Guenther Klar v Court of First Instance Brussels (Belgium)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Steyn |
| Judgment Date | 10 November 2021 |
| Neutral Citation | [2021] EWHC 3001 (Admin) |
| Docket Number | Case No: CO/187/2021 |
| Court | Queen's Bench Division (Administrative Court) |
[2021] EWHC 3001 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mrs Justice Steyn DBE
Case No: CO/187/2021
Mark Summers QC and Joel Smith (instructed by Howard Kennedy LLP) for the Appellant
Clare Montgomery QC and Florence Iveson (instructed by Crown Prosecution Service) for the Respondent
Hearing date: 19 October 2021
Approved Judgment
A. Introduction
The appellant, Guenther Klar, is the subject of a European Arrest Warrant issued by the respondent, an Investigative Judge at the Dutch-Language Court of First Instance of Brussels, on 15 April 2019 (“the warrant”). The warrant seeks the appellant's return to stand trial for offences of tax fraud, money laundering and participation in a criminal organisation, by which conduct it is alleged the Belgian State has been defrauded of €22,732,088.75, of which €11 million was actually paid out. It is only right to record that as these are extradition proceedings Mr Klar has not set out his defence to the allegations made against him.
The warrant was certified by the National Crime Agency on 17 June 2019 and the appellant was arrested the following day. He has been on bail throughout these extradition proceedings, having been released on conditional bail by Westminster Magistrates' Court on 18 June 2019.
The appellant's extradition hearing was heard by District Judge Zani (‘the judge’) on 8–9 December 2020. On 14 January 2021, the judge handed down judgment and made an order for Mr Klar's extradition, against which he now appeals.
Leave to appeal was granted by Johnson J on three grounds, namely:
i) The judge erred in finding that the warrant complies with the requirement in s.2(4)(c) of the Extradition Act 2003 (“the 2003 Act”) (“the section 2 ground”).
ii) The judge erred in finding that the warrant complies with sections 10 and 64 of the 2003 Act (“the dual criminality ground”).
iii) The judge erred in finding that the warrant complies with section 12A of the 2003 Act; no decision has been taken to try Mr Klar in Belgium, and Mr Klar's absence from Belgium is not the sole reason for the failure to take this decision.
Since leave was granted, the Divisional Court has given judgment in Killoran v Belgium [2021] EWHC 2290 (Admin), which has the effect that the appellant's third ground, based on s.12A, cannot succeed. In written submissions, the appellant initially sought to contend that Killoran was decided per incuriam, and to adduce foreign law expert evidence in support of that submission. However, on the eve of the hearing, Mr Mark Summers QC, on behalf of the appellant, indicated that that argument would not be pursued. At the outset of the hearing, Mr Summers conceded ground three (subject to reserving his position in respect of any appeal), and withdrew the application to admit new evidence. Accordingly, the argument before me was limited to the first two grounds.
B. This court's powers on appeal
The court's powers on appeal are set out in s.27 of the 2003 Act. As the application to adduce fresh evidence has been withdrawn, and no new issue has been raised, on this appeal the relevant power is contained in subsection (3): the court may allow an appeal if the appropriate judge ought to have decided a question before them differently, which would have required the judge to order the requested person's discharge. The question is whether the judge made the wrong decision. It is only if the court concludes that the decision was wrong that the appeal can be allowed: see Poland v Celinksi [2015] EWHC 1274 (Admin), [2016] 1 WLR 551 at [24].
C. The warrant and further information
Box E of the warrant states (with paragraph numbers in square brackets for ease of reference):
“[1] The present warrant relates to fraud offences that were allegedly committed at least during the period from June 2012 to May 2016 and as a result of which the Belgian State has very probably been defrauded out of over 22 million euros, of which 11 million euros were actually paid out as a result of unlawful reimbursements of withholding tax on dividends paid by Belgian quoted companies. Allegedly, the fraud scheme was largely organised from the Comoros.
[2] The Belgian Income Tax Code provides for a tax on dividends that is collected through the withholding tax. The dividend-paying company ensures that the withholding tax is paid to the Belgian State. The net dividends are paid to the shareholders of such dividend-paying companies.
[3] On foot of applicable double-taxation treaties, certain foreign companies may file an application for reimbursement of the withholding tax on dividends from Belgian companies. Such applications are mainly filed using the “276DIV form”, together with a declaration of the state of residence, a ‘dividend credit advice’ (share portfolio with the net dividend and withholding tax) and a proof of purchase.
[4] The applications are filed by the TAX RECLAIM AGENT, GOAL TAXBACK, which collects all required documents from SALGADO CAPITAL and its economic owners (5 entities). Also, the TAX RECLAIM AGENTS receive a power of attorney from the representative of these funds for filing such applications with the Belgian tax authority. According to the information available to us, there are indications that the ‘dividend credit advices’ that were presented, are false documents. These documents had been created on the basis of fictitious share transactions for the sole purpose of making an entity fictitiously appear as a financial beneficiary, in order to be able to file withholding tax reimbursement applications unlawfully.
[5] The fraud scheme allegedly involves certain entities, i.e. American pension funds, being unlawfully and subsequently considered as the ultimate beneficiaries of shares and receivers of net dividends, for the sole purpose of obtaining an unlawful reimbursement of withholding tax. The fraud itself entails that the “custodian”, i.e. the financial party that keeps the dividends, issues a “dividend credit advice”, which states that the accounts of the pension funds have been credited with the amounts of the net dividends. However, no proof of payment of such dividends to the pension funds has been found.
[6] The reclaim from the Belgian State is done by the “custodian”, who uses a “tax reclaim agent” to do so. As a result, “tax reclaim agents” reclaim the same withholding tax several times on behalf of various entities. That is why the Belgian Treasury made reimbursements on the basis of fictitious share transactions without having collected the net dividend.
[7] One of these “custodians” is the company SALGADO CAPITAL (hereinafter referred to as “SALGADO”) from the Union of the Comoros. It has been established that SALGADO always uses the same “tax reclaim agent”, i.e. GOAL TAXBACK LTD from the United Kingdom. Via GOAL TAXBACK, applications for withholding tax reimbursements on behalf of 5 different pension funds were filed with the Belgian tax administration.
[8] GOAL TAXBACK's contact person with SALGADO is the individual named Guenther KLAR.
…
[9] The investigation has revealed that Guenther KLAR (previously GRANT-KLAR) is the beneficial owner of SALGADO CAPITAL and of 2 entities (KHAJURAHO EQUITY/TRADING SARL and EUROPA LLP EXECUTIVE PENSION SCHEME), for which such withholding tax reimbursement applications were filed, SALGADO CAPITAL acted as “custodian” for these entities, i.e. the management of the share portfolios. SALGADO CAPITAL also issued the certificates relating to the purchase of the shares.
[10] According to the analysis of the bank accounts held by SALGADO CAPITAL and Guenther KLAR, the reimbursements have mainly flowed to the personal accounts of Guenther KLAR. This does not correspond with the expected money-flows, i.e. to the entities claiming to be the beneficiaries of the dividends. The analysis of these accounts has also revealed that the net dividend and the purchase of the corresponding shares were never paid.
[11] Therefore, Guenther KLAR appears to be in control of a large number of the parties involved in the fraud scheme and appears to have received the largest part of the returns in his personal account.
[12] The tax fraud scheme involves an alleged fraud to the detriment of the Belgian State for an amount of 22,732,088.75 euros during the period from 18 January 2013 to 31 May 2016.” (emphasis added)
The details given in Box E then address the nature and legal classification of the alleged offences, identifying:
i) Four offences for which the parties have used the umbrella term “the fraud offences”, namely, fraud, forgery of documents, use of false documents and tax fraud, contrary to sections 193, 196, 197 and 496 of the Criminal Code and section 449 of the Income Tax Code;
ii) Money laundering, contrary to section 505 of the Criminal Code; and
iii) Participation in a criminal organisation, contrary to sections 324bis and ter and 326 of the Criminal Code.
The Framework List offences of participation in a criminal organisation, fraud, laundering of the proceeds of crime and swindling were ticked.
In response to requests, the public prosecutor provided the following further information on 23 June 2020 (“the 7 th FI”) (with paragraph numbers added in square brackets for ease of reference):
“[1] The EAW stipulates clearly:
— the criminal offence is a fraud harming the Belgian Treasury;
— it was largely organized from the Comoros (the self-declared seat of the company ‘Salgado International’);
— the fraud happened between June 2012 and May 2016;
– the fraud used ‘tax reclaim agents’ who presented false documents documenting fictitious share transactions;
— Guenther Klar was the contact person for the...
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