Tax treaty turbulence—Court of Appeal rules on the interpretation of the UK-Japan Double Tax Treaty (Vietjet Aviation Joint Stock Company v FW Aviation (Holdings) 1 Ltd)
Tax analysis: In a decision handed down on 24 June 2025, the Court of Appeal dismissed VietJet’s appeal from the High Court decision of Mr Justice Picken. The case concerned a dispute between FW Aviation (Holdings) 1 Ltd (FWA) (part of FitzWalter Capital) and the Vietnamese airline as to whether FWA had successfully acquired rights under aircraft leasing arrangements previously entered into by VietJet. The Court of Appeal concluded that it had. There were various grounds of appeal, two of which concerned the interpretation of the UK-Japan Double Tax Treaty (the Treaty). The Court of Appeal provided further guidance on the interpretation of tax treaties generally, and applied case law confirming that carrying on an investment activity and carrying on a trade are always mutually exclusive concepts (though a company can do both at the same time and be taxed on each activity separately). The court considered the anti-abuse provision in Article 11.7 of the Treaty and concluded that FWA, by choosing to incorporate in England, did not have a main purpose of ‘taking advantage’ of the interest article in the Treaty. Written by Susanna Breslin, barrister at 11 New Square.