The Supreme Court has ordered the former National Irish Bank (NIB) to disclose to the Revenue Commissioners details of Irish residents who had accounts at its branch in the Isle of Man.
The decision in the long-running case will affect about 140 Irish-based customers who had accounts at the Isle of Man branch before NIB closed its operation there in 2002. NIB was acquired by the Danish banking group, Danske, in 2005.
The Isle of Man High Court cleared the way for the Supreme Court's order when, in a recent decision, it declared that the bank was not precluded by any obligation of confidentiality to account holders from complying with such an order from the Supreme Court of Ireland.
Revenue said it welcomed the Supreme Court's decision, but it is not expected that it will have an impact on financial institutions generally. In an unrelated development in July, it emerged that Revenue had obtained new details from High Court orders of Irish residents transferring money to and from tax havens such as the Isle of Man, Guernsey and Liechtenstein. This resulted in the uncovering of €12.8 million in unpaid taxes.
The NIB case dates from 2006, when the Revenue sought an order in the High Court for the disclosure of documents related to Irish-resident customers with accounts at the bank’s Isle of Man branch. In an application brought under the Taxes Act, it wanted a schedule of all Irish-resident deposit-holders whose account balance at the branch exceeded £5,000 or €6,350 at any time.
The bank resisted the order on the grounds that it might be in breach of its duty of confidentiality to its account holders. It also argued that it would be inappropriate for the Irish courts to make an order that might impinge on the proper jurisdiction of the Isle of Man.
The High Court refused the order sought by the Revenue, concluding that the relevant section of the Taxes Act did not apply to a branch located in the Isle of Man.
Even if it did, the trial judge remarked, he would “not deliberately offend the integrity of the Isle of Man or its judicial system by granting an order which I knew they would strongly object to”.
Revenue then appealed to the Supreme Court, which, in a decision last January, broadly supported the Revenue’s case but deferred making an order to enable the bank to obtain a definitive ruling from the Isle of Man court.
“The reason for such an approach is that Irish courts should not, without sufficient clarity as to the consequences of the proposed measure, make an order which might place a party in a position of having to find itself in breach of the laws of another country,” the five-judge Supreme Court found.
When the case came before the Manx court last month, it was established that the records sought by the Revenue had been held in a storage facility on the Isle of Man until last February, but were then moved to Belfast so that bank staff could review the material on foot of the issues raised in the Supreme Court’s decision.
In its ruling, the Isle of Man court said the bank would not breach its duty to its customers under Manx law by complying with an order of the Supreme Court over the disclosure of account information. The judge, Andrew Corlett, pointed out that the bank no longer had a presence on the island, and neither did the documents or information sought.
He said the granting of the declaration did not contravene the long-established rule of law that Manx courts could not entertain an action for the enforcement of a revenue law of a foreign state.
