Judicial bias and tax avoidance, some quick thoughts

Dan Neidle’s twitter steam this morning raises interesting questions as the result of, what he describes as an, “Amazing story in the FT that a judge who participated in a tax avoidance scheme heard two cases that were plausibly relevant to the scheme.”

[It’s paywalled but here’s the opening…]

Judge Smith’s own case was this one:

[Paywalled I imagine although as it’s from 2014 it might be worth trying. Here’s a clip…]

[Dan continues]

… and much later heard the appeal in Euromoney, about whether an arrangement had a main purpose of avoiding tax. assets.publishing.service.gov.uk/media/62e3bb80…

And Archer, concerning when a taxpayer can lawfully withhold payment of tax pending a JR of a tax decision assets.publishing.service.gov.uk/media/62223c83…

It’s unlikely – but not impossible – that the scheme the judge participated in was still being litigated at the time the judge heard these two appeals. But still feels improper to me, given the natural human temptation to relitigate one’s own case. 

I see no sign of bias in the judgments, but that’s not the point. We should expect the courts to do a better job of avoiding the appearance of bias 

My own contribution to the FT piece was to emphasise the absence of proper systems of governance around such matters.

It has been suggested to me that law firms and banks prohibit senior staff from participating in tax avoidance schemes.

There’s been a bit of a pushback on twitter from some sensible folks. Ed Levey KC emphasises that we might not know enough about the particular cases to judge apparent bias (my own view is that Dan does know enough to comment in the way that he has, but I take the point) and there has been some emphasis on the intelligence and reasonableness of the judge in question as meaning an actual conflict was unlikely.

The latter point is an important one. Dealing with apparent bias is not a matter of intelligence or decency, and (incidentally) it is not well dealt with by declaring a prior interest (the research strongly suggests this makes decisions worse not better). Nor is there an imputation of poor character if one raises a question of apparent bias (the processes can be, I’d guess are often, subconscious). Things like high intelligence, objectivity bias, and moral licensing (all of which we might, again without any insinuation, reasonably think are particular problems for judges), should make the judiciary especially cautious around risks to their objectivity. Judges make mistakes, just like the rest of us. Think of Lord Hoffman and the Pinochet case, or Lord Neuberger persuading himself he could advise on the Post Office Litigation.

It is very interesting indeed that law firms and banks are said to have prohibited firms from participating in tax avoidance schemes but the judiciary have not. It is a more practical recognition of my broader point. The judiciary needs to think harder about its own governance and reputation.