is calculated according to a formula and will be between 21% and 41% of the total capital value (calculated according to provisions in the UK Swiss Agreement).  This payment will in most cases clear all liability for income tax, capital gains tax, inheritance tax and VAT, and associated interest and penalties.

For the on-going position the taxpayer will need to decide whether anonymity is to be preserved and a lifetime withholding tax is paid on the income and gains of the assets as they arise, or alternatively if disclosure is to be made.  The rates for the withholding tax are in line with, but slightly less than, the top rates of UK tax as they are collected as they arise and so earlier than on a self assessment basis (40% on dividend income, 48% on other income and 27% on capital gains).

The one-off payment and lifetime withholding tax are unlikely to be the correct rates of tax to apply to the particular assets, income or gains, and so disclosure will often be the better option for UK resident and domiciled taxpayers.

If no option is selected by 31 May 2013 as regards the one-off payment then anonymity will be preserved and the tax payment will automatically be taken by the asset holder.  Similarly, the lifetime withholding tax will commence once the agreement comes into force (1 January 2013) unless the option to disclose is chosen.

UK Resident and Non-UK Domiciled

Those who are not domiciled within the UK but are resident here have additional options as regards the one-off payment. As they can also opt out of it, or apply it only to income and gains with a UK source or those that are remitted to the UK.  There will be no or only limited clearance of past tax liabilities if these options are chosen.  The lifetime withholding tax also only applies to income and gains with a UK source or those that are remitted to the UK.  The taxpayer will need to supply the asset holder with a certificate as to their domicile supplied by a lawyer, accountant or tax adviser in order to select this option.

Withholding Tax on Death

There is also provision for a withholding tax (at 40%) to apply when the UK taxpayer dies, but this is only in the case of UK resident and domiciled taxpayers.  Again, there is the option of disclosing the relevant details to the Revenue to avoid a withholding tax being taken.

Liechtenstein Disclosure Facility (‘LDF’)

Thankfully, for those who own Swiss assets but have not paid the correct amount of tax, there is a disclosure facility currently open with the Revenue.  The LDF allows those with offshore undisclosed assets to establish a link with Liechtenstein (if one did not exist already), disclose their position to the Revenue and benefit from the Revenue looking no further back than 1999, much reduced penalty rates and also removing the threat of criminal prosecution for tax evasion (which the UK Swiss Agreement does not).  If the taxpayer acts quickly enough, their tax position can be regularised in a cost efficient manner and the UK Swiss Agreement need not cause such concern.

Andrew Godfrey

Penningtons Solicitors LLP,
Abacus House,
33 Gutter Lane,
London  EC2V 8AR

Andrew.godfrey@penningtons.co.uk
Tel: +44 (0)20 7457 3074

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.

 

Service of claim form via Facebook

Recently this year, Mr Justice Teare authorised a claimant to serve a claim to a defendant via Facebook for the first time in the High Court.

Australia and New Zealand –both Commonwealth countries with similar legal systems – are well ahead, having allowed service of legal documents by Facebook and Twitter since 2008. However change has been in the air in England for some time, as a similar ruling was made at the County Court in October 2009 whereby permission was granted to serve an injunction via Twitter.

The case is a commercial case and involves a £1.3 million claim by two investment managers against their broker and two of its employees. The broker denied responsibility and argued that in case it was held liable, it was entitled to recover a contribution from the two individuals, however no one was sure of the current address of one of the employees, a Mr Fabio De Biase.

The circumstances of this case were very specific: the defendant was a former employee of the claimant and some of his former colleagues were still working for the claimant and were in contact with the defendant via Facebook. They were therefore able to identify him from his photo and also establish that the account was being used as he had recently accepted some of their requests of friendship. The judge was therefore convinced that it was impossible to have his identity mistaken for someone else with the same name.

The Civil Procedure Rules deal with service of claim forms and other documents in the jurisdiction (England and Wales), in the UK and within the EEA.

There are two underlying principles which are encompassed in all the rules on service: (1) correct dispatch of the claim within its validity period and  (2)  effective service, so that the court has jurisdiction over the dispute. The general aim of the  provisions on service is that insofar as possible documents have to actually come to the attention of the party being served.

Service is defined in the glossary to the CPR as “steps required by rules of court to bring documents used in court proceedings to a person’s attention”.

CPR 6.3(1) provides that a claim form may be served on an individual by any of the following methods:

  1. Personal service in accordance with rule 6.5 (i.e. giving the documents directly to the party)
  2. First class post- dx- or other service which provides for delivery on the next business day
  3. Leave in a specified place as per CPR 6.7, 6.8, 6.9 (or 6.10 in respect of Crown proceedings). In brief those places are: at the defendant’s lawyer, at an address that the defendant has provided or at a default address. The default address will only come into play where personal service is not required under CPR 6.5, and the defendant has no legal personal representative and has not otherwise provided an address.
  4. Fax or other electronic means of communication. The key point to note here is that consent to service by this method is required, which can be given either impliedly or expressly. In particular for service via email Practice Direction 6A requires that the party served should always be asked if there are limitations to the format in which documents can be received and the maximum size of attachments. The claimant should always tag the email so to obtain an electronic receipt confirming that the email has been both delivered and read.
  5. Any method authorised by the court

The place of service will ordinarily be the usual or last known residence of the individual. The claimant must take reasonable steps to ascertain the defendant’s current address or place of business and if unable to do so the claimant must consider whether there is an alternative place or method by which service may be effected. He then must seek an order for alternative service of the claim and this is where the new case establishes a new era for the service of claim forms.

There are no details on how service was then practically effected using Facebook, but it was almost certainly carried out by way of a private message with the documents attached by PDF sent by the solicitors of the claimant. However, at the time of writing Mr De Biase has not yet participated in the proceedings.

What is important here is that the courts recognised the increasing power of social networking sites like Facebook. This is clearly another example of the English case law system being by nature a flexible means in the hands of the judges which allows them to adapt rules of law, which are sometimes old and obsolete, to modern life and modify legal procedure taking into account changes of society.

Rocco Franco
Partner at Pini Franco LLP

rfranco@pinifranco.com

This article is a summary of recent developments and, whilst every care has been taken to ensure the accuracy of the information provided, it should not be regarded as a substitute for advice in any particular case. Every case is different and you must not act solely on the basis of information contained here. BILA and the article’s author make no warranties as to the accuracy of the information contained in the article and are not responsible for the content of external websites. Where opinions have been expressed, they are the personal opinions of the author and do not constitute professional advice on any level, nor do they represent the opinions of BILA.