The Higher Regional Court (OLG) in Frankfurt has overturned the verdict of the first instance in a bizarre dispute between two successor companies of West LB over tax refunds due to illegal cum-ex transactions by the former Landesbank.

This was announced by the law firm Linklaters, which had successfully defended the first liquidation institution (EAA) in court.

Until its demise in 2012, West LB belonged to the North Rhine-Westphalian savings banks and the state of North Rhine-Westphalia.

Hanno Mussler

Editor in Business.

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As the Higher Regional Court determined, WestLB was involved in tax evasion between 2005 and 2008.

With cum-ex stock transactions, in which shares were traded in circles around the dividend record date, the bank disguised ownership and allowed taxes that were only paid once to be credited multiple times.

1 billion tax reclaim

After the statute of limitations for criminal penalties was extended from ten to 15 years in cases of "particularly serious tax evasion" in 2020, the Düsseldorf tax office demanded that WestLB refund previously refunded capital gains taxes plus interest of a good 1 billion euros.

Since then, there has been a dispute as to whether any tax liabilities were also transferred to the "bad bank" when WestLB's capital market business was transferred to the EAA in 2012, or whether Portigon is liable for them.

The two successor companies of WestLB differ in their ownership structure.

Portigon is owned entirely by the state of North Rhine-Westphalia, directly and indirectly via the state-owned NRW bank.

In contrast, NRW only holds 48 percent of the EAA.

A good 50 percent belong to North Rhine-Westphalia's savings banks.

Portigon will mainly shoulder the pension burdens of former West LB employees.

The company may now need fresh equity.

With its judgment of December 21, 2022 (Az. 4 U 282/21), the Frankfurt Higher Regional Court upheld the EAA's appeal to reverse the first-instance judgment of the Frankfurt Regional Court (Az. 2-27 O 328/20) and to dismiss Portigon's lawsuit.

The fourth civil senate saw it as proven that the parties had never agreed on a transfer of the tax burden from West LB's cum-ex transactions.

As a result, the state has not succeeded in shifting WestLB's tax burden onto North Rhine-Westphalia's municipal savings banks.

The verdict is not yet legally binding.

Appeals are possible at the Federal Court of Justice, according to the OLG.