Denmark is facing one of the largest legal bills in British judicial history after losing a high-profile tax fraud case in the UK. The country’s tax authority, Skattestyrelsen, could be liable for around £400 million in costs following its failed attempt to recover billions it claimed were lost through a dividend tax refund fraud linked to hedge fund trader Sanjay Shah.
A Landmark Legal Defeat
The case — one of the most complex ever heard in London’s High Court — revolved around the so-called “cum-ex” trading scandal, in which investors allegedly exploited loopholes to claim refunds on taxes that were never paid. Denmark accused Shah and his now-defunct hedge fund Solo Capital Partners of defrauding the government of about £1.4 billion through these trades.
However, the High Court ruled last month that the Danish tax authority had failed to prove its case, even though the judge acknowledged that some defendants, including Shah, had been “dishonest in various ways.” The ruling also criticized Denmark’s tax refund controls, calling them “so flimsy as to be almost non-existent.”
Costly Consequences
Court documents show that Denmark must cover a substantial portion of the defendants’ legal costs, including those of Shah and his related entities, collectively known as the “Shah defendants.” They are entitled to recover 85% of their legal expenses from September 2023 to April 2025, and 100% outside that period.
The aggregate cost of the case on both sides is estimated at about £400 million, covering years of litigation, 26 barristers, and a trial that ran for 138 days. The closing submissions alone exceeded 5,000 pages.
Law firm Meaby & Co, representing Shah, declined to comment. Other defendants, including Jas Bains, Solo Capital’s former legal chief, also had their cases dismissed. Bains criticized the Danish authority for pursuing what he described as an “ill-conceived and disproportionate legal action.”
Denmark Plans to Appeal
The Danish tax authority said it would seek to appeal the decision, asserting that if it succeeds, it will attempt to recover the legal costs. The Court of Appeal has not yet decided whether to allow the case to proceed.
In a statement, Kim Tolstrup, deputy director-general of Denmark’s anti-fraud unit, emphasized the broader recovery mission:
“We have been assigned to recover as much as possible of the estimated DKr12.7 billion [$2 billion] lost through alleged fraud against the Danish government. So far, we have recovered almost DKr4.1 billion through legal action worldwide.”
He added that Denmark’s total legal expenses in England over the past decade are projected to reach DKr1.3 billion ($185 million).
The Broader “Cum-Ex” Scandal
Denmark is among several European nations — including Germany, France, and Italy — to have been affected by the “cum-ex” dividend tax scheme, which is believed to have cost governments across the continent tens of billions of euros.
In a separate criminal case in Denmark, Sanjay Shah was convicted in December 2023 of orchestrating a scheme that defrauded the state of DKr9 billion ($1.3 billion). He received a 12-year prison sentence, though he continues to deny wrongdoing, arguing that he merely exploited legal loopholes. His appeal is scheduled to be heard in November 2026.
A Costly Lesson in Oversight
The failed London lawsuit underscores the financial and reputational risks of large-scale cross-border litigation. For Denmark, the case highlights weaknesses in its tax system controls and the enormous costs of pursuing complex financial fraud cases in international courts — a reminder that, even in the pursuit of justice, the price of failure can be historic.
