DATES:  1972 July 18, 19, 20

 

COUNSEL:  Lord Denning M.R., Buckley and Orr L.JJ.

 

SOLICITORS:  Rayner & Co.; Solicitor of Inland Revenue.

 

APPEAL from Goulding J. [1972] Ch. 585.  [*267] 

 

LORD DENNING M.R.  This case arises out of the persecution of the Jews in Nazi Germany. Mr. Meier Oppenheimer is a Jew. He was born in Germany and lived there all his life until the persecution. In or about  [*268]  1948 he became naturalised here and became a British subject. In 1953 or thereabouts the new Federal Government of Germany, as compensation for the injustice which had been done to him, awarded him a pension. The question is whether that pension, when received here, is subject to English income tax.

 

The taxpayer was born in Germany in 1896. He qualified there as a teacher and for some 20 years from 1919 to 1939 he taught at a Jewish orphanage in Bavaria. He was detained for a short time at a concentration camp at Dachau, but soon after his release he left Germany in 1939 for England and has resided here ever since. In 1948 he applied for naturalisation and became a naturalised British subject. In 1953 the German authorities determined to make compensation to the employees of Jewish religious communities. They awarded the taxpayer a pension from October 1, 1952. In 1961 he became 65 and they awarded him a second pension. Both pensions were payable out of the public funds of Germany.

 

The question is whether the taxpayer is liable to pay English income tax on the sums he receives from Germany in respect of those pensions. By reason of conventions against double taxation between England and Germany, it appears that, if he is a national of the United Kingdom onlybut not of Germany (i.e. if he has single nationality) he is liable to pay English income tax. But if he has dual nationality, that is, if he is a national of Germany as well as of the United Kingdom, he is exempt from having to pay English income tax.

 

The revenue authorities assert that, for the years 1953-54 to 1967-68 he was a national of the United Kingdom only and they have assessed him to tax on the pensions for those years. The special commissioners upheld the assessments. Goulding J. reversed the commissioners. He held that the taxpayer had a dual nationality in those years, in that he was a national of Germany as well as of England, and that, accordingly, under the convention, he was exempt from English income tax.

 

The conventions about double taxation relief were agreed in 1954 and 1964 and were made law in this country by the Double Taxation Relief (Taxes on Income) (Federal Republic of Germany) Orders 1955 (1955 S.I. No. 1203) and 1967 (1967 S.I. No. 25). The relevant provisions are substantially the same in each instrument. I will read from the Order of 1967 because it is clearer. Article IX (2) provides that:

 

“Remuneration, including pensions, paid, in respect of present or past services or work, out of public funds of the Federal Republic … shall be exempt from United Kingdom tax unless the payment is made to a national of the United Kingdom who is not also a German national.”

 

The term “national” is not defined, but article II (3) provides that:

 

“In the application of the provisions of the present convention by one of the contracting parties [i.e. by the United Kingdom] any term not otherwise defined in the present convention shall, unless the context otherwise requires, have the meaning which it has under the laws in force in the territory [i.e. of the United Kingdom] relating to the taxes which are the subject of the present convention.”

 

[*269]  As a result of that article, it was agreed before the special commissioners, that the meaning of the word “national” in the convention fell to be determined by English law. It is plain that under English law the taxpayer is a “national of the United Kingdom” within article IX (2). The question is whether under English law he is “also a German national” within article IX (2). If he is also a German national, i.e., if he has, by English law, dual nationality, he is exempt from United Kingdom tax: but if he has only single nationality (of the United Kingdom), then he is not exempt.

 

In order to see whether the taxpayer is “also a German national” by English law, I turn to see whether he is a German national by German law, though I realise that this is not the ultimate question to be decided.

 

The nalionality of the taxpayer by German law.

 

The German municipal law was proved before the commissioners by Dr. Cohn. a well-known Professor of German Law now residing in this country. The first relevant German decree was passed on July 22, 1913. It contained this provision:

 

“A German who has neither his habitual residence nor his permanent abode in Germany shall lose his nationality when he acquires a foreign nationality if such acquisition is made upon application by him … unless he has the written permission of his native country to retain his nationality.”

 

If that decree was applicable to the taxpayer in 1948, be would have by German law lost his German nationality when he became a naturalised British subject. The next relevant decree was made on November 25, 1941. It provided:

 

“A Jew whose usual place of abode is abroad may not be a German citizen. … A Jew loses German citizenship if, at the date of entry into force of this regulation, he has his usual place of abode abroad.”

 

Seeing that the taxpayer was a Jew who has his usual place of abode abroad, by German law he lost his German nationality at that time in 1941. It was an objectionable law, but still it was the German law at that time.

 

According to Dr. Cohn that decree of November 25, 1941, remained the law of Germany until a decision of the Federal German Constitutional Court given in 1968 by which the decree of November 25, 1941, was absolutely void ab initio, but that decision of the Constitutional Court had no retrospective effect. So the 1968 decision did not, of itself, restore to the taxpayer the German nationality which he had lost in 1941. But we were told that, in consequence of the 1968 decision, he is entitled to apply now for reinstatement as a German national and has done so; and it will be granted automatically. Dr. Cohn expressed the opinion that

 

“under German law, if the taxpayer had not lost German nationality under the decree of November 25, 1941, he lost the said nationality under the German nationality law of July 22, 1913, on being naturalised as a British subject in 1948.”

 

Dr. Cohn’s evidence was accepted by the special commissioners. They  [*270]  said: “We find from that evidence that under German law [the taxpayer] ceased to be a German national not later than June 4, 1948, when he became a national of the United Kingdom.” I do not think that finding can be challenged. It means that, by German law, the taxpayer, during the years of assessment, did not have dual nationality. He was not a German national. He was only a national of the United Kingdom. If the question fell to be determined by German law, he would not be exempt from United Kingdom tax.

 

The nationality of the taxpayer by English law.

 

But the question does not fall to be determined by German law. It falls to be determined by English law. It was urged before us that English law must itself apply the German law. At first I thought this was correct: for I thought on the authorities that a country was in charge and solely in charge of the nationality of its citizens; and that when Germany passed the decree of November 25, 1941, it was effective in English law to deprive the taxpayer of his German nationality: and that however objectionable or atrocious that decree might be, we had to some extent to recognise it as between that country and the individuals concerned. That view was supported by the law as stated by Russell J. in Stoeck v. Public Trustee [1921] 2 Ch. 67, 82:

 

“Whether a person is a national of a country must be determined by the municipal law of that country. Upon this I think all text writers are agreed.”

 

It was supported also by a decision of the United States Court of Appeals for the Second Circuit relating to this very German decree of November 25, 1941. It is United States; ex rel. Schwarzkopf v. Uhl (1943) 137 Fed. Rep. 2d 898 where it was said, at p. 903:

 

“There is no public policy of this country to preclude an American court from recognising the power of Germany to disclaim Schwarzkopf as a German citizen.”

 

But on reconsideration I think that those observations have no application to this case. We are here concerned with dual nationality. If a man is a British national, owing allegiance here, it is for the English law to say whether he can, consistently with that allegiance, be also a national of another country, owing allegiance to that other country also. I turn therefore to see whether English law does recognise the taxpayer as having, by English law, dual nationality.

 

When the taxpayer came to England in 1939, he was a German national; and English law would regard him as such; notwithstanding that he was a refugee from the Nazi persecution of the Jews. When the German authorities passed the decree of November 25, 1941, the English courts would not recognise it as valid, by English law, to deprive him of his German nationality. Not only was it an objectionable and atrocious law. It was passed at a time when England and Germany were at war: and English law will not recognise any decree of an enemy power which purports to deprive its citizens of their enemy nationality in time of war: see Rex v. Home Secretary, Ex parte L. [1945] K.B. 7 and Lowenthal v. Attorney-General  [*271]  [1948] 1 All E.R. 295. So after 1941 the taxpayer was regarded, by English law, as a German national just as he had been before. The war did not terminate officially until July 9, 1951. So if nothing more had happened, he would have been regarded, by English law, still as a German national.

 

But in 1948 the taxpayer applied for naturalisation as a British subject and was granted it. This was done under the British Nationality Act 1914, which was then in force. He qualified for naturalisation by his long residence in England since 1939 and by his declared intention to reside here. On May 24, 1948, he was given a certificate of naturalisation: and on June 4, 1948, he took the oath of allegiance, swearing that he would be “faithful and bear true allegiance to His Majesty King George the Sixth his heirs and successors according to law.”

 

It is plain that, by being given that certificate, and by taking the oath of allegiance, the taxpayer, by English law, became a national of the United Kingdom: and I do not see how English law could at the same time regard him as a national of Germany also. There was at that time, in the eyes of the law, a state of war still existing between England and Germany. He could not owe allegiance at one and the same time to both of two countries who were at war one with the other. Nationality and allegiance are twin bed-fellows. One cannot exist without the other. It was in the absolute discretion of the Secretary of State whether to grant him naturalisation or not: and I cannot imagine that the Secretary of State would at that time grant a certificate of naturalisation to one who was, or claimed to be, still a German national. To my mind, by applying for naturalisation, the taxpayer renounced his German nationality: and well he might, seeing the way the German authorities had treated him. If he had remained a German national, he would have owed allegiance to the German government, and it would have been the obligation of the German government to protect him. Protection and allegiance are reciprocal, see Calvin’s Case (1609) 7 Co.Rep. 1, 5. But the German authorities had long ago, in 1941, repudiated its obligation to protect him. They had, by their law, deprived him of his nationality and thus absolved him from any obligation to them. When he took the oath of allegiance here he accepted that repudiation. He became a British national and no longer a German national. He was thereafter habitually and principally resident in the United Kingdom. His effective nationality was British. It was his single nationality. I can understand a man having dual nationality when each of two countries, by its laws, grants him its protection and he owes allegiance to each: but I cannot understand his having dual nationality when only one of those countries acknowledges him as its national and the other repudiates it. Then he has single nationality of the one country who acknowledges him and not of the other. The commissioners said: “We hold that under English law [the taxpayer] was not a German national certainly from June 4, 1948, when he became a national of the United Kingdom.” I think they were quite right in so holding.

 

The result is that for the years in question from 1953-54 to 1967-68 the taxpayer was regarded in English law as a United Kingdom national and not also as a German national. He is not, therefore, entitled under the conventions to exemption from United Kingdom tax. We are told that,  [*272]  as a result of the 1968 decision of the Federal Constitutional Court, it is open to the taxpayer now to apply for German nationality; and to get it almost automatically. If he becomes a German national, I expect the English law will accept him then as being of dual nationality and will grant his exemption. But he is not exempt for the past years when he was not a German national.

 

I come therefore to a different conclusion from Goulding J. I hold, in agreement with the special commissioners, that the taxpayer is properly assessed to tax.

 

BUCKLEY L.J.  The question which arises in Mr. Oppenheimer’s case is whether he is entitled to relief from United Kingdom income tax in respect of a number of years for which he has been assessed to United Kingdom income tax in relation to annual payments received by him from the Federal German Government in the circumstances set out in the case that has been stated to the court. The question arises under article IX of the Double Taxation Convention of 1955, which was subsequently superseded by, or its place was taken by, a later convention of 1967. The terms of the relevant article in those two conventions are the same and I will read from the convention of 1955, of which article IX (1) provides:

 

“Remuneration, including pensions, paid, in respect of present or past services or work, out of public funds of one of the contracting parties shall be exempt from tax in the territory of the other contracting party, unless the individual concerned is a national of that other party without being also a national of the first-mentioned party.”

 

So the question is whether in the relevant years, the taxpayer was a national of the United Kingdom and was also a national of Federal Germany. If the taxpayer was a national of the United Kingdom and was not also a national of Federal Germany, he is not entitled to relief. The taxpayer was a citizen of the United Kingdom by naturalisation: and the question is whether at the relevant times he was also a national of Federal Germany for the purposes of this article. Now, it is common ground that that question has to be answered as a question of English law; but in English law it is treated as a question of fact which has to be decided in the light of evidence as to the German domestic law on the subject. That was pointed out by Russell J., in Stoeck v. Public Trustee [1921] 2 Ch. 67, in a passage which was cited by Goulding J. in his judgment ([1972] Ch. 585, 591). Russell J. said, at p. 82:

 

“Whether a person is a national of a country must be determined by the municipal law of that country. Upon this I think all text writers are agreed. It would be strange were it otherwise. How could the municipal law of England determine that a person is a national of Germany? It might determine that for the purposes of English municipal law a person shall be deemed to be a national of Germany, or shall be treated as if he were a national of Germany; but that would not constitute him a national of Germany, if he were not such according to the municipal law of Germany. In truth there is not and cannot be such an individual as a German national according to English law;  [*273]  and there could be no justification for interpreting or expanding the words ‘German national’ in the manner suggested.”

 

The reasoning of that passage appears to me to be unanswerable. There is no doubt that in the years of assessment under consideration the taxpayer was not by German law a German national, because under the decree of 1941 to which Lord Denning M.R. has referred he had lost his German nationality. Under German law the decree of 1913 could not have applied to him in 1948 because he had already lost his German nationality in 1941. But it is contended that we should pay no attention to the law of 1941, on one or other of two grounds. First, it is said that the decree of 1941 was a law of a penal or confiscatory nature of a kind which the courts in this country will not recognise. Secondly, it is said that it was a law made when this country and Germany were in a state of war, purporting to alter the status of persons in this country who were enemy aliens, and that the courts in this country will not recognise such a law. Taking the first of those two points first, it is well established that the courts in this country will not give effect to legislation of another country which is penal or confiscatory, at any rate if it is of a discriminatory or oppressive character, in relation to matters within the competence of the courts of this country. But in my view that principle cannot have any application to the question of whether or not a particular person is or is not a national or citizen of the country whose law is criticised. The law may be as oppressive as can be; nevertheless within the country whose domestic law it is, it is effective to deprive the person concerned of whatever that law affects - in this case, citizenship. The question being whether by the domestic law of that country the person is or is not a citizen of the country, it is of no avail to say that the law is one which the courts of this country should not recognise: that does not alter the fact that the answer to the question whether or not the person is a national or citizen of the country must be answered in the light of the law of that country however inequitable, oppressive or objectionable it may be. No authority can be found in the books one way or the other upon this point. At any rate, no case has been found by the industry of counsel, and I am sure that had there been a case, it would have been forthcoming. But we were referred to the American case, United States; ex rel. Schwarzkopf v. Uhl (1943) 137 Fed.Rep. 2d 898, 903, where, in a Circuit Appeals Court in the United States the judge said:

 

“There is no public policy of this country [that is the United States] to preclude an American court from recognising the power of Germany to disclaim Schwarzkopf as a German citizen. The cases relied upon by the respondent relate to giving effect to foreign confiscation of property having an American situs - an entirely different matter from conceding that a foreign state may determine for itself who shall have the rights and privileges of citizenship.”

 

It seems to me that the views there expressed are such as must commend themselves as being correct, and I feel unable to accept the argument which Mr. Godfrey presented to us that we should ignore the 1941 decree upon the basis that it was a penal decree.

 

As to the other point, it is clearly established by authority in this country  [*274]  (the cases we were referred to were Rex v. Home Secretary, Ex parte L. [1945] K.B. 7 and Lowenthal v. Attorney-General [1948] 1 All E.R. 295) that the courts in this country will not in war-time recognise laws passed in a foreign country purporting to alter the status of enemy aliens in this country. The reason for that is I think clear: it would be extremely embarrassing for security reasons and other reasons if during war-time enemy aliens could suddenly be disembarrassed of their status as enemy aliens in this country. That reason no longer operates as soon as the state of war ceases to exist; and I can see no reason why such a law made by a foreign country should not be given effect to or recognised in this country once the particular reason for refusing to recognise it, which is connected with the existing state of war, is removed. Mr. Godfrey has contended that once such a law has been refused recognition in the courts of this country, that position must be maintained for all time. With respect to his argument, I cannot see any reason for so holding. On the contrary, it seems to me that common sense indicates that as soon as the particular cause for refusing to recognise the law and give it any effect in this country is removed, it should have the same effect as any other foreign law and should be recognised accordingly. So in my view on neither of those grounds is it possible to say that we should not recognise the effect of the 1941 decree; and if the 1941 decree is taken into consideration, it is clear that at the relevant times the taxpayer was not a national of Germany.

 

ORR L.J.  I agree that this appeal should be allowed. With regard to the issue of double taxation relief, the first question is whether the Nazi decree of 1941 which deprived the taxpayer of German nationality is to be disregarded under English law, either on the ground that it contains penal or confiscatory provisions and on that account should be wholly disregarded, or on the narrower ground that English law for reasons of public policy will not recognise in respect of an enemy alien any change of his nationality effected by his domestic law in time of war. For the reasons given by Buckley L.J. I am satisfied that the decree in question, however offensive its character, does not fall to be disregarded for the present purpose on the ground that it contains penal or confiscatory provisions; but in my judgment it did, when passed, fall to be treated as ineffective under English law on the ground that it is contrary to public policy that an enemy alien should be allowed to escape from the disabilities of that status by virtue of a change in his nationality effected by his domestic law in time of war.

 

The further question then arises, whether such a change of nationality is to be disregarded by English law for ever or merely until the termination of the state of war. There is no case on this point one way or the other; but since in my judgment a change of nationality effected by an alien’s domestic law ought to be disregarded by English law to the extent only that public policy so requires, and since the reason of public policy for disregarding such a change in the case of an enemy alien disappears with the cessation of the state of war, I consider that the correct view of the rule of public policy here in question is that it merely suspends recognition of the change of nationality during the continuance of the state of war. It follows that from July 9, 1951, English law, in my judgment  [*275]  was bound to recognise the German decree of 1941 as effective and from that date onwards the taxpayer had no other nationality than British.

 

I would add that in my judgment the German law of 1913 whereby a German national loses his German nationality on acquiring, on his own application, a foreign nationality has no relevance to the present appeal. That law by its terms could not apply to a citizen in Germany who had already lost his German nationality at the time of his becoming a citizen of another country.

 

Appeal allowed.