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Oppenheimer v. Cattermole; Nothman v. Cooper

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Oppenheimer v. Cattermole; Nothman v. Cooper

Case Title and Citation

Meier Oppenheimer, appellant, v. Inspector of Taxes (Cattermole), respondent; and Miriam Nothman, appellant, v. Inspector of Taxes (Cooper), respondent.
February 5, 1976
House of Lords
Ponente: Lord Cross of Chelsea

Facts

  • Meier Oppenheimer, a German-born Jew (born 1896), lived in Germany until 1939, was briefly detained in a concentration camp, left Germany, and lived in the United Kingdom thereafter. He was naturalised as a British subject on June 4, 1948. Since 1953 he received a pension paid from German public funds as a former employee of a Jewish religious community.
  • UK–Federal Republic of Germany double taxation conventions (1954 and 1964), given effect in the UK by Orders in Council in 1955 and 1967, provided that remuneration including pensions paid out of one state’s public funds is exempt from tax in the other state unless the individual is a national of the taxing state without being also a national of the paying state (Article IX).
  • The assessments in dispute covered tax years 1953–54 to 1967–68. The decisive question was whether Oppenheimer was also a German national during those years.
  • Before the Special Commissioners, expert evidence addressed: (a) the German Nationality Law of July 22, 1913 (loss of nationality on acquiring a foreign nationality absent prior permission), (b) the Nazi decree of November 25, 1941 (purporting to strip Jews abroad of German nationality), and (c) later German constitutional law.
  • Initially, the Commissioners upheld assessments; Goulding J. reversed; the Court of Appeal (Lord Denning MR, Buckley and Orr LJJ) restored the assessments on differing grounds.
  • On December 13, 1973, the House remitted the case to the Special Commissioners to make supplementary findings, particularly on Article 116(2) of the 1949 German Basic Law and relevant German decisions.
  • In the supplementary case, the Commissioners found, on the evidence of Dr. Cohn and Dr. Jaques and German court decisions (including the Federal Constitutional Court in 1958 and 1968), that the 1941 decree was void ab initio, but that from May 23, 1949, persons in Oppenheimer’s position were not regarded for German municipal law purposes as having German nationality unless they applied under Article 116(2) or returned to Germany; Oppenheimer did neither during the assessment years.
  • In the companion appeal, Nothman v. Cooper, the taxpayer, a Jewish teacher who emigrated in 1939, received periodic payments from the FRG under Wiedergutmachung legislation (compensation for persecution-related career loss) from 1952. She argued the payments were not taxable income, were voluntary, or were not foreign possessions; alternatively she sought exemption under Finance Act 1961, section 22(1) (exclusion for certain specifically tax-exempt German compensation annuities).

Issues

  1. Was Oppenheimer a German national during the assessment years such that Article IX of the UK–FRG double tax conventions exempted his German public pension from UK income tax?
  2. Under Article 116(2) of the 1949 German Basic Law, must persons stripped of nationality by Nazi measures apply or return to Germany after May 23, 1949 to be treated as German nationals?
  3. Should English courts treat the Nazi decree of November 25, 1941 as valid for determining nationality status?
  4. In Nothman, were the periodic payments taxable income from a foreign source?
  5. Do those payments qualify as tax-exempt annuities under Finance Act 1961, section 22(1)?

Ruling

  1. No — Oppenheimer was not to be treated as a German national during the assessment years; the treaty exemption did not apply.
  2. Yes — Article 116(2) required an application or return to Germany; absent that, those affected were not treated as German nationals after May 23, 1949.
  3. No — the 1941 decree was void ab initio under German constitutional law and, in any event, would not be given effect by English courts for status; the case turned on the Basic Law regime.
  4. Yes — Nothman’s payments were taxable income arising from a foreign source.
  5. No — they were not specifically exempted from German tax under the relevant German law, so the UK statutory exclusion did not apply.

Reasoning / Ratio Decidendi

  • The conventions leave undefined terms to the law of the applying state; English law, following Stoeck v. Public Trustee, determines foreign nationality by reference to the foreign state’s municipal law. The Commissioners’ supplementary findings, grounded in German court decisions, were that after May 23, 1949, persons like Oppenheimer were not regarded as German nationals unless they applied under Article 116(2) or returned to Germany. He did neither during the assessment years.
  • The Federal Constitutional Court (1968) declared the 1941 decree “null and void ab initio,” but explained that Article 116(2) implemented a humane policy: no nationality would be thrust upon persecutees unless asserted by residence or application. Thus, even assuming Oppenheimer had not lost nationality upon UK naturalisation in 1948, he ceased to be treated as German from the Basic Law’s commencement until application.
  • English courts would not perpetuate wartime non-recognition of enemy status changes beyond hostilities, and would not rely on the Nazi decree to deprive rights; public policy and German constitutional jurisprudence aligned in treating the decree as having no effect in law.
  • For Nothman, the periodic payments under Wiedergutmachung were receipts of income character, derived from a foreign source (the statutory entitlement under German law). They were not mere voluntary gifts and did not fall within Finance Act 1961, s. 22(1), absent a “specific exemption” from comparable German taxation.

Doctrine / Legal Principle

  • Nationality for UK legal purposes, including tax treaty application, is determined by the foreign state’s municipal law as a question of fact.
  • Void Nazi-era expatriation measures do not control post-1949 status; under Article 116(2) Basic Law, recognition of nationality requires affirmative assertion (application or residence).
  • English courts may refuse to give effect to discriminatory foreign measures and confine wartime non-recognition of status changes to the period of hostilities.
  • Periodic compensation-style payments can constitute taxable income from a foreign source absent a clear statutory exemption.

Disposition

Appeals dismissed. The treaty exemption did not apply to Oppenheimer; Nothman’s receipts were taxable and not excluded by Finance Act 1961, section 22(1).

Concurring / Dissenting Opinions

Lords Hailsham of St. Marylebone L.C., Hodson, Pearson, and Salmon agreed with Lord Cross of Chelsea. Lord Pearson noted that, had the Basic Law not intervened, he would have treated the 1941 decree as effective until the successor constitutional regime addressed it; no formal dissent was entered.

Significance / Notes

  • Clarifies how UK courts apply foreign nationality law when construing tax treaties and confirms deference to authoritative foreign constitutional interpretations.

  • Affirms that Nazi racial measures are legally null yet, under the Basic Law, post-war recognition of nationality depends on affirmative election by the affected person.

  • Confirms treatment of FRG Wiedergutmachung payments as taxable income unless a specific statutory exemption applies, guiding characterization of similar reparations or compensation schemes.

  • Illustrates the boundary between public policy non-recognition of odious foreign acts and principled reliance on a successor state’s constitutional settlement for status determinations.

Taxation Law
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