Analysis: How rich oil firms are using a secretive court to fight capital gains tax in developing world

By George Turner from Finance Uncovered.

At a little known but powerful international court of arbitration, so secretive that senior officials decline to disclose even the dates of hearings, a new case has been filed that will pitch a mighty US oil major from Houston, Texas, against one of the world’s last Communist-run countries.

On the face of it, this battle between ConocoPhillips and the Socialist Republic of Vietnam is as dry as it gets. Hardly anyone has yet heard of it.

But the result could mark a significant shift in the way huge multinationals fight off the threat of taxes from desperate revenue authorities in developing countries.

For ConocoPhillips is using the not-so-glamourous Bilateral Investment Treaty Mechanism of the UN to launch a pre-emptive legal strike against Vietnam’s intention to levy an estimated $179m capital gains tax charge on oil fields sold by one of its UK subsidiaries.

Capital gains: A new frontier

Think of any of the major tax avoidance scandals that have dominated headlines in the last ten years: Google, Facebook, Apple, Nike, all have focused on profit shifting, the art of moving money out of profitable markets and into tax havens as a means of avoiding corporate income tax.

Most commonly, profit shifting happens when companies move revenues abroad, for example by billing their customers from an offshore company, or by invoicing a local business for fees and costs from an offshore company.

However, there is another important form of tax avoidance which multinationals frequently abuse but which has received little attention from the media: avoiding tax on capital gains.

Over the next few years, as more countries claim their resources have been bought and sold by foreigners tax free, this issue is likely to become a new frontier in the anti-tax avoidance campaign.

A capital gain is where a company or an individual sells an asset and makes a profit on that sale due to an increase in value of the asset being sold. Think of selling a house. The money you make by the virtue of your house increasing in value is your capital gain.

When it comes to major multinational mergers and acquisitions the capital gains can be enormous, and tax can easily be avoided if deals are structured offshore.

Capital gains tax: Made in Vietnam?

In 2012, a UK subsidiary of ConocoPhillips sold two other UK companies it owned, ConocoPhillips Gama Limited, and ConocoPhillips Cuu Long. It sold them to a UK company owned by Perenco, the Anglo-French oil firm. Perenco is also a party to the arbitration.

The only assets held by ConocoPhillips Gama and Cuu Long were Conoco’s oil interests in Vietnam.

ConocoPhillipsAccording to accounts filed at UK Companies House, ConocoPhillips sold the companies for $1.3bn making a profit of $896m. Buried in the detail of those accounts, a small note states that the company paid no taxes on that capital gain.

Why? Because Britain operates a loophole known as a “substantial shareholder exemption”. This means that profits on the sale of shares in subsidiary companies are not subject to capital gains tax in the UK.

But although the UK may choose not to levy any capital gains tax, that has not prevented Vietnam’s policymakers from trying to do so.

Under the terms of the UK-Vietnam tax treaty, Vietnam has the right to tax any capital gains made by UK companies that originate in Vietnam. If the profits on the deal were subject to the standard corporation tax rate in Vietnam, then ConocoPhillips could have to cough up an estimated $179m to the Vietnamese government.

So the question therefore becomes, what and where is the source of the profits?

If you are ConocoPhillips, the value is all in the shares, and the profit should be located in the UK. When we asked the company about the deal a spokesman said: “The sale was between two UK incorporated and resident entities with no taxable presence in Vietnam. The target companies are also UK companies. As a result, no taxes were owed on the sale in Vietnam.”

The Vietnamese government takes a different view, claiming the profits really arise out of the transfer of the oil assets. As these were located in Vietnam, it says that’s where they should be taxed.

Indeed, Vietnam has signalled its intention to tax the transaction – and that has alarmed not only the US oil giant, but also in all likelihood other similarly powerful corporations.

The potential precedent for multinationals

If Vietnam is successful, there could be profound implications for other developing countries, which have often seen Western companies make huge profits on their investments, only to walk away with them tax-free.

It is an issue that has concerned policymakers at the highest levels of the United Nations and the Organisation for Economic Cooperation and Development. In essence, the argument is: if multinationals make fortunes from a poorer country’s resources, then surely the host should have the right to levy the appropriate tax on the gains.

But ConocoPhillips is holding firm, telling Finance Uncovered that it would “pursue all available legal remedies to challenge any attempt by Vietnam to tax the transaction”.

And that is exactly what the company is doing with this new legal move: it wants to stop the threat in its tracks.

ConocoPhillips and Perenco have quietly filed a petition in the secretive investment tribunal, requesting it orders Vietnam not to levy the tax.

Unusually, the case is being brought under the UK-Vietnam Bilateral Investment Treaty, which is subject to an arbitration process run by a little known corner of the United Nations System, The United Nations Commission on International Trade Law.

The use of the Bilateral Investment Treaty Mechanism is itself controversial. Such disputes are expensive, opaque and are not usually used to settle tax disputes.

Cavinder BullNeither ConocoPhillips nor Cavinder Bull (pictured, left), a senior Singaporean barrister and chairman of the arbitration panel looking into the case, would disclose the location, or the dates, of the hearings.

And this case is thought to be the first to look at the issue of capital gains tax. If it goes ahead, that itself could act as a deterrent to developing countries trying to levy taxes because such battles cost fortunes in legal fees – about $5m a case, on average.

Michael Lennard is the Chief of the UN International Tax Cooperation Section who is currently on sabbatical as a visitor at the Oxford University Centre for Business Taxation. He has negotiated many tax and investment agreements, and speaking in a personal capacity he told Finance Uncovered: “The proceedings are held in secret, with expensive Western law firms often having to be hired to deal with arcane procedures.

“Most of the potential arbitrators in tax-related cases are not tax experts or else are tax advisers to corporations, with insufficient experienced and non-partisan arbitrators from the developing world (such as academics), not enough women and not enough younger experts.

“As a result it is extremely difficult for developing country governments to secure the expertise they need to defend these cases.”

For many, this reeks of injustice: big multinationals using the sledgehammer of a secretive and prohibitively expensive court to deprive developing countries of the revenue they feel is theirs.

Jayati Ghosh, a renowned professor of economics at Jawaharlal Nehru University in New Delhi, said: “Developing countries’ experience with the outcomes of such cases does not inspire optimism, as it is well known that the panels tend to be more investor friendly and generally support the claims of firms over the rights of governments or even the human rights of their citizens.”

Perenco declined to comment.

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The WW1 Conspiracy

“If my sons did not want wars, there would be none.” — Gutle Schnaper, Mayer Amschel Rothschild’s wife.

Understanding why the World Wars were deliberately created.

Wars have always been the catalysts of massive change in human civilization since the dawn of time. Wars force people to grasp at security, to clamor for an answer in the midst of chaos, for when we are comfortable; we are complacent, rigid, and uncompromising, real change has most often come in times of desperation — hence “Order out of chaos”, or “Ordo ab chao”, a Masonic principle and motto of the 33rd degree of Scottish Rite Freemasonry. Such a term states the necessity of conflict in bringing forth order, and the interchangeability of what is “good”, and what is “evil”.

The chaos (CHAO) is the society we see around us today and it is the builders who influence the leaders to manufacture this chaos so that they can conceal their creations in darkness while they work towards the light (ORDO). Without chaos there would never be order. Without darkness, there can be no light and without light there can be no darkness. What is the “AS ABOVE”, is the “SO BELOW” of this Secret Brotherhood.

The eminent banking families of the era knew this ancient principle, and swore by it (and still do):

They had (and still have) the influence to ignite major conflicts to set the scene for their brand of politics; the politics of globalization, and that is exactly what they did by funding all sides of the world wars. This was a time far more nationalistic than now, a time of many kings, not few, the real challenge of the secret Masonic Anglo-American order was conquering them all without firing a single shot of their own.

The great wars brought Europe to its knees and did away with the old order (shattering the strength of the Ottoman Empire, British Empire, Russians, Germans, etc) in exchange for the new order: the rise of the UN, the EU, and the European nations’ financial and military dependence on the Masonic globalist bankers.

Political centralization was accelerated in the disguise of being a safeguard against another great war. Later on, the Soviet Union was funded and created as an excuse to keep these globalist political institutions in place.

The Soviets were the much needed “red terror” to unite the Western nations against — for fear is one of the most compelling emotions, a great dose of which kept European nationalism subdued and the globalist vision sustained right through to present times.

How it all began.

World War one, known as the “Great War” and, most infamously, “the war to end all wars”, was one of the bloodiest conflicts in known human history. It all began with three influential men. Among some of the wealthiest individuals in British society:

  1. William T. Stead — Major English newspaper editor who, as a pioneer of investigative journalism, became a controversial figure of the Victorian era.
  2. Reginald Brett, aka Lord Esher — an éminence grise, a friend, confidante and adviser to Victoria, Edward VII, and George V. Known as one of the primary powers behind the throne of his era.
  3. Cecil Rhodes — An enormously wealthy diamond magnate, visionary, and major Rothschild affiliate, whose exploits in South Africa and ambition to transform the African continent would earn him the nickname of “colossus”.

Cecil Rhodes, who, with the Rothschild-Rhodes company, made an extortionate amount of money exploiting South Africans in the wildly profitable mining industry, would have the finances and links to start building a network of like-minded influential people prepared to further influence the course of modern history.

Rhodes was a pioneering advocate of globalization, saying of the English, “I contend that we are the first race in the world, and that the more of the world we inhabit the better it is for the human race. I contend that every acre added to our territory means the birth of more of the English race who otherwise would not be brought into existence.”

Rhodes was open with his ambitions, an 1890 article entitled “Mr. Rhode’s Ideal of Anglo-Saxon Greatness” was published by the aforementioned Mr. William T. Stead, who was a key publicist for Rhodes’ ideals.

The article featured the stunning subhead; “He believed a wealthy secret society should work to secure the world’s peace, and a British-American Federation.”

“(The) Idea for the development of the English-speaking race was the foundation of ‘a society copied, as to organization, from the Jesuits’.”

“We could arrange with the present members of the United States Assembly and our House of Commons to achieve the peace of the world.”

The article quotes Rhodes as saying:

“The only thing feasible to carry out this idea, is a secret society, gradually absorbing the wealth of the world.”

Here are some videos from The Corbett Report, one of the most reputable, well-researched sources of independent media:

Rhodes wanted to make the British Empire a superpower in which all of the British-dominated countries in the empire, including Canada, Australia, New Zealand, and Cape Colony, would be represented in the British Parliament. Rhodes included American students as eligible for the Rhodes scholarships. He said that he wanted to breed an American elite of philosopher-kings who would have the United States rejoin the British Empire. As Rhodes also respected and admired the Germans and their Kaiser, he allowed German students to be included in the Rhodes scholarships. He believed that eventually the United Kingdom (including Ireland), the US, and Germany together would dominate the world and ensure perpetual peace.

After Cecil Rhodes.

Rhodes left a vast sum of money in his will after his death in 1902 to various influential confidantes, in the posthumous W. T Stead published “The Last Will and Testament” of 1902, Rhode’s reasoning was outlined:

It stated that he lamented the loss of America from the British Empire and that they should formulate a secret society with the specific aim of bringing America back into the Empire. Then he lists all the countries he needs to include in this list to have world domination, to have an English-speaking union, to have British race as the enforced culture in all countries worldwide.

He sought support, funding, plans, his agenda was in place — his funds left to those he trusted, and soon after this WW1, WW2 and so forth occurred, modern history quickly took shape.

The Round Table Group.

After Rhode’s death in 1902, this secret society revealed itself slightly, revealing itself as a force for world peace. Its modus operandi was imperialism, a secretive continuation of the open imperialism of previous centuries.

The Boer war was orchestrated to consolidate Rothschild power over the resources of South Africa.

Sir Alfred Milner, a close associate of Rhodes, was instrumental in igniting the Boer War:

“I precipitated the crisis, which was inevitable before it was too late. It is not very agreeable, and in many eyes, not a very creditable piece of business to have been largely instrumental in bringing about a war.”

When W. T. Stead initially objected to the Boer War, Rhodes told him:

“You will support Milner in any measure that he may take short of war. I make no such limitation. I support Milner absolutely without reserve. If he says peace, I say peace; if he says war, I say war. Whatever happens, I say ditto to Milner.”

Rising Germany & The Pre-WW1 Days.

German ascendance in geopolitical power in Europe threatened the Masonic hegemony and world vision, in order to crush the independence of the major European powers, with Germany’s Kaiser being the most threatening, not to mention Russia’s Tsar, it required a devastating war, that war would be WW1 and the Bolshevik revolution.

Lord Esher was a close confidante of the King, a monarch with a hands-on approach to foreign diplomacy and a disdain for the rise of German power, such a sentiment dovetailed perfectly in line with the group’s aims. With insiders in Russia and France, the Triple Entente formed, the pincer that would crush Germany and, in the chaos of war, ruin the other major European nations.

In the run up to the war, the British press released story after story framing Germans as hostiles in every regard, bringing public perception in line with the goals of the master plan.

The British helped the Japanese in the 1904-05 war against Russia, another major national competitor. Japan turned to Cecil Rhodes’ co-conspirator Lord Nathan Rothschild, who supplied them with munitions, copious funds, and denied the Russians access to the Suez canal and high-quality coal, which the British did provide to the Japanese. All this helped Japan win the war.

The Japanese fleet was even constructed in Britain, but these facts did not find their way into the Milner controlled press.

When the Russian navy accidentally fired on a British fishing ship in the north sea in 1904 the British public was outraged. The British foreign office, remarkably, tried to pin this incident on the Germans, triggering a press war between the British and the Germans.

Another aggrandizement came when there were (unsubstantiated) scares over the Germans seizing Morocco, an important trade route out of the Mediterranean, once again the media spun the story to make the Germans appear the aggressors.

The Beginning of WW1.

Eventually the elite got their way when Franz Ferdinand was shot, soon after this, the series of diplomatic and political traps were sprung, controversy engulfed the political class of Europe. Not long after this Europe was at war.

In retrospect, the machinations that led to this war are a masterclass in how power really operates in society. The military compacts that committed Britain and ultimately the world to war had nothing to do with elected parliaments or representative democracy.

When Conservative Prime Minister Arthur Balfour resigned in 1905, deft political manipulations ensured that members of The Round Table; including Herbert Henry Asquith, Edward Grey, and Richard Haldane; three men who liberal leader Henry Campbell-Bannerman privately accused of “Milner worship”, seamlessly slid into key positions in the new liberal government, and continued the strategy of German encirclement without missing a step.

In fact, the details of Britain’s military commitments to Russia and France, and even the negotiations themselves, were deliberately kept hidden from members of Parliament, and even members of the Cabinet who were not part of the secret society. It wasn’t until November 1911, a full six years into the negotiations, that the Cabinet of Prime Minister Herbert Henry Asquith started to learn the details of these agreements; agreements that had been repeatedly and officially denied in the press and in Parliament.

The result of the first world war achieved the intended result; to simplify the world stage and do away with the once-powerful dynasties of old, creating a power vaccum for the new order.

Aftermath.

In the aftermath of the war, four empires disappeared: the German, Austro-Hungarian, Ottoman, and Russian. Four dynasties, together with their ancillary aristocracies, fell as a result of the war: the Romanovs, the Hohenzollerns, the Habsburgs, and the Ottomans. Yet one major dynasty still reigned supreme, the Rothschild dynasty and its affiliated ancillaries.

Soon after, the League of Nations was formed on 28 June 1919, which eventually became the UN, following WW2, this was taken yet further as the European Union was formed with a direct reference to avoiding massive war in Europe again. The EU’s main website states “The European Union is set up with the aim of ending the frequent and bloody wars between neighbours, which culminated in the Second World War.” Yet it was these massive wars that were ignited to justify such a political reformation.

The same dialectic was enacted with the “War on Terror” in recent times to justify intervention in places the world order desires to control. I see no ends to such deception so long as the eminent Western banking dynasties persist.

Russia Decries Renewed Arms Race

Russia has decried Donald Trump’s withdrawal from a nuclear arms deescalation deal in a move that experts have called the ‘most severe crisis in nuclear arms control since the 1980s’ — as the U.S. president confirms the US will leave the 1987 Intermediate-Range Nuclear Forces Treaty (INF) agreement, citing “Russian non-compliance”.

Malcolm Chalmers, the deputy director general of the Royal United Services Institute stated that “If the INF treaty collapses, and with the New Start treaty on strategic arms due to expire in 2021, the world could be left without any limits on the nuclear arsenals of nuclear states for the first time since 1972.”

Wiping out the “entire transnational elite”.

Russia must develop the capability to destroy the US in a single swift blow if it wants to persuade the Americans to end the nuclear arms race and return to the negotiating table, military expert Konstantin Sivkov said.

In order to curb the aggression from the West, Moscow shouldn’t compete with Washington in number of nukes, Sivkov wrote in a new article.

If “areas with critically dangerous geophysical conditions in the US (like the Yellowstone Supervolcano or the San Andreas Fault)” are targeted by those warheads, “such an attack guarantees the destruction of the US as a state and the entire transnational elite,”

On Monday, US President Donald Trump warned Russia and China that Washington intends to build up its nuclear arsenal until “people come to their senses.”

The president said: “Unless Russia comes to us and China comes to us and they all come to us and they say, ‘Let’s all of us get smart and let’s none of us develop those weapons,’ but if Russia’s doing it and if China’s doing it and we’re adhering to the agreement, that’s unacceptable. So we have a tremendous amount of money to play with with our military.”

A dream of “single global superpower”.

Russian state news agencies on Saturday cited a foreign ministry source as saying Washington’s move to pull out of the treaty is motivated by a dream of a single global superpower.

“The main motive is a dream of a unipolar world. Will it come true? No,” a foreign ministry source told Ria Novosti state news agency.

Washington “has approached this step over the course of many years by deliberately and step-by-step destroying the basis for the agreement,” the official said, quoted by Russia’s three main news agencies.