Neutral Citation Number: [2004] EWHC 358 (Ch) 
Case No: HC02C03865 & others
 
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 03.03.04

Before :

THE HONOURABLE MR JUSTICE PARK
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Between :

	The claimants under the Loss Relief Group Litigation Order 	Claimants	
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	The Commissioners of Inland Revenue	Defendants	

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Graham Aaronson QC, David Cavender and Paul Farmer (instructed by Dorsey & Whitney) for the Claimants
Richard Plender QC and David Ewart (instructed by The Solicitor of Inland Revenue) for the Defendants 

Hearing dates : 11 February to 13 February and 16 February 2004
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Judgment

Mr Justice Park : 

Overview
1.	In this judgment I use the abbreviations GLO for Group Litigation Order and CJEC for the Court of Justice of the European Communities.
2.	On 23 May 2003 the Chief Chancery Master made a GLO within rule 19.10 to rule 19.15 of the Civil Procedure Rules.  The GLO operates against a tax background.  I am the nominated judge under it.  Within the ambit of the GLO a substantial number of multi-national groups of companies (at present 55) have brought proceedings against the Inland Revenue.  They seek to challenge certain territorial limits of the system of group relief which operates in United Kingdom tax law.  The claims of the groups are described in the GLO as ‘the Loss Relief Group Litigation’, and the order is generally referred to as the Loss Relief GLO.  The claimants wish to obtain from the court decisions that rules in United Kingdom statutes which in some circumstances appear to deny group relief to United Kingdom companies are overridden by articles of the EC Treaty or by articles in Double Taxation Agreements.  In that connection they first wish the court to decide that some companies have paid too much tax because they did not receive group relief which they should have received.  They also wish to obtain further consequential reliefs from the court, in the form of compensation of some kind for indirect effects of what are contended to have been unlawful applications of the statutory rules.  Sometimes the claims for consequential relief are made by the same companies as those which contend that they ought to have been given group relief, but often they are made by other companies which are members of the same groups.
3.	Without doubt the GLO raises important and difficult issues of substantive law.  However, those issues have not been the subject of the recent hearing, and they are not the subject of this judgment.  The judgment is about a jurisdictional issue which arises from the procedure for the administration of our tax system.  Any developed tax system must provide machinery for the resolution between the taxpayer and the State of disputed issues of tax law and of the facts to which the tax law has to be applied.  Under our system the machinery so provided is a system of appeals which begin with first instance hearings before designated first instance tribunals, the General Commissioners and the Special Commissioners.  On issues of the magnitude and sophistication of those covered by the Loss Relief GLO the relevant tribunal would almost certainly be the Special Commissioners, who are full-time and highly regarded specialists in revenue law.  Dr Plender QC and Mr Ewart have submitted on behalf of the Revenue that the basic questions of tax law sought to be raised by the GLO ought to be raised on conventional tax appeals to the Special Commissioners, and that the High Court either has no jurisdiction to entertain the questions at all, or if it has it should decline to exercise it.  The Revenue make this point only in relation to the questions of whether United Kingdom companies ought to have received group relief which was denied to them, as opposed to the questions of whether, if group relief was unlawfully denied, some form of further compensation should be available to them or to other companies in the groups concerned.  On behalf of the claimants Mr Aaronson QC, Mr Cavender and Mr Farmer have submitted that a High Court judge does have jurisdiction to determine the questions of tax law, and that I ought to be willing to go ahead and determine them.
4.	However, I agree with Dr Plender and Mr Ewart.  In my judgment issues of tax law which are disputed between taxpayers and the Revenue ought to be resolved on appeals to the Commissioners, and not on cases brought before a High Court judge sitting at first instance (as opposed to sitting on appeal from first instance decisions of the General and Special Commissioners).  I do not think that it matters greatly whether I have no jurisdiction at all or whether, if I have, I need to decide whether or not to exercise it, since if the latter is the case I will decline to exercise whatever jurisdiction I have. 
Group relief and its territorial limits
5.	Group relief was introduced into United Kingdom tax law in 1973.  The statutory provisions are now contained in ICTA 1988 ss.402 et seq.  The basic idea is simple.  Suppose that two companies are members of the same group.  For example, one might be the parent company and the other might be a subsidiary; or they might both be subsidiaries, direct or indirect, of the same parent company.  If one of them has profits on which it would ordinarily be liable to pay corporation tax, but the other has losses which it could, for tax purposes, have set off against profits of its own if it had had any, the second company may ‘surrender’ the losses to the first company, and the first company may ‘claim’ them.  If Company 1 has a profit of 100 and Company 2 has a loss of 100, and they are both in the same group of companies, Company 2 may surrender its loss to Company 1.  Company 1’s taxable profit of 100 is reduced to nil by Company 2’s loss so that Company 1 does not have any tax to pay.  But Company 2 does not have a loss to carry forward.  If, however, there is no group relationship between them, Company 1 pays tax on its profit of 100 and Company 2 has a loss of 100 which it can carry forward and which it might be able to set against profits of its own in a future accounting period. 
6.	There is a mass of detailed legislation enlarging around the basic idea.  It covers, for example, what kinds of tax losses or other forms of tax relief of a company are eligible to be surrendered.  The foremost example is trading losses of a current accounting period (not losses brought forward from an earlier period).  There are rules about how to match up the accounting periods of the surrendering and claimant companies: not usually a source of difficulty, because the commonest thing is for all companies in the same group to have the same accounting periods as each other.  There are elaborate provisions defining precisely what characteristics two companies need to have for a group relief relationship to exist between them.  The rules as to the national residence of the companies are crucial in this case (and I will come to them below), but other detailed rules are not important for present purposes.  I might mention, however, that a subsidiary must be at least a 75% subsidiary to qualify.  The commonest case, of course, is a 100 % subsidiary.  There are also provisions, which I need not go into, extending the concept of group relief to claims and surrenders of losses, etc, between companies which, instead of a group relationship, have a consortium relationship between them.  The basic idea of a consortium is a structure under which two or more companies combine to form a jointly owned trading company in which they all have a reasonably substantial holding (not less than 5% each).
7.	As I have said, I do not need to go into the details of all those kinds of matters.  For simplicity I can concentrate in this judgment on groups rather than consortia, and I will assume that all subsidiaries are, directly or indirectly, 100% subsidiaries.  The critical statutory provisions can be shortly stated.  They are all contained in the Taxes Act 1988.  I need only quote s.402(2), parts of s.413, and then s.402(3A) and (3B) (which were introduced for accounting periods ending on or after 1 April 2000).
402(2)		Group relief shall be available where the surrendering company and the claimant company are both members of the same group.
413(3)		For the purposes of this Chapter – 
(a)	two companies shall be deemed to be members of a group of companies if one is the subsidiary of the other or both are 75% subsidiaries of a third company; …
413(5) 		References in this Chapter to a company apply only to bodies corporate resident in the United Kingdom; and in determining for the purposes of this Chapter whether one company is a 75% subsidiary of another, the other company shall be treated as not being the owner – 
(c)	 of any share capital which it owns directly or indirectly in a body corporate not resident in the United Kingdom.
402(3A) [taking effect in 2000]	Group relief is not available unless the following condition is satisfied in the case of both the surrendering company and the claimant company.
(3B)		The condition is that the company is resident in the United Kingdom or is a non-resident company carrying on a trade in the United Kingdom through a branch or agency.
8.	The points which matter for the purposes of this judgment are the requirements in s.413(5) that the companies must be resident in the United Kingdom, and, from 2000 onwards, the similar residence requirements of s.402(3B).  They mean that, if they take effect according to their terms, group relief is only available if the surrendering and claimant companies are resident in the United Kingdom and are both members of a group which has a United Kingdom parent (which can, however, itself be a subsidiary of a non-United Kingdom parent).  An exceptional case, introduced in 2000, is that group relief is available to or from the United Kingdom branch of a non-resident company.  The important cases for present purposes are those which, according to the wording of the provisions, are excluded from group relief because the residence requirements are not met.  I will give three examples.
i)	A United Kingdom parent company has operations in the United Kingdom which it conducts partly itself and partly through a United Kingdom subsidiary.  It also has a subsidiary resident in, say, France.  The United Kingdom operations give rise to profits which are liable to United Kingdom corporation tax.  The French subsidiary makes losses.  On the wording of the United Kingdom statute the losses of the French subsidiary cannot be surrendered and used against the profits, taxable in the United Kingdom, of the United Kingdom parent company and its United Kingdom subsidiary. 
ii)	A French parent company has a United Kingdom subsidiary.  The United Kingdom subsidiary has taxable profits; the French parent company, either within itself or within a French subsidiary, has losses.  The French losses cannot be surrendered against the United Kingdom profits.
iii)	A non-resident parent company owns two United Kingdom subsidiaries.  It owns them directly, not through an interposed United Kingdom holding company.  One United Kingdom subsidiary has taxable profits; the other has tax-allowable losses.  The losses cannot be surrendered against the profits.
9.	The foregoing are three very simple examples.  In the practical reality of many large multi-national groups more complicated structures are likely to arise, particularly so if one introduces the possibility of consortium companies.  The Revenue and the professional advisers of the participants in the GLO have identified many variants on the basic patterns, and most of them are exemplified in one way or another by the six groups which have been identified as potential test cases for this GLO.  They all have the underlying common thread that, if all the relevant companies had been resident in the United Kingdom, group relief would have been available so as to shelter the profits of a United Kingdom company from United Kingdom tax, but, because the residence requirements of the statute were not met in one or more respects, group relief was not available after all.  That result undoubtedly follows if the wording of the United Kingdom legislation takes effect according to its terms. 
The substantive arguments advanced by multi-national groups
10.	Notwithstanding the apparent result of the United Kingdom statutory provisions, in recent years taxpayer groups have developed arguments that the provisions may be contrary to, and may be overridden by, articles of the EC Treaty or of applicable Double Taxation Agreements.  The effect sought to be achieved is that a United Kingdom resident company which is a member of a group of companies and which has taxable profits may be able to reduce or extinguish its United Kingdom tax liability by claiming group relief from non-United Kingdom companies in the group which have losses.  It is also argued that group relief is available between two United Kingdom subsidiaries which are members of the same international group but are not members of a United Kingdom sub-group within it (as in (iii) in paragraph 8 above).  I am not concerned in this judgment to form a view about whether the arguments being deployed are correct or not.  For completeness, however, I will briefly outline the main strands of them.  
11.	In cases where the loss-making companies are resident in other member states of the European Community, or in cases where a member state parent company has two or more directly owned United Kingdom subsidiaries, the taxpayers place reliance on the right of establishment provisions in the EC Treaty.  The first paragraph of article 43 (which used to be article 52 before a renumbering exercise a few years ago), reads as follows: 
Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited.  Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.
The argument is in essence that a fiscal rule which gives favourable treatment to companies in groups, but only if they are all within the same Member State, can operate as an indirect restriction on freedom of establishment.  The Court of Justice of the European Communities has certainly taken a wide view in recent years of the possible impact of article 43 upon national tax systems, and it would be a brave man who predicted what view the Court will take in the reference to it (which has already been made, as I will describe in paragraphs 26 to 28 below) of a question whether the United Kingdom group relief rules do or do not fall foul of the article.
12.	No argument can arise under article 43 where the non-resident company or companies are resident in a third country outside the European Union (for example in the United States).  In the case of such companies there is an argument that group relief may be available by virtue of article 56 of the EC treaty: ‘… all restrictions on the movement of capital between … Member States and third countries shall be abolished’.  However, I anticipate that the foremost contention which will be advanced on behalf of such companies arises under the non-discrimination article of Double Taxation Agreements.  The United Kingdom has Double Taxation Agreements with many other countries, including the United States, and in general they have overriding effect in domestic tax law by virtue of ICTA 1988 s.788.  (As to this generally see my judgment in NEC Semi-Conductors Ltd v IRC [2003] EWHC 2813(Ch)).  The relevant paragraph of the non-discrimination article tends to be in substantially identical terms, since it is derived from a standard form of model Double Taxation Convention prepared by the OECD.  In the case of the United States it reads as follows: 
Enterprises of a Contracting State [the United Kingdom], the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State [the United States] shall not be subjected in the first-mentioned Contracting State [the United Kingdom] to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of that first-mentioned State [the United Kingdom] are or may be subjected.
I anticipate that the main thrust of the argument will be to the following effect: if a United Kingdom subsidiary of a parent company based in (for example) the United States cannot claim group relief from its parent or fellow subsidiaries resident in the United States, whereas a United Kingdom subsidiary of a parent company based in the United Kingdom can claim group relief from its parent and fellow subsidiaries resident in the United Kingdom, that is to subject the United Kingdom subsidiary of a United States parent to other and more burdensome taxation than that to which United Kingdom subsidiaries of United Kingdom parents are subjected.  With appropriate adaptations the argument will apply also to subsidiaries of parents in other jurisdictions with which the United Kingdom has similar Double Taxation Agreements.  It is an important argument, and at some stage it will have to be considered with care and in depth.  The hearing to which this judgment relates was concerned with identifying the court or tribunal which will have the first responsibility for considering it.
The claims sought to be advanced by the claimants in the Loss Relief GLO 
13.	In the Overview at the beginning of this judgment I said that the claimants advance two kinds of arguments: arguments that United Kingdom companies may have paid too much tax because they were denied the ability to claim group relief, and arguments that consequential reliefs in the nature of compensation or restitution should be given to the same companies or to other companies in the groups.  I now give more details.  
14.	A helpful description of the general nature of the claims is given in paragraph 5 of the claimants’ skeleton argument.  It analyses the claims under four heads, of which (i) corresponds to the argument of tax law that group relief should have been given, and (ii), (iii) and (iv) divide the claims for consequential relief into three categories.  I reproduce the relevant paragraph of the skeleton.
5.	The claims by each of the test claimant groups are for at least two, and in some cases for all four, of the following:-
(i)	For the profits of the UK profit-making company to be relieved by the losses of a non-UK resident company.  It may be helpful to refer to this as “basic group relief”.
(ii)	Because of the clear legislative requirement for all the relevant companies to be resident in the UK basic group relief was regarded in every case as not available.  In many cases the profit-making companies used other reliefs (e.g. capital allowances or surplus ACT) which they would not have used had basic group relief been available.  In these cases the profit-making companies claim restitution of the other reliefs or, in the alternative, compensation for their use.  It will be convenient to refer to this as “the reclaim of utilised reliefs”.
(iii)	In many cases other UK members of the group surrendered their own reliefs to the UK profit-making company; and those companies are reclaiming the reliefs.  It will be convenient to refer to this as “the recovery of surrendered reliefs”.
(iv)	In all of the cases the companies which would have surrendered losses, if the group relief rules were not confined to UK resident companies, may have been paid for allowing their losses to be set-off against the profit-making companies’ profits, and they seek compensation for the loss of these payments.  It will be convenient to refer to this as “the claim for payments”.
15.	To anticipate, the general thrust of the submissions of Dr Plender for the Revenue is that the Special Commissioners and not the High Court have jurisdiction to determine claims for relief of the type described in (i): such claims are claims for repayment of taxes paid which, it is argued, ought not to have been paid because, on a true view of the law, group relief should have been given.  Dr Plender accepts that the reliefs of the kinds described in (ii), (iii) and (iv), if available at all, are properly claimed by High Court proceedings since they are claims for reliefs which the Special Commissioners have no power to give.  However, the reliefs within (ii), (iii) and (iv) are dependent on the tax law issue raised by (i).  Therefore the claims within (ii), (iii) and (iv) cannot proceed until the issue in (i) has been determined, and then can only proceed if that issue is determined in favour of the claimants.  It is of course Dr Plender’s submission that that issue must be determined by the Special Commissioners, or (more precisely) in proceedings which begin in the form of a tax appeal to the Special Commissioners, even if they subsequently go through further stages such as onward appeals from the Commissioners to the High Court or beyond, or a reference to the CJEC.
16.	For an illustration of how the issues are raised in the individual cases I was taken through the claim form of one of the claimant groups.  The form advanced various claims for relief on behalf of several different companies in a group of which the parent company is Autologic Holdings plc.  The structure of the group appears to have been that there were a United Kingdom parent company, several United Kingdom subsidiaries and two French subsidiaries.  One of the United Kingdom subsidiaries, called Walon Ltd, had profits.  It was able to reduce the amount on which it had to pay United Kingdom corporation tax to some extent by claiming as much group relief as was available from other United Kingdom subsidiaries, but it still had amounts of corporation tax to pay.  The French subsidiaries had losses, but it was considered at the time that the losses could not be surrendered to Walon by way of group relief, because of the territorial restrictions in the United Kingdom statute.  The particulars of claim advance claims by Walon expressed as being for damages or restitution, but effectively seeking to get back the corporation tax which it says that it would not have paid if it had been given group relief for the losses of the French subsidiaries.  The Revenue’s case is that the substantive issue involved in those claims must be raised on a tax appeal to the Special Commissioners.  
17.	The particulars also include claims by other United Kingdom subsidiaries of Autologic Holdings plc to have restored to them the value of the United Kingdom tax losses or other reliefs which they surrendered to Walon and which they say they would not have surrendered if Walon had been allowed by the Revenue to claim group relief from the French subsidiaries.  There are also claims by the French subsidiaries for amounts equal to the payments for group relief which they say Walon would have made to them.  The Revenue accept that the heads of claim outlined in this paragraph can properly be advanced in the High Court, since the Special Commissioners have no jurisdiction to deal with them.  However, they only arise if Walon was on a true view of the law entitled to claim group relief from the French subsidiaries, and whether it was so entitled is a question which has to be determined first. 
The tax appellate jurisdiction, and the ‘exclusivity principle’
18.	The United Kingdom tax legislation provides for disputes between the Revenue and taxpayers to be resolved by appeals brought in the first instance to the General or Special Commissioners.  Provisions to that effect have been features of our tax system from its earliest times.  For many years the main provisions were ss.31 and 42(3) of the Taxes Management Act 1970, replacing earlier identical provisions.  S.31 gave a right of appeal against an assessment to tax, and s.42(3) gave a right of appeal against a refusal of a claim.  With the introduction of new systems of administration of corporation tax in the 1990s (‘Pay and File’ for a few years, and more recently corporation tax self-assessment), the statutory basis of the rights of appeal has changed.  I need not go into the details of this, since nothing turns on it.  It has always remained the case that a corporate taxpayer which wishes to dispute some point of tax law with the Revenue has a statutory right of appeal to the Commissioners.
19.	There have been several cases over the years which have considered to what extent the jurisdiction of the General or Special Commissioners to determine issues of tax law between a taxpayer and the Revenue is exclusive, in the sense that it is not open to a taxpayer to seek a determination by another procedure, such as an action commenced in the High Court.  The authorities were reviewed comprehensively and authoritatively by Robert Walker J within the last ten years in Glaxo Group Ltd v IRC [1995] STC 1075.  There is a further helpful review in the judgment of Dyson J in R v IRC ex parte Bishopp [1999] STC 531.  In the circumstances I will not go into the cases in depth myself.  There are, however, some observations which I wish to make.
20.	A seminal case in this area was not a tax case at all, but it has been cited and treated as authoritative in most, if not all, of the tax cases which have come before the courts in later years.  This case is Barraclough v Brown [1897] AC 615, a decision of the House of Lords.  The undertakers of a river incurred expenses in removing a vessel belonged to the defendant and which had sunk in the river.  There was no common law right to recover the expense, and the undertakers relied solely on the following statutory provision:
If any … vessel shall be sunk … in the River Ouse … it shall be lawful for the undertakers … to … remove such … vessel, and … the undertakers may … recover [all the expenses relating thereto] from the owner of such vessel in a court of summary jurisdiction.
It should be noted that the statutory power to recover the expenses was to be exercised in ‘a court of summary jurisdiction’.  In fact the undertakers brought proceedings in the High Court, which was not a court of summary jurisdiction.  The House of Lords held that the High Court had no jurisdiction to grant the relief sought from it, and that the undertakers’ claim to exercise its statutory right of recovery failed.  
21.	In my view there are two strands to the reasoning.  One focuses on the analysis that there was no right to recover the expenses except the right conferred by the section, that the section expressly stated that the recovery was to be made in a court of summary jurisdiction, and that therefore no right of recovery in the High Court existed at all.  On that basis the decision could be said to have rested on the feature that both the substantive right of recovery and the procedural mechanism for the exercise of it were contained in the self-same section, so the right of recovery could not exist apart from the particular mechanism.  ‘The right and the remedy are given uno flatu, and the one cannot be dissociated from the other’: Lord Watson at p.622.  Substantive rules of tax law about such matters as whether group relief is available or not are not contained in the same provisions as those which confer and regulate rights of appeal, so in one respect Barraclough v Brown may be distinguishable.  
22.	However, there is the second strand in the reasoning in the House of Lords.  A declaration or decision that the undertakers were entitled to recover their expenses was ‘one of those matters exclusively committed to the jurisdiction of the summary court’.  Therefore, said Lord Watson, still at p.622: ‘I am not prepared to hold that the High Court of Justice has any power to make declarations of right with respect to any matter from which its jurisdiction is excluded by an Act of the Legislature’.  The Act concerned did not expressly exclude the jurisdiction of the High Court, so His Lordship’s reasoning in this part of his speech is to the effect that, if a statutory scheme creates rights and obligations, and also confers on a specific court or tribunal jurisdiction to determine questions about the rights and obligations, it would be inconsistent with that for a party to be able to ignore the statutory procedure and to take the questions to the High Court instead.
23.	The principal tax cases in which Barraclough v Brown has been considered are: Argosam Finance Ltd v Oxby [1965] Ch 390 (the High Court and the Court of Appeal declining to give a declaratory judgment as to the manner in which a share dealing company should, in computing its profits for tax purposes, treat dividends received under deduction of tax); Vandervell Trustees v White [1971] AC (directly concerned with whether the Inland Revenue could and, if they could, should be joined as a party to a case between executors and trustees about which of them was the owner of some shares; but including observations by several members of the House of Lords about the existence and rationale of a principle that tax issues ought to be determined on appeals to the Commissioners and not on proceedings initiated in the High Court); Glaxo Group plc v IRC [1995] STC 475 (the High Court declining to give a declaratory judgment about a disputed procedural issue affecting an assessment to corporation tax under the transfer pricing provisions of what was then ICTA 1970 s.485); and R v IRC ex parte Bishopp [1999] STC 531 (the High Court declining judicially to review an opinion expressed by the Revenue about what would be the tax consequences if two large partnerships of chartered accountants injected their practices into Jersey limited partnerships).
24.	Some other cases were cited to me, but in my view they do not really bear on the issue with which I am concerned.  Thus there can be, and not infrequently there are, High Court proceedings between taxpayers and the Revenue on disputes concerning administrative aspects of the tax system.  A common example is a challenge to the manner in which the Revenue wish to exercise one of the numerous information-gathering powers which they possess.  Beecham v IRC [1992] STC 38, seems to have been viewed by Mervyn Davies J as a case of that type (although the originating summons which brought the case before the judge might have suggested otherwise).  Another example is Balen v IRC [1997] STC 148, a case about whether the Revenue had tripped up in operating the elaborate machinery of the anti-avoidance provisions in ICTA 1970 ss.460 et seq.  (They had not.)
25.	I am not going to go through the judgments in the cases which were cited to me.  They are all consistent in the result: the courts did not decide questions of principle which went to liability.  Such questions (as opposed to questions of machinery) were properly the subject of appeals to the General or Special Commissioners.  I would accept that the precise reasoning which led the courts to that result has varied between some of the judgments.  Some observations are to the effect that there is a simple rule of law that the court has no jurisdiction at all in such matters, an approach which appears to me to be consistent with the second strand in the speech of Lord Watson in Barraclough v Brown (see paragraph 22 above).  Other observations are to the effect that there might in theory be a jurisdiction to decide questions of tax principle in cases begun in the High Court, but that, given the existence of the statutory jurisdiction of the Commissioners, it would be wrong for the High Court to exercise any such original jurisdiction as it might possess.  Robert Walker J in Glaxo summarised his analysis as follows (at pages 1083-1084):
“Possibly the correct view is that there is an absolute exclusion of the High Court’s jurisdiction only when the proceedings seek relief which is more or less co-extensive with adjudicating on an existing open assessment; but that the more closely the High Court proceedings approximate to that in their substantial effect, the more ready the High Court will be, as a matter of discretion, to decline jurisdiction.”
Dyson J concurred with that passage in ex parte Bishopp (at page 543) adding that, since in the case before him no assessment had been made, he did not regard the exclusive jurisdiction principle as an absolute bar to his jurisdiction.  The real question was what relevance, if any, the existence of the statutory scheme for tax appeals had to the exercise of his discretion.  His conclusion was that he ought not to exercise his discretion so as to make any declaration on the questions which the applicants has sought to place before him.
Marks & Spencer plc v Halsey
26.	At the end of paragraph 11 above I mentioned in passing that there is one case in which a question of European Community law which is highly relevant to the present case has already been referred to the CJEC.  The case is Marks & Spencer plc v Halsey, the circumstances of which were as follows.  Marks & Spencer plc, as well as having its substantial and profitable trade carried on in this country, had subsidiaries in France, Belgium and Germany.  Those subsidiaries had made losses which, according to the wording of the United Kingdom statute, could not be surrendered by way of group relief against the profits of the Marks & Spencer itself.  However, the company put forward the argument of Community law relied on by many of the groups which are participants in the present GLO.  It contended that by virtue of article 43 of the EC Treaty it was entitled, notwithstanding the wording of the United Kingdom statute, to group relief in respect of the losses of the subsidiaries established in other member states.
27.	The procedure which the Marks & Spencer group used in order to secure a judicial determination of its argument followed the normal route.  The company made claims for group relief to its Inspector of Taxes; I imagine that the European subsidiaries executed documents purporting to surrender the right to their tax losses.  The Inspector refused the claims (or, perhaps, under the current corporation tax system determined the corporation tax liability of Marks & Spencer on a basis which denied relief for the losses).  Marks & Spencer appealed to the Special Commissioners.  The appeals were heard by the Commissioners in November 2002.  I understand that the possibility of the Commissioners referring the question to the CJEC under article 234 of the Treaty was mentioned, but that neither party asked for a reference.  The parties argued out the point of principle, and on 17 December 2002 the Commissioners issued a decision rejecting the company’s case.  They held that article 43 of the Treaty did not apply and that the United Kingdom company was not entitled to claim group relief for the losses of its European subsidiaries.
28.	Marks & Spencer appealed to the High Court under the regular procedure for appeals to go from the Special Commissioners to the High Court.  The appeal came before me in May 2003, and after a substantial hearing, in the course of which I was referred to a significant number of decisions of the CJEC, I indicated that I was going to refer the question of principle to that court.  I have since done so.  I did not think it appropriate to give reasons for my decision to make a reference, but I think that I can say here that, having considered the recent decisions of the CJEC, I formed the view that there was sufficient substance in the company’s argument to merit a reference being made.  As far as I know there is no report of my decision – naturally so because I gave no reasons.  The earlier decision of the Special Commissioners is reported at [2003] STC(SCD) 70.
29.	The relevance of the Marks & Spencer case to this judgment is twofold.  First, the Revenue say that what the company did there was the correct and appropriate procedure to be followed in order to determine the critical question of tax principle.  That is, the correct approach was to appeal to the Special Commissioners, not to commence proceedings in the High Court.  Second, although some of the fact situations in cases within the present GLO are different from those in Marks & Spencer, it is likely that the decision of the CJEC in that case, when it comes, will be directly in point for some of the GLO cases and will throw a lot of light on most of the others.  It is not known how long it will be before Marks & Spencer will be heard and decided in the CJEC, but it is unlikely that, if a reference to the CJEC is made in the present GLO case (or in future Special Commissioners proceedings involving some of all of the present GLO claimants), it will be possible for that reference to catch up, so to speak, the Marks & Spencer reference and to be heard by the CJEC together with it.
Analysis and discussion
30.	I now set out my reasons for acceding to the submissions of Dr Plender and not accepting those of Mr Aaronson.
31.	I begin by considering the matter from first principles.  I assume four different situations. 
i)	If a single company is in dispute with the Revenue about whether it is entitled to group relief (or any other form of tax relief for that matter), and tries to get the matter resolved by commencing an action in the High Court seeking a declaration or some equivalent relief, it is certain that the court will not deal with the matter, and will say that the issue must be determined within the statutory procedure for tax appeals.  I do not think that it matters particularly whether the basis of the court’s decision in that respect is that it has no jurisdiction at all, or that it may theoretically have jurisdiction but will decline to exercise it.  Further, it does not make any difference in practice whether there is already an assessment in place.  Suppose that correspondence has been progressing between the Inspector of Taxes and the company’s advisers, that it is clear that agreement is not going to be reached, and that the Inspector has indicated his intention to make an assessment (or to take some other formal step which has the same effect under the modern system of self-assessment for corporation tax).  Could the company’s advisers divert the matter from the normal appellate route (which begins with the Special Commissioners) by rapidly commencing an action in the High Court before the Inspector has made his assessment (or taken whatever other formal step he intended to take)?  The answer is: obviously not.  The company should wait for the assessment (or other formal step) and then appeal against it.
ii)	Now suppose that, instead of a single company being in dispute with the Revenue on the point of principle concerned, a large number of companies are in dispute with the Revenue on the same issue.  Would it make any difference to the procedural route for getting the matter determined if the companies band together to have a GLO made, and then invite the High Court to decide the disputed point, cutting out the stage of an appeal to the Commissioners?  Again I say that the answer is: obviously not.  If the High Court would not allow the Special Commissioners to be by-passed by a single company commencing its own action in the High Court, it will be no more willing to allow them to be by-passed by means of a GLO.
iii)	Now I go back to the example of a single company which is in dispute with the Revenue about the availability of group relief or some other relief.  Suppose that it has an associated company which argues that, if the Revenue are wrong in their argument that the disputed tax relief is not available to the first company, then it (the associated company) has a claim for damages against the Revenue.  What will happen if the two companies commence against the Revenue a single High Court action in which the first company claims a declaration that it is entitled to the tax relief and the associated company claims damages?  In my opinion the court will decline to deal with the first company’s claim for a declaration, but will say that instead the company must present its arguments of tax law on an appeal to the Commissioners; the court will also stay proceedings on the associated company’s claim for damages until the outcome of the first company’s tax appeal is known.  The point is that, if the first company was proceeding alone, the High Court would not take jurisdiction to decide the issue of tax law (except, of course, upon an appeal from the Commissioners in the normal operation of the tax appeal machinery), and the first company cannot change the position in that respect by attempting to combine its arguments of tax law with another company’s claim for damages.
iv)	Finally, I combine the foregoing examples.  Suppose that several companies are having the same argument of tax law with the Revenue.  They all have associated companies which wish to make consequential claims for damages against the Revenue.  In my opinion they cannot cause the High Court to have or to exercise a jurisdiction to determine the disputed question of tax law – a jurisdiction which otherwise it would either not have or not exercise – by uniting to create a GLO in which all of the companies with the tax disputes and all of the associated companies with consequential damages claims combine to bring High Court proceedings against the Revenue.  The example in this sub-paragraph is in principle the same as the case before me.
32.	So the foregoing sub-paragraphs indicate how I view the case as a matter of principle.  As a matter of authority I believe that my conclusion is in accordance with the authorities and that a contrary conclusion would be inconsistent with them.  In the Glaxo case Robert Walker J was of the view that the High Court has no jurisdiction where ‘the proceedings seek relief which is more or less co-extensive with adjudicating on an existing open assessment’ (see pages 1083-1084).  Dyson J adopted the same concept in ex parte Bishopp.  In some of the GLO test cases the relief sought, in so far as it is within category (i) described in the extract from the claimants’ skeleton which I quoted in paragraph 14 above, seems to me to be precisely co-extensive with adjudicating on an existing open assessment.  In the other test cases there is relief of the same nature claimed, and the only reason why the cases are not precisely within Robert Walker J’s formulation is because there are not at present existing open assessments.  That could be because an assessment was originally acquiesced in by the company concerned so that the corporation tax has been paid and the assessment is not open any longer.  Or it could be because the exchanges between the Revenue and the company have not yet reached the stage of a formal assessment, although one will certainly be forthcoming in time.
33.	I would not accept that the relief claimed under the GLO cases is prevented from being ‘co-extensive’ with adjudicating upon an existing open assessment merely because, in the GLO cases, the reliefs sought are not limited to some sort of decision (perhaps through a damages or restitution claim) that group relief ought to have been given, but also include claims for consequential relief within categories (ii), (iii) and (iv) in the extract from the claimants’ skeleton set out in paragraph 14 above.  If a case brought within the GLO claimed only one relief and it was co-extensive with adjudicating on an existing open assessment, the High Court would have no jurisdiction.  If a case brought within the GLO claims three or four reliefs and one of them is, but the others are not, co-extensive with adjudicating on an existing open assessment, then in my judgment the High Court has no jurisdiction on the relief claimed which is co-extensive in that way.  And it is the same in principle if that particular relief is not quite co-extensive in that way, but the only reason why not is that in the specific case there does not happen to be an existing open assessment at the time.  I refer in this connection to my comments at the end of the foregoing paragraph.
34.	Arguments were advanced to me by Mr Aaronson that I ought to accept jurisdiction over the whole of the reliefs sought in the GLO claims because that would be the more convenient course for the parties.  If a particular claim is one in which I have no jurisdiction at all over one of the reliefs claimed (probably because there is an existing open assessment, and a High Court decision about the relief would be co-extensive with adjudicating upon the assessment) arguments of convenience cannot possibly make any difference: I have no jurisdiction, however convenient it would be if I had.  But even in cases where I may have a jurisdiction and the issue is whether I will exercise it or not, I am not impressed by these particular arguments.  Counsel for each side drew attention to what he said were particular advantages or disadvantages of the Special Commissioners as compared with the High Court, and vice versa.  I do not think that any of these points were particularly convincing (although I will mention one of them two paragraphs below).
35.	However that may be, the important factor, as it seems to me, is that, whether it would be more convenient to commence the entire case in the High Court or not, that is not the system which our law provides for the resolution of tax disputes between taxpayers and the Revenue.  The system which is provided for that purpose is the machinery of appeals to the General and Special Commissioners.  There may be respects in which that system could be improved upon.  For example in the particular context of inheritance tax the normal route for appeals is to the Special Commissioners, but s.222(3) of the Inheritance Act 1984 provides that in some situations an appeal may commence in the High Court.  It could be argued that something similar would be useful for corporation tax, which is the tax to which the Loss Relief GLO is directed.  But the statutes which regulate corporation tax appeals do not provide for it.  In my judgment the appellate procedures which the statutes have provided are the ones which should be followed, and it would be wrong to subvert and undermine the jurisdiction of the Commissioners by allowing cases between taxpayers and the Revenue, where the point at issue is one of tax law, to be commenced in the High Court.
36.	I said above that there is one argument of convenience on which I had something to say.  Mr Aaronson points out that, if I accede to the Revenue’s submissions (as I am going to do), there may have to be two sets of proceedings in two different courts or tribunals: the tax appeals in the Special Commissioners, and (if the taxpayers win there) the consequential damages or restitution claims in the High Court pursuant to the GLO.  He says that convenience strongly favours having only one set of proceedings in one court or tribunal.  In many cases an argument of that sort has much force, particularly where there would otherwise be two sets of proceedings in two different courts going on at the same time as each other.  In my view, however, the argument has much less force where the two sets of proceedings will happen one after the other, not simultaneously.  That is the present case.  The issues of tax law as to whether, by virtue of article 43 or article 56 of the EC Treaty or by virtue of non-discrimination articles in Double Taxation Agreements, group relief ought to have been available to profitable United Kingdom companies in the various groups must be decided first, before the consequential claims for compensation can proceed.  It does not seem to me to be a major inconvenience that the earlier proceedings are conducted in the jurisdiction which begins with the Special Commissioners, and that, if the taxpayers are successful at that stage, follow-on claims for compensation will be pursued in the different jurisdiction of the High Court.  For all that I know the Marks & Spencer group may have in mind something on those lines for itself, and if so the procedure does not strike me as particularly inconvenient.  I am not deflected from what I believe to be the right course by this particular inconvenience argument which Mr Aaronson has advanced.
37.	I should mention some other arguments which Mr Aaronson placed before me.  He refers me to the detailed procedural requirements for group relief and observes that some of them seem impossible or difficult to comply with if the surrendering company is resident outside the United Kingdom.  For example, a surrendering company is required to deliver a notice to its Inspector of Taxes.  A non-resident surrendering company may not have an Inspector of Taxes.  How is that to be dealt with?  Then again, group relief had to be claimed within a time limit, and there are now other provisions which have an equivalent effect in the detailed rules for corporation tax self assessment.  Mr Aaronson says that some of the claimant companies which are parties to the GLO did not make claims, or did not make them in time, because on the face of the United Kingdom legislation they had no right to claim group relief from non-resident members of the same group.  What is to be done about that?  He asks the question against the background of an argument that, in the case of claims for group relief which rely on considerations of Community law, procedural bars to the relief which infringed the principles of equivalence and effectiveness would be overridden.  This argument is said to be supported by passages in paragraphs 98 to 107 of the CJEC judgment in the combined cases of Metallgesellschaft Ltd and others v Commissioners of Inland Revenue and the Attorney General (Case C-397/98) and (1) Hoechst AG (2) Hoechst United Kingdom Ltd v Commissioners of Inland Revenue and the Attorney General (Case C-410/98).  The judgment of the CJEC was delivered on 8 March 2001 and is reported at [2001] STC 452.
38.	Points of the nature which I described in the foregoing paragraph are important and potentially difficult, but I cannot see what they have to do with the jurisdictional issue which is the subject matter of this judgment.  If a claimant company argues on an appeal to the Special Commissioners that it is entitled to group relief for losses of a group company resident outside the United Kingdom, the Inland Revenue’s arguments against the company might include submissions that the appeal fails anyway for procedural reasons such as the lack of a notice from the surrendering company to its Inspector or the omission by the companies to make formal claims for group relief within the prescribed time limits.  If the Revenue’s arguments do include such submissions, the claimants can respond before the Commissioners, just as they could if the case had commenced in the High Court, by arguing that, in reliance on the passages in the Metallgesellschaft/Hoechst judgment, Community law overrides the procedural and formal requirements.  The Special Commissioners are just as capable of adjudicating on those arguments as is the High Court.  One of the things which the Commissioners can do, if they think it appropriate, is to refer questions of Community law to the CJEC, and the questions referred can include whether group relief can lawfully be denied for non-compliance with the procedural requirements laid down by the United Kingdom statute.  If either party is dissatisfied with how the Commissioners deal with the case, it is always possible to appeal to the High Court in its appellate capacity, not in its original jurisdiction capacity.  That is what Marks & Spencer did, and the appeal resulted in a reference to the CJEC. 
39.	Thus points of the nature described in paragraph 37 above are not, in my view, any reason for preferring that the questions of tax law should be argued in the first instance before the High Court rather than before the Special Commissioners.  Further, there is a more general point which arises in this connection.  For United Kingdom law to require the claimants’ Community law arguments to be ventilated on appeals to the Special Commissioners, rather than on actions commenced in the ordinary court system, does not itself infringe Community law, provided only that, as is the case, the claimants are in that respect in the same position as taxpayers and taxpayer groups which are wholly based in this country.  In Roquette Frères SA v Direction des Services Fiscaux du Pas-de-Calais, Case C-88/99, [2000] ECR I –10481, the CJEC put the point as follows:
… in the absence of Community rules concerning the refunding of domestic taxes which have been wrongly levied, it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing legal proceedings seeking to safeguard the rights which citizens derive from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature, and may not make it impossible in practice to exercise rights which the national courts have a duty to protect.
Conclusion
40.	I may not have dealt with every single argument which Mr Aaronson developed, but I believe that I have dealt with all of the principal ones.  They do not deflect me from my opinion that, for the reasons which I have explained, the High Court, in its capacity as the first instance trial court under the GLO, either does not have or ought not to exercise jurisdiction to deal with the parts of the GLO claims which seek the determination of what the claimants’ skeleton calls the ‘basic group relief’ issue.  I decide the question of principle which has been argued before me accordingly.  In the first instance I will leave it to the parties to consider what should be the implications of this judgment for the GLO, for the individual claims which have been brought within the aegis of the GLO, and for the future progress of the Loss Relief Group Litigation.