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Statutory construction and “basic public policy” in foreign relations: Tax exemptions for “Official agents” of an unrecognised State in the United Kingdom

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References

  1. see, e.g. I.A. Shearer,Starke’s International Law (London: Butterworths, Eleventh Edition, 1994), 118–119 and 121. The point has also received judicial acknowledgement in some countries, e.g. the United States: seeOetjen v.Central Leather Co. (1918) 246 U.S. 297 at 302, affirmingJones v.United States (1890) 137 U.S. 202.

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  2. Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd (No. 2) (1967) 1 A.C. 853 (concerning the German Democratic Republic) andGUR Corporation v.Trust Bank of Africa Ltd. (1987) Q.B. 599 (concerning the Republic of Ciskei). In both cases, the unrecognised States were vested with legal personality on the artificial basis that they were “subordinate entities” legal personality on the artificial basis that they were “subordinate entities” legitimately established by the States withde jure plenary power over the territories in question—respectively, the Soviet Union and South Africa: this doctrine was first aired by Lord Wilberforce inCarl Zeiss Stiftung v.Rayner & Keeler Ltd. (No. 2), supra, at 954, and has attracted near universal derision from commentators:Starke’s International Law, supra n. 2, I.A. Shearer,Starke’s International Law (London: Butterworths, Eleventh Edition, 1994), 118–119 and 121. at 136, refers to the doctrine as a “fiction”, and comments that its conclusions are “strained... and fly in the face of international realities”. See also J. Crawford, “Decisions of British Courts in 1985–6 Involving Questions of Public or Private International Law”,British Yearbook of International Law LVII (1986), 405–428. Some might be tempted to suggest that,prima facie, the TRNC is a “subordinate entity” analogous to East Germany or Ciskei. This conclusion would undoubtedly be fallacious because, while South Africa was in law the titular sovereign of Ciskei, and the British government officially regarded the Soviet Union as havingde jure power in East Germany consequent upon the suspension of German sovereignty and partition of Germany in 1945 (as certified by the Foreign Secretary on 6 November 1964), Turkey did not have any such legal power to dispose of Cypriot territory: the creation if the TRNC was made possible only by an unlawful use of force by Turkey in violation of Article 2(4) of the United Nations Charter. See further:infran. 25. see theCase Concerning Military and Paramilitary Activities In and Ageinst Nicaragua (1986) 76 I.L.R. 1, at para. 190.

  3. See furtherinfra n. 37 Foreign Corporations Act 1991, s. 1.

  4. [1995] S.T.C. 741. See also: C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45 (1996), 954–960.

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  5. Income and Corporation Taxes Act 1988 (hereafter “the Taxes Act”), s. 321(2)(b).

  6. seeHansard H.C. Debs, vol. 48, cols. 723–728 and 984. On 2 October 1989 the Foreign and Commonwealth Office issued a certificate that the TRNC was not a State for the purposes of the State Immunity Act 1978—a certificate which, it is acknowledged, still represents the British government’s view on the subject—seeCaglar, supra n.5 C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45 (1996), 954–960. para. 44. The United Kingdom does not have diplomatic relations with the TRNC; the Commissioners viewed the relations between the British Government and the “Turkish Cypriot community in the north of Cyprus” as being “not in the nature of government-to-government dealings but ... functional contacts only”:supra n. 5, C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45 (1996), 954–960. para. 179.

  7. (1978) 1 Q.B. 205.

  8. Supra n.8, at 218. (1978) 1 Q. B. 205.

  9. Caglar, supra n.5 at paras. 111 and 121.

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  10. Caglar, supra n. 5., at para. 104.

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  11. Supra n. 3. Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd (No. 2) (1967) 1 A.C. 853

  12. Supra n. 3. Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd. (No. 2) (1967) 1 A.C. 853per Steyn J. He went on to remark that “...recognition...is a matter of foreign policy on which the executive is in a markedly superior position to form a judgement”. The conclusiveness of a Foreign Office certificate as to British recognition or otherwise of any entity is stipulated in s.21 of the State Immunity Act 1978.

  13. Caglar, supra n. 5 at para. 121. The wording is borrowed practicallyverbatim from Donaldson M.R.’s proposition inGUR Corporation, supra n.3. Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd. (No. 2) (1967) 1 A.C. 853

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  14. Caglar, supra n. 5, at para. 122.

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  15. (1961) U.K.T.S. 4; Cmnd. 1252.

  16. n.7,supra Hansard H.C. Debs, vol. 48, cols. 723–728 and 984. On 2 October 1989 A convenient collection of parliamentary and Security Council exchanges on the subject is further to be found in “United Kingdom Materials on International Law”,British Yearbook of International Law LIV (1983), at 384–385.

  17. See the “sense of the House” resolution passed by the United States House of Representatives on 16 November 1983 (H. Con. Res. 223); the refusal of successive Administrations to recognise the TRNC has also been judicially noted at appellate level inAutocephalous Church of Cyprus v.Goldberg & Feldman Arts (1990) 917 F. 2d 278, at 291–292 (United States Court of Appeals, 7th Circuit).

  18. see theCase Concerning Military and Paramilitary Activities In and Against Nicaragua (1986) 76 I.L.R. 1, at para. 190.

  19. As contained in the Treaty of Cyprus 1960,supra n. 18 (1961) U.K.T.S. 4; Cmnd. 1252.

  20. supra n.25. see theCase Concerning Military and Paramilitary Activities In and Against Nicaragua (1986) 76. I.L.R. 1, at para. 190. For the historical background of the Stimson Doctrine, seeStarke’s International Law, supra n.2, I. A. Shearer, Starke’s International Law (London: Butterworths, Eleventh Edition, 1994), 118–119 and 121, at 140–143. See also J. Crawford,The Creation of States in International Law (Oxford: Clarendon Press, 1979), 118. The doctrine is expressly incorporated into the domestic law of some States; see, e.g., theRestatement (Third) of the Foreign Relations Law of the United States §202(2), and Comment (e) and Reporter’s Note (5) thereto.

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  26. Re Al-Fin Corporation’s Patent (1970) 1 Ch. 160.

  27. Supra n. 39,Re Al-Fin Corporation’s Patent (1970) 1 Ch. 160, at 180,per Graham J.

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  29. seeStarke’s International Law supra n. 2, at 128–130, especiallysupra n. 15,Caglar, supra n. 5 C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45, at para. 121. The wording is borrowed practicallyverbatim from Donaldson M.R.’s proposition inGUR Corporation, supra n. 3 Examples for such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keller Ltd. (No. 2) (1967) 1. A.C. 853 where reference is made to the decision of the United States District Court for the Southern District of Texas inCompania de Transportes Mar Caraibe SA v. M/T Mar Caraibe (1961) 55 A.J.I.L. 749 (concerning the breaking off of American diplomatic relations with Cuba); and cf. Misra, “India’s Policy of Recognition of States and Governments”,American Journal of International Law 55 (1961), 398–424, especially at 404–409 (concerning India’s ambivalent relationship with Israel after according recognition but refusing to establish diplomatic relations).

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  30. (1922) 38 T.L.R. 259.

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  32. Hesperides Hotels Ltd.. v.Aegean Turkish Holidays Ltd., supra n. 7Hansard H.C. Debs, vol. 48, cols. 723–728 and 984. On 2 October 1989;Reel v.Holder and Another (1981) 3 All E.R. 321; andPolly Peck International plc v.Nadir and Others (1992) 2 Lloyd’s L.R. 238. It is noteworthy that while the latter case actually involved the TRNC, the most that Scott L.J. was prepared to say on the issue was that “Northern Cyprus is not recognised by Her Majesty’s Government but nonetheless has hadde facto control over its territory since about 1974”:Polly Peck International plc v.Nadir and Others, supra, at 240. SeeCaglar, supra n. 5 C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45 (1996), 954–960 at paras. 109–111 and 114–118.

  33. Supra n. 3 Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd. (No. 2) (1967) 1. A.C. 853

  34. Caglar, supra n. 5, at para. 126.

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  35. (1977) Q.B. 529.

  36. Cf.Mortensen v.Peters (1906) 8 F. (J.) 93

  37. Caglar, supra n. 5, at paras. 129–131.

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  38. Caglar, supra n. 5, at para. 141.

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  39. Caglar, supra n. 5, at para. 144.

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  40. Caglar, supra n. 5, at para. 149.

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  41. Caglar, supra n. 5, at para. 150.

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  42. Caglar, supra n. 5, at para. 151.

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  43. As set out in Article 1 of the Montevideo Convention on Rights and Duties of States 1933 (1965 L.N.T.S. 19;American Journal of International Law Supp. 28 (1934), 75–78).

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  44. Caglar, supra n. 5, at para. 168. In paras. 166–167, the Commissioners make an interesting reference to a passage in J. Dugard,Recognition and the United Nations (Cambridge: Grotius, 1981), where the latter discusses the position of the so-called Bantustans at pp. 60–64

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  45. E.g.Hesperides Hotels Ltd. v.Aegean Turkish Holidays Ltd., supra n. 7Hansard H.C. Debs, vol. 48, cols. 723–728 and 984. On 2 October 1989; andPolly Peck International plc v.Nadir and Others, supra n. 46Hesperides Hotels Ltd. v.Aegean Turkish Holidays Ltd., supra n. 7.Hansard H.C. Debs, vol. 48, cols. 723–728 and 984. On 2 October 1989;Reel v.Holder and Another (1981) 3 All E.R. 321; andPolly Peck International plc v.Nadir and Others (1992) 2 Lloyd’s L.R. 238. It is noteworthy that while the latter case actually involved the TRNC, the most that Scott L.J. was prepared to say on the issue was that “Northern Cyprus is not recognised by Her Majesty’s Government but nonetheless has hadde facto control over its territory since about 1974”:Polly Peck International plc v.Nadir and Others, supra, at 240. SeeCaglar, supra n. 5 C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45 (1996), 954–960, at paras. 109–111 and 114–118.

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  47. Caglar, supra n. 5, at para. 217.

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  48. Caglar, supra n. 5, at para. 186.

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  49. Caglar, supra n. 5, at para. 187–188.

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  50. Caglar, supra n. 5, at para. 191.

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  51. Supra, n. 46Hesperides Hotels Ltd. v.Aegean Turkish Holidays Ltd., supra n. 7Hansard. H.C. Debs, vol. 48, cols. 723–728 and 984. On 2 October 1989;Reel v.Holder and Another (1981) 3 All E.R. 321; andPolly Peck International plc v.Nadir and Others (1992) 2 Lloyd’s L.R. 238. It is noteworthy that while the latter case actually involved the TRNC, the most that Scott L.J. was prepared to say on the issue was that “Northern Cyprus is not recognised by Her Majesty’s Government but nonetheless has hadde facto control over its territory since about 1974”:Polly Peck International plc v.Nadir and Others, supra, at. 240. SeeCaglar, supra n. 5 C. Warbrick, “Unrecognised States and Liability for Income Tax”,International and Comparative Law Quarterly 45 (1996), 954–960, at paras. 109–111 and 114–118.

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  53. . The principal authorities cited by the Commissioners wereLuther v.Sagor (1921) 3 K.B. 532 andThe Vapper (1947) 80 Lloy’s L.R. 99.

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  54. Infra n. 74.

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  55. SeeStarke’s International Law, supra n. 2, at 111–113, and R. Higgins,Problems and Process: International Law and How We Use It (Oxford: Clarendon Press, 1994), ch. 7.

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  57. Caglar, supra n. 5, at para. 231.

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  58. (1994) E.C.R. I-3087.

  59. Supra n. 3 Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd. (No. 2) (1967) 1 A.C. 853.

  60. Supra n. 3 Examples of such cases are legion: prominent English ones includeCarl Zeiss Stiftung v.Rayner & Keeler Ltd. (No. 2) (1967) 1 A.C. 853.

  61. Caglar, supra n. 5, at para. 177.

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  1. International and European Law Unit, Faculty of Law, University of Liverpool, Liverpool, UK

    David Turns (Lecturer)

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Turns, D. Statutory construction and “basic public policy” in foreign relations: Tax exemptions for “Official agents” of an unrecognised State in the United Kingdom. Liverpool Law Rev 20, 253–271 (1998). https://doi.org/10.1007/BF02799319

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