Tuesday, April 22, 2014

Racking Up the Money: RICO and the Revenue Rule

I am pretty sure the Revenue Rule will not survive the current era, so this paper by Kye Handy is of interest. Abstract:
The Revenue Rule, a common law rule from British court systems, prevents foreign countries from bringing claims in the United States to enforce or adjudicate tax claims that did not happen in the United States. The Supreme Court in Pasquantino v. United States held that Canada’s right to collect imported liquor taxes was not barred by the Revenue Rule. However, the 2nd Circuit in European Community v. RJR Nabisco Inc., ruled the European Union and Colombia could not recover lost tax money or enforcement costs from cigarette smuggling under RICO because of the Revenue Rule. The European Community petitioned the Supreme Court. After accepting the Community’s petition, the Court reversed and remanded the case back to the 2nd Circuit to be reheard in light of Pasquantino. The 2nd Circuit did not change its ruling citing Pasquantino as a criminal case brought by the U.S. government. With no distinction between criminal and civil RICO cases in current jurisdiction, this comment seeks to provide a solution to the split between the Second Circuit and the Supreme Court. This comment argues in favor of limitations being placed on the Revenue Rule so that it can never trump RICO claims in United States courts. In the alternative it argues if limitations cannot be placed upon the Revenue Rule then the only option is abolition. Lastly this comment provides that if limitations and abolition are not the answer, then foreign countries should appeal to the United States government to bring the RICO claims on their behalf.

And from the paper:
The Racketeering Influence and Corrupt Organizations Act (RICO) allows foreign countries to bring suit in America for illegal acts committed by American citizens. Unfortunately for these foreign countries, a common law rule denies them the remedies they seek. The Revenue Rule bars foreign RICO claims because of an almost 300 year old doctrine which states that “no country ever takes notice of the revenue laws of another.”
The author calls the rule an "injustice" and suggests it should be limited or abolished; I'd say that 300 years of history suggests there must be some good reason for the limitation, but I applaud the effort to make an argument: it is certainly more than we have seen in the context of FATCA even though it almost goes without saying that FATCA is itself, or at minimum portends, the end of the Revenue Rule as we know it. The comment gives a too-brief overview of the history but at least provides some useful sources; worth a read.


1 comment:

  1. One thing that is often forgotten by "American" legal scholars but not by non American scholars such as Art Cockfield is that in civil law jurisdictions such as Quebec the revenue rule is actually statutory law as part of the Quebec Civil Code. So in Quebec at least the courts on their own can't change the revenue rule which leads me to the conclusion that at the very least the 3 SCofC Quebec justices will be very reluctant to narrow the revenue rule for the common law Canadian provinces without some type of legislative change.

    Second the current Canadian government seems to be quite adamant the revenue rule will continue in force for quite some time to come at least for Canadian citizens. I don't doubt there is and will continue to be international pressure on Canada to allow for assistance in collection but how this will all play out and in what time frame is an unanswered question.