Copenhagen/London – Denmark has suffered one of the costliest legal defeats in its fiscal history. In a judgment handed down Thursday in London’s High Court, judges dismissed the Danish Tax Agency’s attempt to claw back DKK 12 billion (≈ €1.6 bn) from a web of global banks and hedge funds that used the now-notorious “cum-ex” dividend-arbitrage scheme.
The ruling is a watershed moment in the sprawling multi-jurisdictional saga that has already seen Germany recover more than €5 bn and sent bankers to prison. Denmark, by contrast, leaves the courtroom empty-handed—at least for now.
How the scheme worked
Cum-ex trades exploited a timing gap: shares were sold just before the dividend record date while both seller and buyer still appeared entitled to a tax refund on the same withheld dividend. Co-ordinated blocs of banks, brokers and law firms circulated stock so quickly that tax administrations effectively paid out rebates twice, or on tax that was never paid. The loophole flourished between 2007-2011 and is estimated to have drained up to €55 bn from European treasuries.
Denmark’s chase for the money
Danish prosecutors filed civil claims in 2018, arguing that the trades were “sham transactions” with no economic substance. Defendants—including units of Barclays, Merrill Lynch, BNP Paribas and hedge fund Solo Capital—countered that they had merely followed the letter of Danish law as it stood at the time. In a 92-page judgment, Justice Andrew Baker agreed, finding “no basis under English private law” to force restitution when the transactions were lawful under Danish rules then in force.
What the court said
“The essence of the claim is that the defendants participated in a fraudulent design,” the judge wrote. “But the evidence shows the trades were executed openly, reported to the Danish authorities and accepted by them until 2015. Retroactive moral outrage cannot create a legal remedy.”
Copenhagen reacts
Finance Minister Nicolai Wammen called the outcome “deeply disappointing” and said the government would “study an appeal vigorously.” The Tax Ministry has already spent an estimated DKK 350 m on litigation and external advisers. Opposition parties demanded a parliamentary inquiry into why the agency originally signed off on the refunds.
More courtroom drama ahead
Denmark’s loss in London does not end the story. A parallel criminal trial is under way in Copenhagen against ten former traders and lawyers, with verdicts expected early 2026. German courts have handed down 29 convictions, including a suspended sentence for British banker Martin Shields and an eight-year term for Hamburg lawyer Hanno Berger. France’s tax authority has filed claims totalling €1.8 bn; the first civil trial there starts in September.
Market fallout
Nordic asset managers warned that Thursday’s judgment could embolden taxpayers to test other loopholes. “The signal is dangerous,” said Charlotte Skovsgaard, chief counsel at PensionDanmark. “If legality hinges only on literal wording, complex tax arbitrage becomes a risk-free option.”
EU moves to close the door
Brussels adopted the “ATAD 3” directive last year, requiring shareholders to hold stock for a minimum period before receiving dividend tax credits. The reform takes effect in 2026, too late to help Denmark recover the lost billions but perhaps in time to stop the next cum-ex-style innovation.
For now, the Danish treasury must absorb a DKK 12 bn hole—equal to nearly 3 % of this year’s health-care budget—while lawyers on both sides brace for the next round of appeals from London to Luxembourg.