CL-2018-000297, CL-2018-000404, CL-2018-000590, - [2025] EWHC 2364 (Comm)

In those circumstances, none of B, V or L could or did ever acquire a right to a real dividend, or receive a real dividend payment, i.e. a payment coming to them through a custody chain of payments by which a payment of dividend proceeds was made by the company to VPS for onward distribution to the company’s shareholders. If B, the cum-ex buyer, had a contractual right to a dividend compensation payment calculated by reference to the declared dividend, that would necessarily be a manufactured dividend, as I used that term in SKAT (Validity Issues) (see at [53], [181]).

That use of terminology was not fixed in the market. Some used ‘manufactured dividend’ only in a more limited way, to refer to obligations under a stock loan or repo, and may have used a different term for the sort of payments with which I am concerned. That different term, for some in the market, may have been ‘market claim’, although that term was far more commonly reserved for the reallocation of distribution proceeds to a party contractually entitled, i.e. (so far as material) to the passing on of real dividend payments. A cum-ex buyer, by definition, is not contractually entitled to distribution proceeds, because it has contracted not to be put in a position which could have entitled it to such proceeds.

That more common, narrower, meaning of the term ‘market claim’ in relation to European equity markets was influenced particularly by the “Market Standards for Corporate Actions Processing” promulgated by the European Corporate Actions Joint Working Group (the ‘CAJWG’), first published in 2009, re-published in 2012 and again in 2015 in identical terms so far as material (the ‘CAJWG Standards’). They defined a ‘Market Claim’ as a “Process to reallocate the proceeds of a Distribution to the contractually entitled party”, and they defined a ‘Distribution’ as a “Corporate Action whereby the Issuer of a security delivers particular proceeds to the holder of the Underlying Security without affecting the Underlying Security”. The making or processing of a dividend compensation payment of the type with which I am concerned is not the processing of a Corporate Action as the CAJWG defined it, for which the CAJWG publication was designed to set market standards, viz. an “Action initiated upon a Security by the Issuer or an Offeror”. It is therefore logical that the CAJWG defined a Market Claim as it did, such that it did not encompass dividend compensation payments of the kind I am considering.

I adhere to the finding that it was understood by market participants that only record date shareholders would receive a real dividend payment, and that a cum-ex buyer would not be a record date shareholder (see SKAT (Validity Issues) at [137]). I also adhere to what I said in that judgment at [146]-[147] and [182], given the definition of ‘manufactured dividend’ I was using; but I supplement it now by making clear that the use of that label was not fixed in the market. On any view, the sort of payment to which I referred at [147], and in the second half of [182(1)], would not be a real dividend payment. In this judgment generally, as I have just been doing, I refer to a payment from a cum-ex seller to its cum-ex buyer, required by contract to compensate the buyer for the fact that it will not receive any real dividend payment, as a ‘dividend compensation payment’.

It was also plain on the expert evidence, and that of factual witnesses at the Main Trial, in line with conclusions I stated in SKAT (Validity Issues), for example at [146]-[147] again, that anyone in the market would understand that what types of entitlement or payment might or might not incur Danish dividend tax, or entitle a tax-exempt party to a WHT refund in respect of such tax, would be a matter of Danish tax law, not a matter of market practice or market terminology. That would obviously include any question of what might or might not count as a ‘dividend’ for that purpose.

In SKAT (Validity Issues), at [269], I said, on the basis of the expert evidence at the Validity Trial, that it was the general practice of custodians to distinguish in CANs between real dividends and manufactured dividends (which, as I was then using that term, included dividend compensation payments). I do not adhere to that finding, as I explain in paragraphs 401 to 413 below. That does not affect the validity or otherwise of the tax refund claims that SKAT says it should not have paid.