De Beers Consolidated Mines Ltd V Howe (1906) Corporate Residence: An Early Attempt at European Harmonisation

This book chapter assesses the 1906 landmark decision by the Judicial Committee of the House of Lords in case of De Beers Consolidated Mines Ltd v Howe (Surveyor of Taxes). The case represents a remarkable instance of a revenue statute leaving a foundational concept – that of the ‘residence’ of companies – for determination by judges. In doing so, the House of Lords based its decision entirely upon the case law of lower courts, one case drawing on the celebrated work of the German jurist Carl Friederich von Savigny. The chapter shares findings of research performed about the intellectual origins of the judicial test for corporate tax residence (‘central management and control’) that has caused De Beers to be viewed as a landmark decision in countries sharing a legal tradition with the UK. The parallels between Savigny’s work on corporate domicile and the development of a judicial test in England for tax residence are explained, as well as the difficulties that arose in the application of the test after the process of transplantation begun.

The decision in De Beers is less well known for the unique historical context and facts that gave rise to the dispute before the English courts. The chapter contextualizes the decision with reference to the factual background to the disputes, as well as the aftermath of the decision since it caused the De Beers company to be subject to double taxation in the UK and the Cape Colony (South Africa). The dramatis personae were no less than Cecil John Rhodes, chairman of De Beers and Prime Minister of the Cape Colony where the De Beers diamond mines were situated, and the Rothschild conglomerate who financed its operations and who were major shareholders that assisted in the establishment of a diamond syndicate in London in control of the global market. The House of Lords famously decided that the company, incorporated in the Cape Colony, was resident in London because it was centrally managed and controlled by its London directors, despite all of its diamond mining business being conducted at the Cape where Rhodes was mostly based. Research conducted in the archives of the House of Lords and private archives of the company revealed incomplete facts before the English courts concerning the South African directors, especially Rhodes, which arguably may have altered the outcome and the impact of the decision on others. The chapter makes the point that the decision by the House of Lords ought to be appreciated and evaluated in light of the uniqueness of the company.