Stanford International Bank Ltd, Re

Stanford International Bank Ltd (“SIB”) was incorporated in Antigua and Barbuda on 7th December 1990. At all times its registered office has been there. It is alleged that SIB was involved in a fraudulent ‘Ponzi’ scheme operated by Sir Allen Stanford and his associates under which some 27,000 investors, primarily from North, Central and South America, bought certificates of deposit from SIB for some $104bn. The scheme collapsed at the beginning of 2009. Thereafter the following events material to these appeals occurred:

These events have now generated four appeals to this court, namely:

I shall deal first with the three appeals concerning the order of Lewison J. I shall then consider the fourth appeal from the order of HH Judge Kramer QC. Finally, having reached my conclusions on all the appeals, I shall consider what overall order I consider that this court should make.

The first three appeals depend on the proper construction and application of the Uncitral Model Law as given the force of law in the United Kingdom by the regulation to which I have referred. It is derived from the UNCITRAL Model Law adopted by the United Nations on 30th May 1997. The regulation implementing it requires, by regulation 2(2), that it be interpreted by reference to any documents of the working group of the UN which produced it and the Guide to its enactment (“the Uncitral Guide”) prepared in response to the request for its preparation made by the UN Commission on International Trade in May 1997. Article 8 of Uncitral provides that:

“In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith.”

The argument before us has revolved around the four definitions contained in Article 2(g) to (j) which are in the following terms:

“(g)

"foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests;

(h) "foreign non-main proceeding" means a foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor has an establishment within the meaning of sub-paragraph (e) of this article;

(i) "foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation;

(j) "foreign representative" means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding;”

As the Uncitral Guide points out in paragraph 71:

“The definitions of proceedings or persons emanating from foreign jurisdictions avoid the use of expressions that may have different technical meaning in legal systems and instead describe their purpose or function. This technique is used to avoid inadvertently narrowing the range of possible foreign proceedings that might obtain recognition and to avoid unnecessary conflict with terminology used in the laws of the enacting state. ....the expression “insolvency proceedings” may have a technical meaning in some legal systems but it is intended...to refer broadly to proceedings involving companies in severe financial distress.”

Notwithstanding the large number of definitions contained in Article 2, including one of an “establishment” as “any place of operations where the debtor carries out a non-transitory economic activity with human means and assets or services”, there is no definition of the phrase “centre of its main interests”. This is used in the definition of foreign main proceeding in order to differentiate a foreign proceeding which is main from those which are not. The effect of recognition as foreign main proceedings is spelled out in Article 20. The phrase is also used in the European Community Regulation on Insolvency Proceedings (Council Regulation (EC) 1346/2000) and in that context was considered by the European Court of Justice in Re Eurofood IFSC Ltd [2006] Ch. 508 (“Eurofood”). I shall refer to both the Regulation and the judgment in some detail later.

The broad issues which arose before Lewison J and now arise on these appeals may be described as follows:

The Uncitral Guide noted in paragraph 23 that:

"To fall within the scope of the foreign law, a foreign proceeding needs to possess certain attributes. These include the following: basis in insolvency-related law of the originating State; involvement of creditors collectively; control or supervision of the assets and affairs of the debtor by a court or another official body; and reorganization or liquidation of the debtor as part of the purpose of the proceeding."

In the case of the Antiguan Liquidation the petition to which I have referred in paragraph 1(5) above set out details in relation to SIB and then averred that SIB had failed to comply with its obligations to file quarterly returns, previous returns had been inaccurate, it had failed to take reasonable precautions to prevent falsification of its records and was insolvent but not able to be restructured or restored so as to resume its business of international banking. FSRC sought an order that SIB be liquidated and dissolved pursuant to s.300 International Business Corporations Act and the appointment of the receiver-managers as liquidators under ss. 304 to 306 of that Act. That Act relates to corporations formed thereunder for the purpose of carrying on any international trade or business. It is to be distinguished from the Companies Act 1995 of Antigua and Barbuda which relates to companies generally.

Sections 304 to 306 International Business Corporations Act are contained in Part IV of that Act entitled Winding Up Corporations. This is to be distinguished from Part IV Companies Act 1995 which relates to winding up of companies more generally and appears to be closely modelled on the provisions of Part V Companies Act 1948. Part IV International Business Corporations Act also contains provisions for winding up, voluntarily or compulsorily (s.284), the payment of the debts due to creditors of any description before any payment to members (ss.286 and 290), for priority of claims in a winding-up (s.289), winding-up a company if it is just and equitable to do so (s.301(b)(ii)) and the powers and duties of liquidators (ss.307 and 308). S.307(g) imposes on a liquidator the duty to apply to the court for directions if he concludes the company is unable to pay its debts.

The order on the petition presented by FSRC was made by Harris J. In his judgment he referred not only to the breaches of obligation by SIB on which the petitioner relied but also the obvious insolvency of SIB. In his order he directed the liquidators to collect all the assets of SIB, wherever situate and provided for them to vest in the Antiguan Liquidators (paras 4 and 5). Paragraph 7 required the Antiquan Liquidators to hold all such assets for the benefit of depositors, creditors and investors in accordance with their interests under the laws of Antigua and Barbuda and in the priority indicated. The Antiguan Liquidators were constituted as foreign representatives (para 20) and authorised to apply for recognition in other jurisdictions (para 21). All proceedings against SIB were stayed or prohibited (para 25).

In paragraphs 94 and 95 of his judgment Lewison J concluded:

“94.

It is, in my judgment, clear from the court's order and the judgment of Harris J that it was not basing the order on section 300 alone. It made the order because, having considered the evidence, it concluded that it was just and equitable that SIB be wound up. An important part of the evidence was that SIB was insolvent and could not be reorganised via the receivership. In my judgment at least one of the reasons why Harris J made the order that he did was that he was satisfied that SIB was insolvent.

95.

I hold, therefore, that the Liquidators were appointed pursuant to a law relating to insolvency and that they are entitled to be recognised as foreign representatives of a foreign proceeding.”

By his appellant’s notice the US Receiver appealed against the recognition of the Antiguan Liquidation as the foreign main proceeding. In the written argument of his counsel the conclusion that the Antiguan Liquidation was a foreign proceeding was not seriously challenged. Rather it was contended that if the Antiguan Liquidation came within the definition of a foreign proceeding contained in Uncitral Article 2(i) then so must the US Receivership. Similarly in its appeal from the order of Lewison J the SFO did not contend that Lewison J was wrong to have concluded that the Antiguan Liquidation was a foreign proceeding within the meaning of Article 2(i).

In my view Lewison J was right to conclude that the Antiguan Liquidation was a foreign proceeding as defined. Part IV of the relevant Act provided for the winding up of corporations incorporated in Antigua for the purpose of carrying on an international trade or business on just and equitable grounds, which include insolvency, as well as infringements of regulatory requirements. The combination of that part of the Act and the order of the court made provision for the collection of all the assets of SIB and their application in satisfaction of all its obligations in the order of priority for which the law provided. That process was expressly subject to the supervision of the High Court of Antigua and Barbuda. Creditors and others were obliged to seek their remedy in the liquidation because individual proceedings were stayed or prohibited. The ultimate purpose of the process was the liquidation, in the sense of dissolution of SIB. Such a process satisfies all the conditions for the application of the definition because it is collective, judicial and pursuant to a law relating to insolvency.

The only real issue on this part of the appeals is whether the US Receivership also possesses the characteristics needed to satisfy the definition of a foreign proceeding contained in Article 2(i). The US Receiver was appointed in the proceedings to which I have referred in paragraph 1(1) above. Paragraphs 15 to 17 of the Complaint set out the authority, jurisdiction and venue provisions on which SEC relied. They were s.20(b) Securities Act 1933, s.21(d) Securities Exchange Act 1934, s.41(d) Investment Company Act 1940 and s.209(d) Investment Advisers Act 1940. Each of those provisions entitled the SEC to bring proceedings in respect of the matters described for an injunction and a civil penalty payable to the US Treasury. In addition s.21(d)(5) Securities Exchange Act 1934 entitled the SEC to seek and the Federal Court to grant any equitable relief that might be appropriate or necessary for the benefit of investors. It was under that provision that the US Receiver was appointed.

In paragraphs 25 to 57 of the Complaint the SEC set out in detail the facts it alleges. In paragraphs 58 to 80 it set out in detail the six causes of action on which it relies relating to violations of the Securities Act and other laws. The relief sought extends to injunctions to restrain continued violations, freezing orders, disclosure of assets and books and records, discovery, disgorgement of illicit gains and profits and civil penalties. The claim for the appointment of a receiver is made in these terms:

“Order the appointment of a temporary receiver for [SIB] for the benefit of investors, to marshal, conserve, protect and hold funds and assets obtained by [SIB] and [its] agents, co-conspirators, and others involved in this scheme, wherever such assets may be found, or, with the approval of the court, dispose of any wasting asset in accordance with the application and proposed order provided herewith.”

The order appointing the US Receiver was made by the District Judge on 16th February 2009 and amended on 12th March 2009. Both orders recited that it appeared that:

“this order is both necessary and appropriate in order to prevent waste and dissipation of the assets of [SIB] to the detriment of the investors.”

By paragraph 1 the court assumed exclusive jurisdiction and took possession of the assets of whatever kind and wherever located of SIB. By paragraph 2 the US Receiver was appointed receiver of those assets with the full powers of an equity receiver under common law as well as such powers as were enumerated in the order. Paragraphs 3 and 4 set out the receiver’s duties and paragraph 5 conferred on him wide ranging powers to enable him to carry them out. Paragraph 7 and 8 stayed or prohibited actions or proceedings against SIB or its assets. Paragraph 6 of the amended order gave the US Receiver power to seek relief on behalf of SIB under the US Bankruptcy Code.

Both the US Receiver and the Antiguan Liquidators relied on evidence of a US lawyer in relation to the nature of a receivership under US law. They were respectively Professor Jay L. Westbrook and Professor Daniel M. Glosband. They disagreed on whether the US common law under which receivers are appointed can be categorised as a law relating to insolvency; but as the proper construction and application of the definition contained in Article 2(i) of Uncitral is a matter of law for this court it is unnecessary to explain why. They were in substantial agreement that a receiver appointed under the US common law, may, in the court’s discretion, be directed by the court to distribute the property of a debtor which is vested in him or under his control pro rata amongst a specified class be they investors or creditors more generally.

Lewison J considered the nature of a foreign proceeding as defined (paras 37 to 42) and the terms of the order appointing the US Receiver (paras 71 to 78). He set out the submissions of counsel for the US Receiver, the Antiguan Liquidators and Sir Allen Stanford at some length (paras 79 to 83). His conclusion on whether the US Receivership is a foreign proceeding within Article 2(i) Uncitral is set out in paragraphs 84 and 85 in the following terms:

“84.

As I have said, it seems to me that the Receiver's authority derives from the terms of the order. I do not, therefore, consider that it is profitable to discuss the sorts of powers which might be conferred on receivers generally. Thus I agree with [counsel for Sir Allen Stanford] that the question is not whether an equitable receivership could generally or ever give rise to pari passu distribution. What matters, to my mind, is what powers and duties have been conferred or imposed on the Receiver by this order. I do not consider that the powers and duties conferred or imposed on the Receiver amount to a "foreign proceeding" for the purposes of the Cross Border Insolvency Regulations, largely for the reasons given by [counsel for Sir Allen Stanford and the Antiguan Liquidators]. In short:

i)

The recited purpose of the order was to prevent dissipation and waste, not to liquidate or reorganise the debtors' estates;

ii)

The detriment that the court was concerned to prevent was detriment to investors;

iii)

The underlying cause of action which led to the making of the order had nothing to do with insolvency and no allegation of insolvency featured in the SEC's complaint. Indeed there is no evidence that any of the personal Defendants (i.e. Sir Allen, Mr Davis or Ms Pendergest-Holt) is in fact insolvent, yet the appointment of the Receiver over their assets must have the same foundation as his appointment over the assets of the corporate Defendants;

iv)

The powers conferred on and duties imposed on the Receiver were duties to gather in and preserve assets, not to liquidate or distribute them. (The order does not, at least on its face, confer any power on the Receiver to sell any of the Defendants' assets of which he might take possession);

v)

In so far as the order mentions creditors who are not investors, they are mentioned only to allow claims to be compromised. The reference to distributions to creditors does not sanction actual distribution; it merely describes the reason why expenses are to be kept to a minimum;

vi)

The order does not preclude claims from being made against the Defendants outside the receivership if either they do not relate to the underlying causes of action on which the SEC's application was based, or they are brought in the District Court for Northern Texas;

vii)

Under the order the Receiver has no power to distribute assets of the Defendants. It would need a further application to the court to enable him to do so;

viii)

The fact that some receiverships may be classified for some purposes as "insolvency proceedings" or be treated as acceptable alternatives to bankruptcy does not mean that this receivership satisfies the definition of foreign proceeding in the Cross-Border Insolvency Regulations 2006;

ix)

The general body of common law or equitable principles which bear on the appointment of a receiver and the conduct of a receivership is not "a law relating to insolvency" since it applies in many different situations many (if not most) of which have nothing to do with insolvency; and many of the principles leave a good deal to discretion.

85.

I do not say that any one of these factors is decisive, but cumulatively they lead to only one conclusion. I hold, therefore, that the receivership is not a "foreign proceeding". I would also hold that since the Receiver has not yet been authorised to administer the liquidation or reorganisation of SIB he is not yet a "foreign representative" as defined, even if the receivership is a "foreign proceeding". It follows that the receivership cannot be recognised under the Cross Border Insolvency Regulations 2006.”

Counsel for the US Receiver challenges the overall conclusion of Lewison J and the individual factors on which he relied. Counsel’s submissions may be summarised as follows:

SFO did not seek permission to appeal from the part of the order of Lewison J which dismissed the application for recognition made by the US Receiver and made no submissions in respect of it. Counsel for the Antiguan Liquidators supported the decision of Lewison J for the reasons he gave. As, in substance, I agree with them I do not find it necessary to set them out at length.

It is clear from the origin and objective of Uncitral, Article 8 thereof and the Uncitral Guide that Uncitral should not be construed by reference to any particular national system of law. It is intended to embrace all systems of law which satisfy the conditions described in the definitions contained in Article 2(i) to (j) so as to provide for reciprocity between all the states which may incorporate Uncitral into their domestic law. Further the definition of foreign proceeding contained in Article 2(i) contains a number of factors, namely “collective...proceeding”, “pursuant to a law relating to insolvency”, “control or supervision” of “the assets and affairs of the debtor” by a foreign court, “for the purpose of reorganisation or liquidation”. Whilst each factor has to be considered the definition must be read as a whole.

I would start with the phrase “pursuant to a law relating to insolvency” for this governs all the other factors. It is contended that such law does not have to be statutory. I agree. It is submitted that it does not have to relate exclusively to insolvency. I agree with that submission in broad terms too. But the first step must be to identify the relevant law. The law of England and Wales relates to insolvency in the sense that it includes the Insolvency Act but unless the proceeding in question is taken under that Act (or some similar jurisdiction) it cannot sensibly be described as “pursuant to a law relating to insolvency”. So it is necessary, in my view, to start by identifying the law, whether statutory or not, under or pursuant to which the relevant proceeding was brought and is being pursued. Having done so it is then necessary to consider whether that law relates to insolvency and whether the other factors to which the definition refers can be regarded as being brought about ‘pursuant’ to that law.

I have identified in paragraph 16 above the provisions of the US law relied on in the complaint filed by the SEC as conferring jurisdiction on the District Court for the Northern District of Texas. Those provisions relate generally to the protection of investors and confer on the SEC wide powers of investigation, prevention by injunction, criminal proceedings or civil penalty and ‘disgorgement’ of illicit gains. In my view it is plain, and I did not understand counsel for the US Receiver to contend otherwise, that none of these statutory provisions can be categorised as ‘a law relating to insolvency’.

One of them, s.21(d)(5) Securities Exchange Act 1934, entitled the SEC to seek and the Federal Court to grant any equitable relief that might be appropriate or necessary for the benefit of investors. It may be that the inherent jurisdiction of the District Court would also have justified such an appointment. The appointment of a receiver is a well-known head of equitable relief. But the appointment of a receiver, whether under s.21(d)(5) Securities Exchange Act 1934 or under the inherent jurisdiction of the court, as equitable relief for the protection of investors in proceedings relating to securities fraud does not, without more, mean that the other ingredients of the definition were brought about ‘pursuant to a law relating to insolvency’. The fact that the court may subsequently make orders which bring into force a process which can be recognised as an insolvency proceeding is immaterial unless and until it is done. The principles of the common law and equity do not ‘relate to insolvency’ unless and until they are activated for that purpose.

It is because there is no such activation or order in this case that the other issues arise. Thus, whilst the US Receivership is an interim judicial proceeding in a foreign state it is not ‘collective’ in the relevant sense because it is for the protection of investors not the wider class of creditors generally, notwithstanding the occasional reference to claimants in the orders. Nor is it, at this stage, for the purpose of reorganisation or liquidation; it is for the protection of investors and the assets of SIB.

The analogy with the appointment of a provisional liquidator in England is, in my view, a false one as the appointment of a provisional liquidator is made under either the statutory law relating to insolvency or a comparable common law or equitable principle. Similarly this conclusion is not inconsistent with that in relation to the Antiguan Liquidation. In the latter case the jurisdiction under Part IV International Business Corporations Act is that under which corporations formed under Antiguan law to carry on any international trade or business are wound up. The grounds for such winding up include the just and equitable ground which, conventionally, includes insolvency. When the winding up order is made, but not before, it gives rise to a collective judicial scheme for the liquidation or reorganisation of the company.

For all these reasons, which are, in essence, those given by Lewison J in paragraph 84 of his judgment I conclude that the US Receivership is not a foreign proceeding within the definition contained in Article 2(i) Uncitral. It follows that the US Receiver cannot be a foreign representative within the definition contained in Article 2(j). Accordingly in my view the answer to the first question I have posed in paragraph 8 above is that the Antiguan Liquidation is, but the US Receivership is not, a foreign proceeding within the meaning of that expression as defined in Article 2(i); similarly the Antiguan Liquidators are, but the US Receiver is not, a foreign representative of SIB within the meaning or that expression as defined in Article 2(j). I should add that before Lewison J the US Receiver also sought recognition at common law in respect of both SIB and what were called Stanford entities. Lewison granted it in relation to the Stanford entities but not in relation to SIB for the reasons he gave in paragraphs 104 and 105. The US Receiver formally contended that Lewison J was wrong in that respect too for reasons given in paragraphs 137 to 141 of counsel’s written argument. Those grounds were not developed in oral argument by counsel for any party and it is not clear to me whether this part of the appeal of the US Receiver was abandoned. Suffice it to say that if it was not abandoned I would reject it for the reasons given by Lewison J.

Given that the Antiguan Liquidation is a foreign proceeding it will be a foreign main proceeding if, but only if, SIB’s centre of main interests (“COMI”) was in the state where, and at the time when, that proceeding was commenced, namely in Antigua, see Article 2(g) and Re: Staubitz-Schreiber [2006] ECR I 701. Article 16.3 of Uncitral provides that:

“In the absence of proof to the contrary, the debtor’s registered office...is presumed to be the centre of the debtor’s main interests”.

Lewison J considered how the court should apply that article in cases where there was a disputed question of fact but no cross-examination. His answer given in paragraph 10 of his judgment, which has not been criticised before us, was that:

“...the court should apply the same test as it applies in deciding questions of jurisdiction under the EC Judgments Regulation 44/2001: viz. that the court must be satisfied, or as satisfied as it can be having regard to the limitations which an interlocutory process imposes, that the company's COMI is not in the state in which its registered office is located: cf. Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1 W.L.R. 12, § 28.”

In paragraphs 11 to 31 of his judgment Lewison J summarised the relevant facts relating to SIB and the Stanford Financial Group of which it formed part under three separate headings. The first heading related to what the judge called SIB’s public face. He recorded the details of its incorporation and the situation of its registered office. He set out (para 11) details of the substantial office building in Antigua it occupied, its employees of whom 88 worked in Antigua. The remainder worked in Canada but probably reported to people in the US or the US Virgin Islands. The judge then considered (para 12) at some length the details of SIB, as reported to the public in its disclosure statement to depositors, including the composition of its board of directors, the business of SIB, the fact that it was regulated by FSRC in Antigua but in no other jurisdiction and the contact address and telephone number in Antigua. He dealt with statements made in various items of marketing materials in paragraphs 13 and 14. The judge then described how SIB obtained deposits through referral agreements with independent financial advisers (para 15), the terms on which they were invested (para 16) and where they were held (paras 17 to 20) and observed that the bulk of SIB’s actual investments were outside the US (para 21). The judge concluded with descriptions of the other banking services provided by SIB (para 22), where and how board meetings were held (para 22) and the types of management expense incurred as shown by its audited accounts (para 24). Lewison J then referred (paras 26 and 27) to the composition of the Stanford Financial Group as controlled by Sir Allen Stanford and how it was marketed as a whole (para 28).

The judge then considered what he described as “behind the scenes”, namely that, in the light of the evidence uncovered so far, Sir Allen Stanford was at the centre of a massive and fraudulent Ponzi scheme (para 29). He found the evidence of the extent to which decisions at strategic level were taken by Sir Allen Stanford and Mr James L. Davis to be inconclusive. In paragraph 31 he recorded that Mr Davis was domiciled and resident in the US. He continued:

“So far as Sir Allen is concerned, he is a citizen of both the USA and Antigua (where he was knighted). He has a high profile in Antigua where he has been a major investor and benefactor. He is also a frequent visitor. Amongst other things he has built the Stanford Cricket Ground and two restaurants in close proximity to SIB's building; he owns the Antigua Sun (Antigua's largest newspaper) and was the sponsor of Antiguan Sail Week. He has homes in the USA. But for tax reasons he spends much of his time (at least half the year) in St Croix in the US Virgin Islands. There is also evidence that at the relevant time he lived in part on his yacht.”

Lewison J then considered the origins of Uncitral and the use of COMI in the EC Regulation on Insolvency Proceedings. He referred to the decision of the European Court of Justice on the meaning of COMI in the context of the EC Regulation in Eurofood. He recorded the submissions of counsel on the meaning of COMI. The judge held (para 70) that:

“i)

The relevant COMI is the COMI of SIB;

ii)

Since its registered office is in Antigua, it is presumed in the absence of proof to the contrary, that its COMI is in Antigua;

iii)

The burden of rebutting the presumption lies on the Receiver;

iv)

The presumption will only be rebutted by factors that are objective;

v)

But objective factors will not count unless they are also ascertainable by third parties;

vi)

What is ascertainable by third parties is what is in the public domain, and what they would learn in the ordinary course of business with the company.”

The judge then left the question of COMI and considered (paras 71 to 95) whether either the US Receivership or the Antiguan Liquidation was a foreign proceeding. In paragraphs 96 to 99 he applied his interpretation of COMI to the facts of the case and concluded that they were not sufficient to rebut the presumption that the COMI of SIB was where its registered office was, namely in Antigua. This conclusion is challenged by the US Receiver on, essentially, three grounds:

This issue arises from the judge’s conclusion in sub-paragraphs iv) – vi) of paragraph 70 of the judgment of Lewison J which I have quoted in paragraph 33 above. In addition when he returned to the subject of COMI in later paragraphs of his judgment he said (para 98):

“.....as I have held, the presumption can only be rebutted by factors that are both objective and ascertainable by third parties....”

The judge arrived at that conclusion by applying the principle applied by the European Court of Justice in Eurofood because the same expression was used in the relevant EC Regulation in much the same context and he ought to follow it, whether or not bound to do so, in preference to his own earlier decision in Re Lennox Holdings Ltd [2009] BCC 155.

To understand the arguments and to explain my conclusion it is necessary to consider the evolution of both the EC Regulation and Uncitral. Both were preceded by the European Convention on Insolvency Proceedings. Its preparation began in 1960. It was open for signature by member states from 23rd November 1995. The Convention applied to proceedings which satisfied four conditions but as there might be more than one proceeding satisfying those conditions it also provided for ‘main insolvency proceedings’. They were defined as proceedings in the contracting state where the debtor had his centre of main interests. In May 1996 the UK Government refused to sign the Convention. In July 1996 there was signed what became known as the Virgós-Schmit Report on the Convention. Though never formally adopted it was and is regarded as an authoritative commentary on the Convention and the subsequent regulation derived from it. In paragraphs 75 and 76 the authors stated:

“75.

The concept of “centre of main interests” must be interpreted as the place where the debtor conducts the administration of his interests on a regular basis and is therefore, ascertainable by third parties. The rationale of this rule is not difficult to explain. Insolvency is a foreseeable risk. It is therefore important that international jurisdiction (which as we will see, entails the application of the insolvency laws of that Contracting State) be based on a place known to the debtor’s potential creditors. This enables the legal risks which would have to be assumed in the case of insolvency to be calculated.

.......

76.

The Convention offers no rule for groups of affiliated companies (parent-subsidiary schemes). The general rule to open or to consolidate insolvency proceedings against any of the related companies as a principal or jointly liable debtor is that jurisdiction must exist according to the Convention for each of the concerned debtors with a separate legal entity. Naturally, the drawing up of a European norm on associated companies may affect this answer.”

Some 11 months later on 30th May 1997 Uncitral was adopted by the United Nations. The phrase ‘centre of main interests’ was used so as to distinguish main from non-main foreign proceedings in Article 2(g). It is used again in the application of the presumption for which Article 16.3 provides, see Article 17.2(a), but not otherwise. The Uncitral Guide pointed out in paragraph 31 that the phrase corresponded to the formulation in article 3 of the European Convention on Insolvency Proceedings

“...thus building on the emerging harmonization as regards the notion of a “main” proceeding. The determination that a foreign proceeding is a “main” proceeding may affect the nature of the relief accorded to the foreign representative.”

The Uncitral Guide pointed out again in paragraph 72 that the phrase used to define a foreign main proceeding was used also in the Convention on Insolvency Proceedings. Similarly the Official Records of the UN General Assembly 52nd Session Supplement No.17 paragraph 153, which is also admissible in the interpretation of Uncitral, see regulation 2(2)(b) Cross Border Insolvency Regulation 2006, records that:

“The view was expressed that the meaning of the term ‘centre of main interests’ in sub-paragraph (b) was not clear and that its use would create uncertainty. In response, it was stated that the term was used in the European Union Convention on Insolvency Proceedings and that the interpretation of the term in the context of the Convention would be useful also in the context of the Model Provisions.”

We were told that the Uncitral Model Law has been adopted by 17 states including the US in 2005, the UK and New Zealand in 2006 and Australia in 2008.

The EC Regulation on Insolvency Proceedings (EC) No: 1346/2000 was promulgated on 29th May 2000 and came into force on 31st May 2002. It superseded the Convention which the UK had refused to sign but included for the first time a number of additional recitals including recital (13) which states:

“The ‘centre of main interests’ should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.”

Article 3, headed “International jurisdiction” provides:

“The courts of the Member State within the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open the insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.”

Provision was made by Article 3(2) for secondary insolvency proceedings to be opened in the Member State in which the debtor possessed an establishment but confined to the assets of the debtor situated in that Member State.

Thus there is a clear correlation between the words used and the purpose to which they are applied in both Uncitral and the EC Regulation. In both there is a rebuttable presumption that the COMI is the state in which the registered office of the company is situated. We were referred to a number of decisions of courts in the US, the UK and the European Court of Justice in relation to the material required to rebut the presumption. It is convenient to refer to them in chronological order whether they are dealing with Uncitral or the EC Regulation. They are Eurofood; In re SPhinX Ltd (2006) 351 B.R.103; Tricontinental Exchange Ltd (2006) B.R. 627; Bear Stearns High Grade Structured Strategies Master Fund Ltd (2008) 389 B.R. 325; Basis Yield Alpha Fund (2008) 381 B.R.37; Re Ernst & Young (2008) 383 B.R. 773; Re Innua Canada Ltd (2009) WL 1025090 and Re Lennox Holdings Ltd [2009] BCC 155.

Eurofood concerned a subsidiary company with its registered office in the Republic of Ireland of an Italian holding company. The Italian parent was confronting a financial crisis and was in extraordinary administration proceedings in Italy. A creditor presented a petition for the winding up of the Irish subsidiary in Ireland and a provisional liquidator was appointed. The court in Italy then determined that the centre of main interests of the subsidiary was in Italy so that under the EC Regulation the Italian court, not the Irish court, had jurisdiction to wind it up. The Supreme Court of the Republic of Ireland referred to the European Court of Justice a number of questions designed to ascertain which court had jurisdiction to wind up the Irish subsidiary. The fourth question sought guidance on the governing factors to be regarded in determining the centre of a debtor’s main interests.

The fourth question was considered by Advocate-General Jacobs in paragraphs 106 to 126 of his opinion. He concluded in paragraph 126:

“I accordingly conclude that, where the debtor is a subsidiary company and where its registered office and that of its parent company are in two different member states and the subsidiary conducts the administration of its interests on a regular basis in a manner ascertainable by third parties and in complete and regular respect for its own corporate identity in the member state in which its registered office is situated, the presumption that the centre of the subsidiary's main interests is in the member state of its registered office is not rebutted merely because the parent company is in a position, by virtue of its shareholding and power to appoint directors, to control, and does in fact control, the policy of the subsidiary and the fact of such control is not ascertainable by third parties.”

That question was considered by the European Court of Justice in paragraphs 26 to 37 of its judgment. The court concluded, so far as now material, in paragraphs 29 to 34:

“29.

Article 3(1) of the Regulation provides that, in the case of a company, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.

30.

It follows that, in the system established by the Regulation for determining the competence of the courts of the member states, each debtor constituting a distinct legal entity is subject to its own court jurisdiction.

31.

The concept of the centre of main interests is peculiar to the Regulation. Therefore, it has an autonomous meaning and must therefore be interpreted in a uniform way, independently of national legislation.

32.

The scope of that concept is highlighted by the thirteenth recital in the Preamble to the Regulation, which states : "The 'centre of main interests' should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties."

33.

That definition shows that the centre of main interests must be identified by reference to criteria that are both objective and ascertainable by third parties. That objectivity and that possibility of ascertainment by third parties are necessary in order to ensure legal certainty and foreseeability concerning the determination of the court with jurisdiction to open main insolvency proceedings. That legal certainty and that foreseeability are all the more important in that, in accordance with article 4(1) of the Regulation, determination of the court with jurisdiction entails determination of the law which is to apply.

34.

It follows that, in determining the centre of the main interests of a debtor company, the simple presumption laid down by the Community legislature in favour of the registered office of that company can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at that registered office is deemed to reflect.”

In re SPhinX Ltd (2006) 351 B.R.103 concerned a company incorporated in the Cayman Islands carrying on business as a hedge fund. Its registered office was in the Cayman Islands but it had no physical offices, employees or assets there. It carried on no trade or business in the Cayman Islands and, as an offshore company, was prohibited from doing so. Its business was conducted under a discretionary investment management agreement by a company incorporated in Delaware and located in New York. The company was put into voluntary liquidation subject to the supervision of the court in the Cayman Islands. The voluntary liquidators sought recognition of the Cayman Islands liquidation under Chapter 15 of the US Bankruptcy Code as a foreign main proceeding. Recognition was opposed by certain US Creditors.

Chapter 15 was inserted into the US Bankruptcy Code for the express purpose of incorporating Uncitral. The court noted that there were, at that stage, no decisions of US courts dealing with COMI and referred to the “recent” ruling of the European Court of Justice in Eurofood. In the light of the facts of the instant case the court concluded that the presumption in favour of the registered office was rebutted. It recognised the Cayman Island Liquidation as a foreign non-main proceeding. The joint liquidators appealed contending that the Cayman Island liquidation should be recognised as a foreign main proceeding. The appeal was dismissed on the ground that the court below had been right to conclude that

“...objective factors ascertainable to third parties pointed to the SPhinX Funds’ COMI not being located within the Cayman Islands thereby sufficiently rebutting the statutory presumption.”

Tricontinental Exchange Ltd (2006) B.R. 627 was not concerned with the evidence required to rebut the presumption because the registered office of the company was in the state in and from which the alleged fraudulent scheme had been managed. Eurofood was not referred to or considered.

Bear Stearns High Grade Structured Strategies Master Fund Ltd (2008) 389 B.R. 325 was factually very similar to Tricontinental Exchange Ltd and the same conclusion was reached both at first instance and on appeal. The principle in Eurofood was recognised as consistent with that of Chapter 15. Basis Yield Alpha Fund (2008) 381 B.R.37 was concerned only with the question whether a company incorporated under the laws of the Cayman Islands and having its registered office there, so that the presumption applied, was entitled to summary judgment to the effect that its COMI was in the Cayman Islands notwithstanding that, as it was registered as an offshore company, it was precluded from carrying on any business in the Cayman Islands. It was held that there was a genuine issue of material fact sufficient to preclude a summary judgment.

In Re Ernst & Young (2008) 383 B.R. 773 the status of foreign main proceeding was accorded to the receivers appointed by the court in respect of a company formed under the law of Canada. It had carried on business in fraud of investors in conjunction with a company incorporated in Colorado. The regulatory body for Colorado contended that the COMI of both companies was in Colorado because that was where the fraud occurred. The court concluded, in effect, that those facts were not sufficient to rebut the presumption. In Re Innua Canada Ltd (2009) WL 1025090 a receiver appointed by the court in Canada succeeded in obtaining recognition of the receivership in New Jersey in respect of the parent company registered in the Turks and Caicos Islands and its subsidiary incorporated in Canada. The registered offices were in the respective states of incorporation. The court concluded that the presumption applied in the case of the Canadian subsidiary and was rebutted in the case of the parent incorporated in the Turks and Caicos Islands.

Finally I should refer shortly to the decision of Lewison J in Re Lennox Holdings Ltd [2009] BCC 155. In that case an application had been made for administration orders in respect of a group of companies two of which had their registered offices in Spain. The question was whether the court in England had jurisdiction in the case of the two companies with registered offices in Spain. Lewison J considered that he had jurisdiction on the basis that to rebut the presumption it was necessary to show that the head office functions were performed in a state other than that in which its registered office was situate. He reached that conclusion on the basis of the advice of the Advocate-General in Eurofood who, he considered, had gone into the matter rather more fully than the court itself. Having had the benefit of adversarial argument in this case he concluded that the head office function test was wrong in law. In paragraph 61 of his judgment under appeal he said:

“Simply to look at the place where head office functions are actually carried out, without considering whether the location of those functions is ascertainable by third parties, is the wrong test. The way in which the ECJ approached recital (13) was not to apply the factual assumption underlying it but to apply its rationale. I accept this submission. To the extent that I considered and applied the head office functions test in Lennox Holdings on the basis accepted by Jacobs A-G in § 114, I now consider that I was wrong to do so. Pre-Eurofood decisions by English courts should no longer be followed in this respect. I accept [counsel for the Antiguan Liquidators] submission that COMI must be identified by reference to factors that are both objective and ascertainable by third parties. This, I think, coincides with the view expressed by Chadwick LJ (before the decision in Eurofood) in Shierson v Vlieland-Boddy [2005] 1 W.L.R. 3966 (§ 55):

"In making its determination the court must have regard to the need for the centre of main interests to be ascertainable by third parties; in particular, creditors and potential creditors. It is important, therefore, to have regard not only to what the debtor is doing but also to what he would be perceived to be doing by an objective observer." (Emphasis added)

Lewison J then considered what was meant by “ascertainable” and concluded in paragraph 62 that:

“...one of the important features is the perception of the objective observer. One important purpose of COMI is that it provides certainty and foreseeability for creditors of the company at the time they enter into a transaction. It would impose a quite unrealistic burden on them if every transaction had to be preceded by a set of inquiries before contract to establish where the underlying reality differed from the apparent facts.”

He rejected the submissions that either of the US cases to which I have referred led to a different conclusion or that if a company had been used as an engine of fraud some other test should be applied.

I have already quoted in paragraph 33 above the conclusion of Lewison J summarised in paragraph 70 of his judgment. He summarised the effect of those conclusions when returning to this issue in paragraph 98 quoted in paragraph 35 above. In their written argument counsel for the US Receiver submitted that Lewison J should have applied the head office functions test he had recognised in Re Lennox Holdings Ltd and not the objective and ascertainable test he applied in this case. They submit that though there are obvious similarities between Uncitral and the EC Regulation both in the definitions and the rebuttable presumptions there are differences too. They rely on the fact that the definition of foreign main proceeding in Uncitral is wider than that of ‘insolvency proceedings’ in the EC Regulation in that the former comprehends at least some types of receivership but the latter does not. They suggest that the EC Regulation is based on mutual trust between Member States, as indicated in recital 22, but Uncitral does not in that it does not depend on reciprocity. This is demonstrated by the fact that Uncitral is part of the law of England and Wales but not of Antigua and Barbuda. They point out that there is nothing in Uncitral comparable to recital 13 of the EC Regulation.

The US Receiver also contends that Lewison J was wrong in applying the ascertainability test to limit the facts which might be considered to those which are in the public domain or apparent to a typical third party doing business with the company. He contends that they should include those which would be ascertained on investigation. Finally he contends that the existence of fraud perpetrated by a group of companies or individuals means that the COMI of each individual or company involved is that of the fraudulent entity as a whole. As SIB was concerned in a massive Ponzi scheme managed and directed from the US the COMI of SIB and all the other companies and individuals involved should be recognised to be in the US wherever their registered offices or habitual residence might be. In oral argument counsel for the US Receiver accepted that ascertainability of a particular fact is a relevant consideration but not, he submitted, a necessary precondition. Likewise he explained that he did not contend that the existence of fraud constituted an exception to the general rule or changed the relevant test.

Counsel for the SFO did not enter into this controversy. His concern was that whichever proceeding was recognised and on whatever basis the restraint order originally granted on 7th April 2009 should take priority over them. Counsel for the Antiguan Liquidators supported the decision of Lewison J for the reasons he gave. In particular counsel contended that the judge was right to follow the decision of the ECJ in Eurofood and to apply the ascertainability test in preference to that of the head office functions test he had applied in Re Lennox Holdings Ltd.

The appropriate starting point for consideration of these submissions is the question whether Lewison J was right to follow Eurofood. In my view he was. The COMI test was first adopted in the European Convention on Insolvency Proceedings. In that context it was plain from the Virgós-Schmit Report para 75, quoted in paragraph 36 above, that the appropriate test depended on ascertainability by those who dealt with the debtor so that they should know which law would govern the debtor’s insolvency. There can be little doubt but that recital 13 of the EC Regulation was intended to reflect that rationale. The derivation of COMI in Uncitral and the various guides to its interpretation in that context show that it was intended that it should bear at least a similar meaning. Thus both the UN Session paper and the Uncitral Guide, both quoted in paragraph 37 above, expressly refer to the corresponding use of the phrase in the EC Convention. The EC Regulation is the successor of the European Convention.

The same expression used in different documents may bear different meanings because of their respective contexts. I can see nothing in the respective contexts of Uncitral and the EC Regulation to require different meanings to be given to the phrase COMI. In both of them the phrase is used to identify the proceeding which should take priority, in one form or another, over other similar proceedings taken in other jurisdictions. In both of them the concern is that persons dealing with the debtor should be able to know before insolvency intervenes which system of law would govern the eventual insolvency of their counterparty. Further as both Uncitral and the EC Regulation apply in England and Wales it is essential that each should be interpreted in a manner consistent with the other. It would be absurd if the COMI of a company with its registered office in, say, Spain which is being wound up both there and in the US should differ according to whether the court in England was applying Uncitral on an application by the US liquidators for recognition as a foreign main proceeding or the EC Regulation in deciding whether the court in England may entertain a petition to wind up the Spanish company here. It follows that if there is any difference in the test promulgated by the ECJ in Eurofood and that applied by the courts in the US then it is right that the court in England should apply the Eurofood test.

It is not strictly necessary to consider whether the US cases to which I have referred indicate any different test to that propounded in Eurofood. Lewison J considered that they did, see paragraph 67 of his judgment, but decided to follow Eurofood whether or not, strictly, it was binding on him. But the test, as formulated by the appellate court in re SPhinX Ltd, referred in terms to “objective factors ascertainable to third parties”, see quotation in paragraph 44 above. That is the same test. Whether or not it was correctly applied in the later cases to which I have referred is not for me to say. Accordingly I see nothing in the US cases to suggest any different conclusion to that dictated by Eurofood.

I have quoted the relevant passages from the judgment of ECJ in Eurofood in paragraphs 40 to 42 above. In my view it clearly established the following propositions:

I turn then to the second submission to which I referred in paragraph 34 above, namely, that on the basis of the evidence before him, Lewison J should have concluded that the presumption was rebutted. The judge’s conclusion was based on the facts he summarised in paragraphs 1, 11 to 31 and 97 of his judgment. He considered each of the 8 matters that counsel for the US Receiver drew specifically to his attention. He held in paragraph 99 that those matters even when taken together were not sufficient to rebut the presumption “reinforced as it is by other objective facts ascertainable to third parties”. Counsel for the US Receiver submitted that the judge reached a wrong conclusion and set out in an appendix to their written argument details of a number of areas in which it was alleged that the judge had given no or insufficient weight to certain facts. Counsel for the Antiguan Liquidators contended that the summary given in the appendix to the written argument of counsel for the US Receiver misstated the relevant evidence and that when correctly stated it did not support the submission made.

I have no hesitation in rejecting the US Receiver’s submission. Provided that he applied the right test, and for the reasons already given I believe that he did, the conclusion of the judge was a matter of fact for him. Moreover it was a multi-factorial conclusion of fact, such as was referred to by Lord Hoffmann in Designers Guild Ltd v Russell Williams (Textiles) Ltd [2003] 1 WLR 2416, 2423H-2424B. (see also Assicurazioni Generali SpA v Arab Insurance Group [2003] 1 WLR 577 para 16.) It is not suggested that there was no evidence to justify the conclusion of the judge or that his conclusion is plainly wrong. It follows that it is not open to this court to contradict the judge’s conclusion on the same evidence as was before him.

Accordingly I turn to the third submission summarised in paragraph 34 above, namely that the fresh evidence we permitted the US Receiver to adduce when taken together with the evidence before the judge does lead to the conclusion that the presumption has been rebutted. The fresh evidence is contained in or is exhibited to the witness statement of Robert Preston-Jones, the solicitor acting for the US Receiver, and comprises (1) the third witness statement of Karyl van Tassel made on 2nd July 2009, (2) the Willis Class Action and (3) the Davis Plea Agreement. I will deal with each in turn.

The witness statement of Karyl van Tassel was sent to Lewison J after he had sent a draft of his judgment to the legal representatives for the parties and just before he handed it down. There is exhibited to it what has been called ‘the Audit evidence’ and ‘the FSRC evidence’. The Audit evidence is to the effect that the auditor of SIB, C.A.S.Hewlett, was regularly paid bribes by or on behalf of Sir Allen Stanford. It is suggested that this fact undermines any reliance put upon the place where the accounts of SIB were audited. I can see that it might undermine any reliance placed on the accuracy of the audited accounts. It has no effect on the location where they were audited. Further the judge did not rely on the location of the audit otherwise than as reinforcing the presumption, see paragraph 97, arising from the location of the registered office of SIB. And even if he had this factor could not have been relevant to the rebuttal of the presumption because, obviously, it was not in the public domain or apparent to a typical third party doing business with SIB at any relevant time. In my view this evidence is plainly irrelevant to the question of the COMI of SIB.

Also annexed to the third witness statement of Karyl van Tassel is evidence indicating that the chief executive office of FSRC and the individual responsible for the appointment of the Antiguan Liquidators as receivers and for presenting the winding up petition in Antigua, Mr Leroy King, was also bribed by or on behalf of Sir Allen Stanford in order to give SIB ‘a clean bill of health’. This fact is said to undermine the reliance placed by Lewison J on the regulation in Antigua to which SIB was subject as an indication of the COMI of SIB. It seems to me that this evidence is also irrelevant. It does not establish that SIB was subject to regulation anywhere else, such bribes were secret and unascertainable and, in any event, the judge did not rely on the place of regulation otherwise than as supportive of the presumption.

The Willis Class action is one brought on 2nd July 2009 in the US courts by a group of holders of CDs issued by SIB against an insurer broker alleged to have given false assurances as to the safety and soundness of the Stanford group generally and of SIB’s CDs in particular. It is alleged, for example in paragraph 86 of the complaint, that SIB was held out to be a US based business guaranteed and insured at Lloyd’s. Accordingly it is suggested that the ‘public face’ of SIB to which Lewison referred was not that of an Antiguan bank. But none of the five exhibits attached to the complaint supports the allegation. None of them states that SIB was based in the US. By contrast one of them states that SIB was based in Antigua and another that it “is not a US bank [and so] not covered by the [Federal Deposit Insurance Company]”. In my view this evidence is of no assistance.

The Davis Plea Agreement is dated 27th August 2009 and sets out facts relevant to the fraud which James M. Davis admitted. It is relied on to support the Audit Evidence and the FSRC evidence and to demonstrate that SIB was a small part of a larger, fraudulent entity based in the US. But there is nothing in it to suggest that the COMI of SIB alone was not in Antigua. This evidence is irrelevant too.

I should also refer to three other documents exhibited to the witness statement of Mr Preston-Jones. The first is the indictment against Sir Allen Stanford and others on 18th June 2009 laid in the US District Court for the Southern District of Texas, Houston Division. This demonstrates the allegations made against the various defendants but does not prove them. The second is the second amended complaint made by the SEC against Sir Allen Stanford and others, but not SIB, in the US District Court for Northern Texas. I do not understand that this is said to do more than keep this court up to date. The third contains papers relating to proceedings for recognition brought by the Antiguan Liquidators and the US Receiver in Canada.

On 11th September 2009 Auclair J recognised the US Receiver but not the Antiguan Liquidators. There appear to have been two basic reasons. First, the judge looked for “the real and important connection” with SIB rather than the rebuttal in accordance with the Eurofood test of any presumption arising from the location of its registered office. Second, the court considered the conduct of the Antiguan Liquidators in removing the data on SIB’s server in Canada without the approval of the court to be such as to render them unsuitable for recognition in Canada. We were told that the order of Auclair J is under appeal. But the two reasons for the judge’s conclusions have no bearing on the proceedings here.

For all these reasons I conclude that none of the fresh evidence relied on by the US Receiver is of any relevance on this appeal. Indeed had its adduction been opposed I consider that it is obvious that we would not have given permission for it.

For all these reasons I conclude, in agreement with Lewison J, that:

The Proceeds of Crime Act 2002 makes provision in Part 2 for the Crown Court in England and Wales to make an order confiscating the proceeds of crime. That jurisdiction is supported by the jurisdiction conferred by ss 40 to 47 to make restraint orders to prevent dealings with certain property. Such a restraint order has the effects specified in s.58. The circumstances in which either type of order may be made and the persons against whom and the nature of the property which may be subjected to such orders are set out in detail. S.444 enables the provisions of the Act to be extended to deal with external requests or orders. An external request is a request by an overseas authority to prohibit dealing with relevant property which is identified in the request (s.447(1)). A relevant order may be for the recovery of specified property or a specified sum of money (s.447(2)). Property is “relevant” if there are reasonable grounds to believe that it may be needed to satisfy an external order which has been or which may be made (s.447(7)).

The power conferred by s.444 was exercised by The Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 SI No: 3181, to which I shall refer as ‘ERO’. Part 2 of ERO, comprising articles 6 to 55, gives effect to such orders in England and Wales. By Article 6 the Secretary of State to whom the external request is directed may refer it to, as in this case, the Director of the SFO. Article 6(5) entitles the relevant director to ask for further information from the overseas authority. Article 7 sets out the conditions to be satisfied if the Crown Court is to give effect to the external request. In this case it was the first condition set out in Article 7(2) namely that a criminal investigation had been started in the country from which the external request came and there was reasonable cause to believe that the alleged offender, i.e. SIB, had benefited from its criminal conduct. In that event Article 8 provides that the Crown Court:

“may make an order (“a restraint order”) prohibiting any specified person from dealing with relevant property which is identified in the external request and specified in the order.”

Such order may be subject to exceptions and cannot affect property subject to charges under five specified provisions.

Article 9 provides that an application for a restraint order may only be made by the Director of the SFO or other relevant prosecutor and may be made on an ex parte application to a judge in chambers. Article 10 entitles any person affected by the restraint order to apply to the Crown Court for the variation or discharge of that order and to appeal to the Court of Appeal from a refusal to do so. On such an appeal the Court of Appeal “may make such order as it believes is appropriate”. Article 11 makes hearsay evidence of any degree admissible in restraint proceedings.

Article 17 provides, so far as material to these appeals:

“(5)

If a court in which proceedings are pending in respect of any property is satisfied that a restraint order has been applied for or made in respect of the property, the court may either stay the proceedings or allow them to continue on any terms it thinks fit.

(6)

Before exercising any power conferred by paragraph (5), the court must give an opportunity to be heard to—

(a)

the relevant Director, and

(b)

any receiver appointed in respect of the property under article 15, 27 or 30.”

Much of the argument before us revolved around the provisions of Article 46(1)-(3), which effectively reproduce s.69(1)-(3) of the Act containing what is conventionally described as ‘the legislative steer’. They provide, so far as material to these appeals:

(1)

This article applies to -

(a)

the powers conferred on a court by this Part;

[(b)...]

(2)

The powers—

(a)

must be exercised with a view to the value for the time being of realisable property or specified property being made available (by the property's realisation) for satisfying an external order that has been or may be made against the defendant;

(b)

must be exercised, in a case where an external order has not been made, with a view to securing that there is no diminution in the value of the property identified in the external request;

[(c)....

(d)...]

(3)

Paragraph (2) has effect subject to the following rules—

(a)

the powers must be exercised with a view to allowing a person other than the defendant or a recipient of a tainted gift to retain or recover the value of any interest held by him;

[(b)....

(c).....]

Article 49(2) incorporates the definition of “free property” contained in s.82 of the Act. Article 49(3) incorporates the provisions in relation to property contained in s.84(2)(a) and (c) to (g) and s447(4) to (6) of the Act. Those provisions are in the following terms:

“82.

Free property

Property is free unless an order is in force in respect of it under any of these provisions–

(a)

section 27 of the Misuse of Drugs Act 1971 (c. 38) (forfeiture orders);

(b)

Article 11 of the Criminal Justice (Northern Ireland) Order 1994 (S.I. 1994/2795 (N.I. 15)) (deprivation orders);

(c)

Part 2 of the Proceeds of Crime (Scotland) Act 1995 (c. 43) (forfeiture of property used in crime);

(d)

section 143 of the Sentencing Act (deprivation orders);

(e)

section 23 or 111 of the Terrorism Act 2000 (c. 11) (forfeiture orders);

(f)

section 246, 266, 295(2) or 298(2) of this Act.”

“84 Property: General Provisions

[(1)....]

(2)

The following rules apply in relation to property–

(a)

property is held by a person if he holds an interest in it;

[(b)...]

(c)

property is transferred by one person to another if the first one transfers or grants an interest in it to the second;

(d)

references to property held by a person include references to property vested in his trustee in bankruptcy, permanent or interim trustee (within the meaning of the Bankruptcy (Scotland) Act 1985 (c. 66)) or liquidator;

(e)

references to an interest held by a person beneficially in property include references to an interest which would be held by him beneficially if the property were not so vested;

(f)

references to an interest, in relation to land in England and Wales or Northern Ireland, are to any legal estate or equitable interest or power;

(g)

references to an interest, in relation to land in Scotland, are to any estate, interest, servitude or other heritable right in or over land, including a heritable security;”

“447 Interpretation

[(1)....

(2)...

(3)...]

(4)

Property is all property wherever situated and includes–

(a)

money;

(b)

all forms of property, real or personal, heritable or moveable;

(c)

things in action and other intangible or incorporeal property.

(5)

Property is obtained by a person if he obtains an interest in it.

(6)

References to an interest, in relation to property other than land, include references to a right (including a right to possession).

[(7)-(12)]

I should also refer to Article 54(a) which provides:

“54.

In this Part “defendant”—

(a)

in relation to a restraint order means—

(i)

in a case in which the first condition in article 7 is satisfied, the alleged offender;

(ii)

in a case in which the second condition in article 7 is satisfied, the person against whom proceedings for an offence have been started in a country outside the United Kingdom (whether or not he has been convicted);”

As I indicated in paragraph 1(8) and (9) above the restraint order in this case was sought pursuant to the Letter of Request dated 6th April 2009 sent by the US Department of Justice to the Central Authority of the United Kingdom and duly referred to the SFO. The Letter of Request stated that SIB amongst others was being investigated by various US Federal law enforcement agencies for violations of US Criminal laws that prohibit wire, mail and securities fraud and money laundering. It stated that the evidence collected to date indicated that SIB amongst others had transferred the proceeds of such violations to bank accounts in the UK and elsewhere and were liable to confiscation. The letter went on to indicate that SIB had been used as an instrument of fraud by the individuals being investigated, that the fraud had generated $7.2bn of investments and that some $110m had been transferred to accounts in the UK. The Letter of Request then asked the UK authorities to freeze and restrain all proceeds of the alleged crimes so that the US authorities might provide restitution to the world-wide victims of the crimes. It gave notice that further requests might be made later. It continued:

“Time Constraints

US authorities request the UK authorities file an application to freeze or restrain the identified criminal assets requested by close of business on Tuesday 7th April 2009. Details of such need will be provided on request.”

The Letter of Request also sought confidentiality so as not to prejudice the ongoing enquiries in the US.

The letter continues with a summary of the facts relied on for the allegation that the individuals “acting through SIB (an off-shore bank domiciled in Antigua) and through a network of...financial advisers” executed the massive fraud alleged. It describes the US proceedings to date including the appointment of the US Receiver and the injunction granted by the District Court for the Northern District of Texas. It sets out the tracing attempts made by the US authorities and the discovery of three accounts in the name of SIB held with Credit Suisse, four with HSBC and one with Longley Asset Management UK in London. After setting out the offences alleged to have been committed, details of the persons and entities alleged to have been involved, including SIB, the letter concludes with a request to freeze any and all assets located in the UK except those held in the names of Stanford Bank of Panama and Bank of Antigua with Credit Suisse or HSBC in London because:

“The United States needs this particular freeze or restraint in order to ensure that these assets are legally secured for criminal or quasi-criminal confiscation efforts and to protect those assets from potential dissipation by other persons to the possible prejudice of the real victims of the Stanford fraud and money laundering conspiracies.”

The letter continues with details of five accounts in the name of SIB with Credit Suisse in London and four at HSBC and the likelihood of further requests for confiscation and other orders. It concluded with the statement:

“Ultimately, all the confiscated proceeds will be returned to all the world-wide victims on a pro rata pursuant to US law, and for these assets, the relevant UK laws.”

The Letter of Request was dealt with in the SFO by an employed barrister, Mr Tanvir Tehal. He made a witness statement to which he exhibited the Letter of Request. In paragraph 3 he stated:

“I do not have personal knowledge of this case and rely entirely on information contained in [the Letter of Request]”.

He then dealt with the formal requirements for the making of a restraint order on the incorrect basis that criminal proceedings in the US had been commenced against SIB. In paragraph 8 he said:

“To the best of my knowledge there is a civil freezing order made by the High Court in London on 6th April 2009 against those assets which are the subject of this witness statement and the restraint order sought. The reason for this restraint order is that it is believed that the civil freezing order will be discharged shortly.”

He then referred to the risk of dissipation, the orders sought and who the orders should be served on and how.

As recorded in paragraph 1(9) above the restraint order was made by HH Judge Kramer QC on an ex parte application made on 7th April 2009. The transcript of the proceedings indicates that the judge was told that there was an ongoing investigation in the US into SIB and the Stanford Group, that the restraint order was needed in order to preserve assets to answer a confiscation order in due course and that the US authorities did not wish the contents of the witness statement to be disclosed. The order and the evidence in support of it were served on SIB as described in paragraph 1(9) above. On 17th July 2009 the application for its variation was made as indicated in paragraph 1(15) above and was disposed of by HH Judge Kramer QC on 29th July 2009 as stated in paragraph 1(17) above. Two days before Judge Kramer gave judgment Mr Addy J. de Kluiver, a senior trial attorney in the US Department of Justice, made a further witness statement in answer to questions put to him by counsel for the SFO.

The first question was why the SFO was not informed in the Letter of Request of the appointment of the Antiguan Liquidators. The answer is in these terms:

“The existence vel non of an Antiguan receiver at the time of the letter of request had no relevance to our criminal case, so we are not sure why we would be under any obligation to disclose that fact. Moreover at the time we sent out the letter of request, the Antiguan receiver, while appointed by the FSRC, had not been legally recognised as such by any court. At the time, the only receiver that had been recognised by any court was the US Receiver, and the only orders obtained regarding assets were the US orders of restraint obtained by the SEC that are referenced in the Letter of Request.”

The second and third questions sought information as to when Mr de Kluiver first knew that SIB was not to be a defendant to the criminal proceedings in the US and whether the assets of SIB in London were liable to forfeiture or confiscation by the US authorities. He replied that by 6th April 2009 no final decision whether to prosecute SIB had been taken but that SIB could be added to the indictment at any time. Further SIB’s assets in London were liable to forfeiture because SIB was the alter ego of the individual defendants and an instrumentality in money laundering.

By the fourth question the deponent was asked to comment on the allegation made in court that:

“The US authorities have knowingly attempted to frustrate the work of the Antiguan Liquidator by not disclosing the appointment of the liquidator in the Letter of request on which the SFO acted and obtained the Restraint Order?”

The response was as follows:

“See first response to question (a). The US Receiver who has been vigorously opposing the Antiguan receiver is not acting in concert with the Department of Justice. The US Receiver has an obligation to protect the victims’ interests that arise under US laws separate and apart from our criminal powers and he answers only to the judge who appoints him. The Department of Justice does not control the actions of the Judge the US Receiver reports to. The criminal powers that the Department of Justice exercises are completely unrelated to the US Receiver’s actions. At no time did lawyers for the Antiguan receiver contact the criminal prosecutors and inform us of their plans of going after all assets in all countries regardless of the costs and duplication of effort. They still have not contacted us and the criminal indictment identifying which assets we intend to forfeit has been in the public domain for over one month now.”

In his judgment delivered on 29th July 2009 HH Judge Kramer QC set out the facts and described the application before him as one to discharge the order he had made on the 7th April for material misrepresentation or non-disclosure and alternatively for its variation. The material misrepresentations or non-disclosure alleged related to

The judge then set out the relevant provisions of ERO and posed four questions, namely was there material (1) misrepresentation or (2) non-disclosure as a result of which the order was obtained? Even if there was (3) should the order be discharged? In any event (4) should the order be varied as requested? I pause to observe that the first two questions posed by the judge were the wrong ones. The question is not whether the order was obtained as a result of the misrepresentation or non-disclosure but whether the information not disclosed was material to be taken into account in deciding whether or not to grant relief without notice and if so on what terms, see e.g. Dormeuil Freres SA v Nicolian Ltd [1988] 1 WLR 1362, 1368.

The judge then answered each of the four questions he had posed for himself. With regard to the first question he concluded:

“It is true that in paragraph 5 of his witness statement Mr Tehal misrepresented the position [sc. SIB was a defendant to the criminal proceedings] but I accept the submission that that was an innocent error made in haste and not a material one.”

Given that the judge had asked himself the wrong question the conclusion that the misrepresentation was not material cannot be correct.

In relation to question 2 the judge concluded that there was non-disclosure of the Antiguan Liquidators (which must have been a reference to the Antiguan receiver-managers and the liquidation proceedings) as at that date but he accepted the argument set out in the skeleton argument of counsel for SFO that, in effect, such non-disclosure made no difference to the result. But that submission specifically accepted that the existence of the Antiguan Liquidators was material to the exercise of the court’s discretion. In fact, of course, on 7th April 2009 the individuals who were subsequently appointed liquidators were in office as court appointed receiver-managers and the winding-up proceedings had been commenced. Thus, not only did the judge not ask himself the right question but his answer to the wrong question demonstrates that the answer to the right question was affirmative. The judge did not deal at all with the remaining allegations of non-disclosure I have summarised in paragraph 82(2) and (3) above.

The judge then considered the third question. He reminded himself of the purpose of a restraint order and the duty of the court to act fairly. He referred to ERO Article 46(2)(b) and adopted the reasoning of Laws and Longmore LJJ in Jennings v Crown Prosecution Service [2005] EWCA Civ 746 at paras 52 to 56 and 64 as to the balance to be struck between the public interest and the requirement that a party, including an emanation of the State, must act in strict compliance with the rules and standards as to disclosure to be made on an ex parte application. In the context of the instant case he saw no reason to discharge the restraint order. For similar reasons he declined to vary the order. In conclusion he added:

“Even if I am wrong in my answers to the four questions, are there now grounds for making the order sought by SFO? I am satisfied that as of today’s date, there being no freezing order in place in the Queen’s Bench Division, the order can and should still be made by this court. The position is that the funds in question were transferred to this jurisdiction by the individual defendants in the name of SIB, prima facie, fraudulently. Accordingly, it is, in my judgment, in the public interest to make the order and, were it necessary for me to do so, I would.”

In these circumstances counsel for the Antiguan Liquidators submits that the restraint order should be set aside for the following summary reasons:

I have no doubt that there was substantial misrepresentation and non-disclosure of material matters when the ex parte application was made to HH Judge Kramer QC. First, he was not told of the position in Antigua. By 7th April 2009 the receiver-managers had been confirmed in office by the High Court of Antigua and Barbuda (paragraph 1(3) above), they had reported to the court that SIB was insolvent and should be put into liquidation (paragraph 1(4) above) and two petitions to wind up SIB had been presented to the High Court in Antigua and Barbuda (paragraphs 1(3)-1(5) above) and were about to be heard. That these facts were known to the DoJ or would have been if the most elementary enquiries had been made of the High Court in Antigua is clearly established by the witness statement of Addy J. de Kluiver quoted in paragraph 79 above.

Second, the judge was not told about the actions of the SEC in obtaining a freezing order over the assets of SIB from Jack J on 27th March 2009. It is curious that Mr Tehal stated in paragraph 3 of his witness statement that he had no knowledge of the case except what the Letter of Request had informed him yet in paragraph 8 of the same witness statement he mentioned the High Court freezing order notwithstanding that the Letter of Request does not. So it would appear that Mr Tehal must have been told of the freezing order by someone; but what was the basis for his statement in paragraph 8 that “it is believed that the civil freezing order is about to be discharged”? Although it was initially granted on 27th March 2009 until 6th April 2009 there was every likelihood that it would be continued from time to time until a full inter partes hearing could be held, as indeed it was. Had proper enquiries been made the judge would have been told, as the fact was, that the freezing order had, on 6th April, been continued over 27th April 2009.

Third, although the Letter of Request referred to the appointment of a receiver in respect of SIB and the grant of temporary injunctions by the US District Court for the Northern District of Texas, such appointment was not referred to in the body of Mr Tehal’s witness statement as it should have been, see National Bank of Sharjah v Dellbourg [1993] 2 Bank L.R. 109. No reference was made to the extensive powers granted to the US Receiver or of the fact that under the order appointing him the US court had assumed exclusive jurisdiction and taken possession of all the assets of SIB wherever located. It may be that the DoJ was not acting in concert with the SEC or the US Receiver, as Mr de Kluiver states in his witness statement made on 27th July 2009, but there is no suggestion that information available to the SEC or US Receiver would not have been made freely available to the DoJ had they asked.

Fourth, HH Judge Kramer QC was not told of the correspondence between the English solicitors for the Antiguan receiver-managers and the various financial institutions holding assets of SIB. For instance on 27th February 2009 the solicitors notified HSBC, Credit Suisse, Marex Financial and Longley Asset Management of the appointment of both the Antiguan receiver-managers and the US Receiver. In practical terms none of those financial institutions would have accepted instructions on behalf of SIB from any of the former officers of SIB. This correspondence was known to the US Receiver and should have been known to the DoJ. The judge was not told of the substantial publicity given to the troubled Stanford Group either but it is clear from the transcript of the hearing before him on 7th April 2009 that he was well aware of it.

Fifth, the affidavit of Mr Tehal was misleading and incorrect in stating in paragraph 5 that proceedings had been commenced in the US thereby satisfying the second condition specified in ERO Article 7(3). In its context that must have been a reference to criminal proceedings but none had been commenced by 7th April 2009. This mistake is not of itself of great significance because the condition specified in Article 7(2) to the effect that there was an ongoing criminal investigation was satisfied and the judge was told that this was the basis of the application before him.

Taken together the matters which should have been disclosed but were not undermined the allegation made in both the Letter of Request and the witness statement of Mr Tehal that there was an immediate risk of dissipation of the assets of SIB such as to warrant the grant of a restraint order unlimited in point of time on an ex parte application. The judge could not have been criticised had these matters been disclosed, as they should have been, and he had declined to make any order on an ex parte application. The obvious course would have been to see if the application for the restraint order could be heard by the same judge as would hear the application for the renewal of the freezing order on 27th April. At the most he might have granted a restraint order for a limited period so as to hold the position until a proper inter partes hearing could be arranged. For these reasons I conclude that not only did HH Judge Kramer QC ask himself the wrong questions but he gave the wrong answer to them. The effect or result of the non-disclosure was the grant of an order unlimited in point of time which, on proper disclosure, could not have been justified.

In these circumstances the public interest to which Laws LJ referred in Jennings v CPS [2006] 1 WLR 182, 198 para 56 did not require the court to make the order HH Judge Kramer QC made on 7th April 2009 and this court is entitled in its discretion to set aside the restraint order so that the SFO may be deprived of any advantage it obtained by means of the non-disclosure, see Brinks Mat Ltd v Elcombe [1988] 1 WLR 1350, 1357 and to mark its disapproval of the conduct of SFO/DoJ [ibid p.1359]. In addition it has the power conferred by ERO Article 10(3) to make such order as it believes is appropriate. What advantage may have been obtained and what is appropriate now depends on the other contentions of the Antiguan Liquidators summarised in paragraph 87 above. I approach them on the assumption that no restraint order had been made on 7th April 2009.

As recorded in paragraph 1(10) above the order for the winding up of SIB in Antigua also appointed the then receiver-managers as joint liquidators and vested all SIB’s property of whatever nature and wherever situated in them. As the law of Antigua and Barbuda was the law of both the place of incorporation of SIB and of its COMI the winding up order had the effect under the law of England and Wales of vesting the moveables of SIB in the Antiguan Liquidators even before recognition under Uncitral of the Antiguan Liquidation as the foreign main proceeding, see Dicey, Morris and Collins 14th Ed. rules 195(2) and 197. Given my assumption as stated in paragraph 94 above it is unnecessary to consider the application or effect of Galbraith v Grimshaw [1910] AC 508.

On 29th July 2009 Judge Kramer decided that even if the restraint order were then set aside the proper exercise of the discretion of the court would have been to grant it afresh. Counsel for the Antiguan Liquidators submits that the judge was wrong. They submit that as at 29th July and on the assumption the restraint order had been set aside the proper exercise of the court’s discretion would have been to refuse to grant a restraint order. They contend that because of the terms and effect of the winding up order made in Antigua Article 46(3)(a) applied and required the refusal of a restraint order so that the Antiguan Liquidators might retain or recover the assets of SIB vested in them.

It was accepted that as at 29th July 2009 at least one of the conditions imposed by ERO Article 7 was satisfied. The evidence indicated that the property sought to be restrained was relevant property within the definition contained in s.447(7). Proceedings for an offence had been commenced in the US against, amongst others, Sir Allen Stanford and there was reasonable cause to believe that he had benefited from his criminal conduct. In any event the investigation as against SIB had not, so far as I am aware, been concluded.

On an application for a restraint order made on 29th July the court would have to exercise the discretion given by Article 8(1) in accordance with the legislative steers given in Article 46(1)-(3). The submission summarised in paragraph 96 above rests on the proposition that the Antiguan Liquidators have an interest in the bank deposits referred to in the Letter of Request and are “persons other than the defendant” for the purposes of Article 46(3)(a). For the reasons already given I would accept that they have an interest in those deposits but I do not accept that they are persons other than the defendant. S.84(2)(d), quoted in paragraph 73 above, is applicable in accordance with ERO Article 49(3). Given that it is made applicable to external orders and requests the word “liquidator” must, in my view, extend to a liquidator appointed under the law of the place of the company’s incorporation or COMI. The effect is that references to property held by SIB include references to property vested in the Antiguan Liquidators.

Arden LJ has raised the possibility that the unsecured creditors of SIB, both individually and collectively, hold interests in the assets of SIB for the purposes of Article 46, that the court should have those interests in mind when exercising its discretion whether or not to grant a restraint order and should insert a proviso to any such order such that those interests are preserved. As Hughes LJ points out no party before us and no unsecured creditor contended that the unsecured creditors held such an interest. Accordingly it is not a point which arises for decision on this appeal. My provisional view is the same as that of Hughes LJ. Further, I agree with him that even if unsecured creditors might have such an interest it would not be either necessary or appropriate to insert any proviso into any restraint order we may make. If an unsecured creditor seeks to establish such an interest then he must do so in the Crown Court, not in the Court of Appeal on the final disposition of these appeals.

It follows that Article 46(3)(a) would not have applied to an application for a restraint order made on 29th July 2009 so the discretion afforded by Article 8(1) would have to be exercised in accordance with the legislative steer given in Article 46(2)(b), namely “with a view to securing that there is no diminution in the value of the property”. In my view this consideration would require the grant of a restraint order on 29th July 2009 because by then the freezing order originally obtained by the SEC had been discharged by Jack J but also to stop for the time being the risk of the diminution in the value of the deposits held with the specified banks in the name of SIB in paying the costs of either the Antiguan Liquidation or the US Receivership.

But the question remains whether to ensure that the advantage obtained by the grant of the restraint order on 7th April 2009 without full disclosure requires merely an order that SFO pay the costs to date or an order discharging the original restraint order with costs and granting it afresh as of 29th July 2009. I find it hard to imagine what advantage there could have been. Nevertheless it seems to me that in principle this court should make the latter order so that any advantage which might have arisen is denied to SFO/DoJ. I would reserve for further argument the question whether those costs should be assessed on an indemnity basis or only on the standard basis.

I summarise my conclusions on the appeal of the Antiguan Liquidators from the order of HH Judge Kramer QC made on 29th July 2009 as follows:

As I indicated in paragraph 3 above it is necessary to have regard to the conclusions on each appeal and the effect they may have on each other. Only then can the terms of the final orders to be made on each of them be determined. Each of the Antiguan Liquidators, the US Receiver and the SFO/DoJ contended that it was better placed than either of the other two to administer the world-wide assets of SIB and recompense the victims of the frauds perpetrated by the individuals charged in the US through the instrumentality of SIB. The Antiguan Liquidators contend that they are the representatives of SIB duly appointed under the law of the place of its incorporation or its COMI and well able to collect and administer all the assets of SIB and distribute them amongst all the creditors. The US Receiver contends that he is better able to do so amongst all the victims of the fraud and not only those who are creditors of SIB. The SFO/DoJ submit that they can carry out the same functions as the US Receiver but at public expense rather than at the expense of the victims or creditors.

None of these solutions is ideal in that the US Receiver and the SFO/DoJ would not, seemingly, compensate creditors of SIB who are not victims of the frauds but the Antiguan Liquidators would not directly compensate victims of the frauds who were not also creditors of SIB. On the other hand there will be a good deal more for the victims if the administration of the assets and their distribution is entrusted to the SFO/DoJ for that should avoid most of the very substantial costs being incurred by both the Antiguan Liquidators and the US Receiver. Further the court is, in my view, entitled to place reliance on the passage in the Letter of Request I have quoted at the end of paragraph 76 above confirmed by the statements in the witness statement of Mr Addy J.de Kluiver made on 29th October 2009 to the effect that the assets of SIB in England will be distributed to the victims pro rata and pursuant to the relevant UK laws. In principle, therefore, I see no reason not to make the restraint order as of 29th July 2009 so as to confer administrative priority on the SFO/DoJ.

But it does not follow from this conclusion that the order recognising the Antiguan Liquidation as the foreign main proceeding should be withheld pursuant to ERO Article 17(4). Not only is Uncitral Article 17 mandatory but the exercise of the jurisdiction conferred by ERO for making forfeiture and other orders requires a representative of SIB authorised to consider and, if thought fit, oppose subsequent applications of SFO/DoJ for confiscation or other orders. Prima facie the jurisdiction conferred by Article 20(2)-(6) of Uncitral is wide enough to enable this court to tailor the effect of the recognition order and the powers of the Antiguan Liquidators so as to confer priority of administration of the assets of SIB on SFO/DoJ. Further it is for consideration whether the provisions of Article 22 of Uncitral can be used so as to provide some protection for creditors of SIB who are not also victims of the fraud. I understood it to have been agreed at the hearing that we should allow further argument on what powers should be conferred on the Antiguan Liquidators in the light of all our conclusions. Accordingly I would, in addition to the specific matters to which I have already referred:

Were it not for the making of a winding up against SIB on 15 April 2009, I would have no hesitation about agreeing with the Chancellor that the order of HHJ Kramer QC dated 7 April 2009, and continued by him on 29 July 2009, should be (a) discharged by this Court by reason of material non-disclosure and (b) re-imposed with effect from 29 July 2009. However, I respectfully differ from him over the interests which a restraint order may affect. The unsecured creditors of SIB arguably became interested in the assets of SIB when the order for its winding up was made, and arguably any restraint order must be made subject to their interests. The parties should be given the opportunity to make submissions on these questions as they have not yet been fully argued, and their resolution may affect the issue whether the restraint order of 7 April 2009 should be discharged and whether, and, if so, on what terms, it should be re-imposed. If either of the parties wishes to argue them, they cannot simply be left “for another day”.

The issues arising out of the making of the restraint order on 7 April 2009 are the correct starting point for resolving these appeals. However, on the issues arising out of the matters heard by Lewison J, in substantial agreement with the Chancellor, I consider that Lewison J came to the right conclusion on the questions that were decided by him in his careful judgment dated 3 July 2009.

I am indebted to the Chancellor for his clear and comprehensive judgment, which will greatly shorten my task. I also adopt his description of the background and the definitions contained in his judgment.

The points which I make in this judgment will be organised under the following headings:

THE MATERIALITY OF THE NON-DISCLOSURE BY THE SFO PRIOR TO THE MAKING BY HHJ KRAMER QC OF THE RESTRAINT ORDER DATED 7 APRIL 2009

I agree with the judgment of the Chancellor on this issue (paragraphs 88 to 94). In my judgment, there has, even now, been no frank explanation of exactly how much the DoJ knew as at 6 April 2009 (when the LOR was issued) about the appointment of the Antiguan receivers on 26 February 2009, or the presentation by the Financial Services Regulatory Commission of Antigua and Barbuda (“FSRC”) of a petition for the winding up of SIB or of the other winding up petition mentioned by the Chancellor. These petitions were both relevant at 7 April 2009, though the latter, which was presented by a creditor, was opposed, and was dismissed by the Antiguan court on 15 April 2009. Nor has there been any satisfactory explanation of the reasons why HHJ Kramer QC was told that the application was required to be made so urgently. It is said by Mr Mitchell QC that there was a risk of flight by individual defendants but Mr Kovalevsky QC threw doubt on this in fact and in any event this was really a reason for confidentiality. Even now there is no explanation why more accurate information about the freezing orders obtained in the High Court in London was not available for the application to HHJ Kramer QC. I note that the hearing in Antigua of the winding up petition of the FSRC took place in the same week as the application was first made to HHJ Kramer QC in London.

In my judgment, the petitions for the winding up of SIB ought to have been disclosed to HHJ Kramer QC because, if an order was made, a liquidator would be appointed with power to collect the assets, thus reducing the risk of dissipation, and also because it was reasonably arguable that on the making of a winding up order the unsecured creditors would acquire interests for the purposes of Article 46(3)(a) ERO. The petitions, it may be noted, had been presented on 9 and 24 March 2009 and so were clearly not presented to pre-empt the restraint order.

In my judgment, had there been proper disclosure of in particular the Antiguan proceedings and those before Jack J, there would have been no need to make a restraint order on 7 April 2009, and such an order should not then have been made. Even a temporary order was unnecessary, though it could have been made on strict terms as to immediate service on SIB and with liberty for SIB to apply to discharge it on very short notice. Mr Mitchell sought to meet these difficulties by submitting both orally and in writing that, if told of the winding up petition, HHJ Kramer QC might have regarded the threat of the appointment of the liquidators as a threat of dissipation in itself in view of the enormous costs which their appointment would generate. That would not by itself have justified the making of a restraint order without notice. It would have been a wholly innovative and unprecedented application on which the court would need submissions from both parties. There would be no risk of dissipation in the meantime; thus the reason suggested by Mr Mitchell for making the application would without more be an attempt to use the court’s processes to steal a march on the prospective liquidators by removing assets which they would on appointment be entitled to control. The right course would be to obtain an order for short service on SIB.

The only point of difference between the Chancellor and Hughes LJ on non-disclosure is on the Dellbourg point, by which I mean the point that information about the US Receiver should have been in the witness statement placed before HHJ Kramer QC on the application for a restraint order, rather than simply in the letter of request (LOR). I agree with the Chancellor for the reasons he gives. As the Chancellor explains, the information in the LOR about the US Receiver was inadequate. There was no reference to his power to take possession of the assets of SIB. If the exercise of putting the material information into the witness statement had been performed, it is more likely that proper thought would have been given to why information about the US Receiver was material to the application for a restraint order and what then had to be disclosed. That supports the wisdom of requiring disclosure to be made in the statement.

THE EFFECT ON THE RESTRAINT ORDER DATED 7 APRIL 2009 OF THE NON-DISCLOSURE BY THE SFO: SHOULD THE ORDER HAVE BEEN DISCHARGED BY HHJ KRAMER QC? SHOULD THIS COURT NOW MAKE A NEW RESTRAINT ORDER?

For the reasons given by the Chancellor, I agree that, certainly had there been no winding up order on 15 April 2009, the restraint order made on 7 April 2009 should have been discharged in July 2009. I agree with the Chancellor that, because of the seriousness of the non-disclosure, the restraint order has to be discharged. As explained, I consider that there is a continuing failure to make proper disclosure of the DoJ/SFO’s knowledge as at 7 April 2009 of the events and proceedings then unfolding in Antigua and of the reason for urgency. I bear in mind, in accordance with what this Court said in Jennings v CPS [2005] EWCA Civ 746 at [55] to [57], the fact that the application was made in the public interest. However, there was in fact no real risk of dissipation on 7 April 2009. Mr Mitchell did not suggest that the sanction of discharge of a restraint order was excluded by Article 46 or any other article of ERO and in the light of Jennings such an argument may not be open to him in this court in any event.

I also agree that this Court should in principle impose a new restraint order. Article 46(2)(b) ERO (set out below) specifically requires the court to exercise its powers to make a restraint order. This particular provision is more than a mere steer. It is, in effect, a direction that a restraint order should be made and maintained in force at all times. Webber v Webber [2007] 2 FLR 116 at [42], on which the Antiguan Liquidators relied, does not assist as that was concerned with two apparently conflicting domestic statutory schemes for dealing with the assets sought to be restrained. There is no reason why a new restraint order, if imposed, should not take effect from 29 July 2009 in replacement for that discharged for material non-disclosure. There would be no point in discharging the original restraint order and re-imposing it with effect from 7 April 2009.

If some third party had acquired an interest in the property restrained after the date of the restraint order imposed on that date, then, in agreement with Hughes LJ, I consider that that is a factor that would have had to be considered in deciding whether the restraint order should be discharged. It follows that it is reasonably arguable that, if the creditors of SIB now have an interest in the assets of SIB which would be overridden by a restraint order, or which they can assert under Article 46(3)(a) ERO, the court, when deciding whether to discharge or re-impose a restraint order, have to determine whether such interest existed in law and, if it did, take it into account in its decision whether to discharge the restraint order on the grounds of non-disclosure.

I note, though it is a separate matter, that, even if the creditors have an interest in the assets of SIB, it is still possible that some pre-existing interest of individual victims of the fraud will trump them, but no such interest has yet been asserted by them.

If the issue of the nature of the creditors’ interest, if any, in SIB’s assets is not resolved before any final decision is taken on whether to discharge the restraint order the following situation may arise. Suppose that the restraint order dated 7 April 2009 is discharged and that this court makes a new restraint order with effect from 29 July 2009. Suppose further that at a later date it is determined that the creditors have an interest in the assets the subject to the restraint order for the purposes of Article 46(3)(a) by virtue of only of the order for the winding up of SIB on 15 April 2009. Suppose further that in that event the SFO wishes to argue that, notwithstanding the material non-disclosure found by this court, the restraint order dated 7 April 2009 should not to be discharged because the interest of the creditors would then take precedence and that interest only arose after the original restraint order was made. Such an argument might be founded upon the terms of Article 46 (2). (I would add that if they wish to take this course they might well be required to give fuller information about the application for that order than they have done to date). They will not be able to advance that argument if by then the order of 7 April 2009 has already been discharged. The clock cannot then be turned back. Put another way, the question whether the creditors have any interest in the assets of SIB for the purposes of article 46(3)(a) is a logically prior issue which should, if it is reasonably arguable and the point is one which the parties wish to argue, be decided first. To hear more argument would also enable the Antiguan Liquidators to amplify the argument foreshadowed in their skeleton argument (as explained below) and, if successful, to achieve the release of substantial liquid funds which they say are urgently needed for the purposes of the liquidation. If the parties decide not to argue the point, they will have to accept any consequences that flow from such waiver.

The restraint order dated 7 April 2009 was not served on SIB until 27 April 2009. I infer from this that the liquidators did not know about it until then. The winding up order was therefore made in ignorance of the restraint order and not to pre-empt it.

EFFECT FOR THE PURPOSES OF ARTICLE 46(3)(A) ERO OF THE WINDING UP ON SIB ON 15 APRIL 2009

It is clear that ERO does not protect any interest of the defendant. But it does clearly require protection to be given to the interests of other persons: see Article 46(3)(a) ERO, which is considered in more detail below.

As a matter of law, the liquidators have two capacities. First, they are the agents of SIB. Secondly they are trustees for the unsecured creditors (see below and in the Annex to this judgment). However, their only interest in the assets of SIB (subject to any lien for their costs and remuneration, which has not been raised) is as trustees: they have no other interest as unsecured creditors.

In their written argument, the liquidators stated that the position in the winding up of SIB in Antigua is comparable to that in English law, namely that on winding up a trust arises over the company's assets for the benefit of all creditors pursuant to the statutory winding up scheme. At paragraph [68] of their skeleton argument, they submitted that the legislative steer in Article 46 (3)(a) requires the court to exercise its powers with a view to allowing certain persons, who have an interest in the assets, other than the defendants and the recipient of tainted gifts, to retain the value of their interests. A footnote states that those persons in this case are the liquidators in whom SIB's assets are vested and the creditors on whose behalf liquidators hold SIB's assets on trust. Again, at paragraph [88] of their skeleton argument under a cross heading “Article 46 (3)(a)”, the liquidators submitted that:

“In this case the legislative steer must in any event give way to the Liquidators (and SIB's creditors') interest in the restrained assets:

…

(2)

Article 46 (3)(a) is operative because neither the liquidator nor SIB's creditors are defendants or the recipients of a tainted gift within the meaning of article 46 (3)(a).

(3)

The assets within this jurisdiction have since their appointment on 15 April 2009 vested in, and been held for SIB’s creditors on trust by, the Liquidators…”

However, no submissions in amplification of these written submissions were made orally, and accordingly the SFO and US Receiver did not make submissions thereon. According to my notes of the hearing, in the course of argument by Mr Kovalevsky, I interposed to suggest that the winding up of SIB might have divested SIB of the beneficial interest of its assets, but this point was not taken up. The argument of the liquidators was that the assets were vested in the liquidators and that the liquidators were different persons from SIB. But Mr Kovalevsky had no real answer to the s 84(2)(d) point on this.

The position of the liquidators is confirmed in a recent email to the court in which counsel for the liquidators observe: “It is not strictly accurate, however, to say that the creditors’ interest is separate from the interest of the Liquidators, but rather that their interest arises under the same statutory trust of SIB’s assets of which the Liquidators are the trustees.” Thus the liquidators have not focused on the interests of the creditors as such.

In all the circumstances, this Court cannot resolve the question whether unsecured creditors have any interest which this Court should protect under Article 46(3)(a). Counsel for the SFO in a recent e-mail to the court described the argument that “unsecured creditors hold any interest in the assets of SIB separate and additional to any interest therein held by the liquidators” as “untenable”. In my judgment, for the reasons given below, that submission is wrong, and the question whether they have such an interest is properly arguable, and in the events which have happened that question can be raised even though it was not raised before HHJ Kramer QC or fully argued on this appeal. As it has not been fully argued, I have reached no concluded view on it.

I propose to deal with this point in these stages: (a) the basic statutory scheme for domestic restraint orders; (b) whether the scheme is different in its effect in relation to external restraint orders; (c) the significance of s 84(2)(d) POCA, and (d) the effect of this conclusion on the obligation imposed by the court under Article 46(3)(a) ERO.

This interaction of insolvency law and the proceeds of crime legislation is a matter of some difficulty and importance. Of course, in some legislation, Parliament treats a company as if it were no more than its shareholders. The statutory duties of auditors, for instance, are owed to the company in the interests only of its shareholders and not those of its creditors: Stone & Rolls Ltd (in liquidation) v Moore Stephens [2009] UKHL 39. But POCA contains express provisions dealing with the position of a company in liquidation, and contemplates that the order may affect the course of the liquidation. When I refer to an “insolvency proceeding”, I mean either a bankruptcy or a liquidation, whether voluntary or compulsory.

I start with the provisions of POCA where the related criminal proceedings are within England and Wales and the insolvency is governed by the Insolvency Act 1986. The interaction between insolvency law and POCA is described thus in the explanatory notes for POCA:

“Section 417: Modifications of the 1986 Act

559.

The purpose of Part 9 is to explain what happens when the same property is subject both to criminal confiscation legislation and to insolvency legislation. The Part is United Kingdom-wide and much of it is based on earlier legislation. Sections 417-419 deal with the interaction of the insolvency legislation of England and Wales with the confiscation legislation of England and Wales, Scotland and Northern Ireland ("the 1986 Act" means the Insolvency Act 1986 in this context). This is necessary because both the criminal confiscation legislation and the insolvency legislation throughout the United Kingdom affect property in other jurisdictions.

560.

The basic rule expressed by section 417 is that, if at the time a person is adjudged bankrupt under the 1986 Act a restraint order has previously been made or a receiver or administrator has previously been appointed in respect of any of his property, that property is excluded from his estate for the purpose of the bankruptcy. So any of that property first goes to satisfy the confiscation order, rather than being dispersed to creditors. The legislation is designed to prevent defendants from attempting to use the insolvency legislation to defeat the purpose of the confiscation legislation.

561.

Schedule 11 makes some related consequential amendments to the Insolvency Act 1986. They deal with the problem that property can only be included in a bankrupt's estate at the time the bankruptcy order is made. If restraint or receivership action is underway when the bankruptcy order is made, any unconfiscated property cannot be given to the creditors at a later date. The amendments provide that property not required for confiscation can subsequently be included in the bankrupt's estate. See also the note on Schedule 11, paragraph 16, amendments to the Insolvency Act 1986.

Section 418: Restriction of powers

562.

This section, on the other hand, explains the circumstances under which the bankruptcy legislation takes priority. If a person is adjudged bankrupt before a restraint order is made or a receiver or administrator is appointed, no property that is for the time being comprised in the bankrupt's estate may then be placed under restraint or subject to realisation under the confiscation legislation. However, once the creditors have been satisfied, any remaining property may be used to satisfy the confiscation order.

563.

Further to the problem described under the previous section and dealt with in Schedule 11, paragraph 16, subsections (3)(d) and (e) prevent the confiscation court from exercising its powers in relation to property left over after a confiscation order has been satisfied. This will ensure that, where a bankruptcy order has been made, any surplus sums will go into the bankrupt's estate for distribution to creditors, rather than being distributed by the Crown Court to the defendant and others under the confiscation legislation…

Winding up in England & Wales and Scotland

Section 426: Winding up under the 1986 Act

568.

Section 426 deals with the situation where an insolvent company rather than an individual holds realisable property. Broadly, if action is taken under the confiscation legislation before a winding up order is made, confiscation takes precedence over insolvency. The provision is thus analogous to that which applies to personal bankruptcy in England and Wales or Northern Ireland, and sequestration in Scotland. This section covers the company insolvency legislation of both England and Wales and Scotland. The same legislation, the Insolvency Act 1986, applies to company insolvency in the two jurisdictions.”

It is not necessary for me to set out the statutory provisions themselves for the purposes of this judgment. The effect of these parts of the statutory scheme with respect to the assets on which it is intended to fasten may be summarised as follows: once subject to a restraint order, always subject to a restraint order. Likewise once subject to insolvency proceeding governed by domestic law, always subject to that insolvency proceeding. The result is entirely logical: a restraint order is simply a freezing order: it cannot of itself effect changes in the ownership of assets though it may prevent certain new interests from arising. The policy would appear from the explanatory notes to be to prevent a defendant using an insolvency proceeding commenced after a restraint order as a means of defeating a restraint order. There is no mention of extending this policy to insolvency proceedings commenced before a restraint order is made. The explanatory notes make it clear that there are circumstances (viz. the prior commencement of an insolvency proceeding) when the insolvency proceeding has priority over the public interest in restraint and confiscation.

In his judgment, Hughes LJ contemplates that a restraint order may be made against a company in liquidation only if the liquidation post-dates the restraint order (judgment of Hughes LJ, paragraph 181 (i)). He also canvasses the possibility that a confiscation order may be made against a company in liquidation whether the liquidation commences before or post-dates the making of the restraint order (judgment of Hughes LJ, paragraph 181 (ii) and (iii)). This is not consistent with the passage from the explanatory notes set out above, and in my respectful judgment it does not represent the effect of POCA. Moreover, one would not expect the position to be different as between confiscation and restraint. If the assets were in existence at all material times, one would not expect them to be within the restraint order and then not capable of being subject to confiscation, or vice-versa. If the position were otherwise, the result would be neither fair nor logical. The liquidator or trustee in bankruptcy would continue to conduct the realisation of assets and act as the officeholder but if a conviction occurs and the confiscation order ensues, it will turn out that the officeholder will not have exercised the powers following the restraint order for the benefit of creditors but will have conducted himself for the benefit of those entitled under the confiscation order. In my judgment, it would be very odd if the special statutory powers in the Insolvency Act 1986 intended to benefit creditors, such as the power to avoid earlier transactions and to examine officers on oath, could be used to boost the assets available for confiscation. Moreover, it would follow that if the liquidator or trustee happens to have distributed to creditors after the restraint order before conviction occurs, those assets would fall entirely outside the confiscation order. That would create a perverse incentive to deal with the liquidation as quickly as possible. In my judgment such an interpretation would be unlikely to be correct.

Where the law of some other jurisdiction governs the insolvency proceeding, i.e. the winding up takes place outside England and Wales, then questions would arise as to whether that proceeding was recognised in England and Wales. If it was, and the rights of creditors were in substance the same as those in an insolvency proceeding governed by the Insolvency Act 1986, one would in the first instance expect the interaction of the insolvency proceeding and the proceeds of crime legislation to be the same.

It is to be noted that a domestic restraint order may be made against a company incorporated in the United Kingdom or a company incorporated elsewhere. Moreover, companies that may be wound up under the Insolvency Act 1986 include companies registered in other jurisdictions. Likewise, an external restraint order may be made either against a company incorporated outside the United Kingdom or indeed against a company incorporated within the United Kingdom. S 426 POCA (referred to in the explanatory notes set out above) applies to any company which may be wound up under the Insolvency Act 1986. However, the insolvency proceeding must be one governed by the law of England and Wales or the law of Scotland. S 426 does not therefore apply where a restraint order is made against a defendant which is, or becomes, subject to an insolvency proceeding commenced in, say, Antigua.

The position of unsecured creditors in a liquidation commenced outside England and Wales, if a domestic restraint order is to be made, is under the statutory scheme left to be governed by s 69(3)(a) POCA, which is in the same terms as Article 46(3)(a) ERO, considered below.

One would also expect that the domestic scheme would in general be replicated in relation to the interaction of an external restraint order or an order enforcing the same (an external order). There is no reason on the face of it to make the position of the creditors in a liquidation of a defendant any worse simply because the restraint order is an external restraint order rather than a domestic one. Indeed, it might be argued that such a result would offend Article 14 of the European Convention on Human Rights (“the Convention"), taken with Article 1 of the First Protocol to the Convention (“FPC”).

The Chancellor has observed in his judgment:

“There was not incorporated into ERO the provisions of Part 9 of the Act which modify the provisions of the Insolvency Act 1986 in the case of a person adjudicated bankrupt in England and Wales or of a company being wound up under that Act. In such cases a pre-existing bankruptcy or winding-up takes priority over a restraint order.”

The silence of ERO on this point means that the answer has to be found in ERO read against the background of the general law.

For the reasons given above, the only issue with which I have to deal is whether the point is reasonably arguable. In my judgment, it is reasonably arguable that the unsecured creditors of SIB have an interest for the purposes of Article 46(3)(a). In summary, my reasons, which are amplified in the Annex to this judgment, are as follows:

Significance of s 84(2)(d) POCA

It is said that s 84(2)(d) POCA produces an effect contrary to that stated in the explanatory notes (see for example the judgment of Hughes LJ at paragraph 181 (iii)). S 84 has been applied in part to orders under ERO (Article 49), and it is convenient to set out s 84 as it applies under ERO and to assets in England and Wales:

In my judgment, the effect of s 84(2)(d) is to make it clear that, where the following two conditions are fulfilled, references to property held by a company include references to property held by its liquidator. The two conditions are: (i) that the company is in liquidation; and (ii) that an order has been made that its assets vest in its liquidator. Both those conditions are fulfilled in the case of the Antiguan Liquidators so that the property of SIB now vested in them is treated as “held” by SIB for the purposes of ERO. In a liquidation conducted in England and Wales, an order of the court is required to vest the property of a company in liquidation in its liquidator, and such an order is now not normally made.   But, even if that is not the position in Antigua, s 84(2)(d) can only apply in those cases where a vesting order is made or that is the effect of the law governing the liquidation. Thus, s 84(2)(d) does not lay down some universal rule applying to all liquidations, and, because of that, it would be unlikely to have the effect of depriving unsecured creditors of any interest in the property of the company in liquidation which they would otherwise have just because a vesting order has been made. This is all the more likely when it is borne in mind that a vesting order need not relate to all the assets of the company. If the creditors have an interest in the assets of the company (a point which I consider below), those assets are (to that extent) treated as “held” by the creditors: see s 84(2)(a). In any event, s 84(2)(d) cannot displace the statutory scheme as set out in ss 417, 418 and 426 POCA and summarised in the explanatory notes set out above. S 9 POCA (dealing with the amount that may be confiscated under a domestic confiscation order) does not alter this conclusion because it only empowers the court to make an order over free “property” “held” by the defendant. The meaning of “property” is subject to s 84, to which I have already referred. Where a company is the registered owner of property but is also a trustee of it for someone else, the beneficial interest in the property is treated as held by that other person: see s 84(2)(a).

I agree with Chancellor that the Antiguan Liquidators, who are appointed under the law of Antigua and Bermuda, are on the evidence capable of being treated as “liquidators" for the purposes of s 84(2)(d).

When a confiscation order is made pursuant to POCA, it is made by reference to property held by the defendant, which does not include property in which another person has an interest (s 84(2)(a)). Where action is taken to enforce a restraint order made under ERO, the court must decide whether to give effect to it. It would not be able to give effect to it if to do so would be incompatible with the Convention rights of any person affected by it (Human Rights Act 1998 ("HRA"), s 6; Article 21 ERO). Convention rights include the right of property guaranteed under Article 1 FPC.

Effect of this conclusion on the obligation imposed by Article 46(3)(a) ERO

What should the court do in this situation? It is convenient to set out the material parts of Article 46 ERO again:

“46 Powers of court and receiver

(1)

This article applies to—

(a)

the powers conferred on a court by this Part;

(b)

…

(2)

The powers—

(a)

must be exercised with a view to the value for the time being of realisable property or specified property being made available (by the property's realisation) for satisfying an external order that has been or may be made against the defendant;

(b)

must be exercised, in a case where an external order has not been made, with a view to securing that there is no diminution in the value of the property identified in the external request;

(c)

must be exercised without taking account of any obligation of a defendant or a recipient of a tainted gift if the obligation conflicts with the object of satisfying any external order against the defendant that has been or may be registered under article 22;

(d)

may be exercised in respect of a debt owed by the Crown.

(3)

Paragraph (2) has effect subject to the following rules—

(a)

the powers must be exercised with a view to allowing a person other than the defendant or a recipient of a tainted gift to retain or recover the value of any interest held by him;…”

Article 46(3)(a) uses the phrase “person other than the defendant”. For the reasons given by the Chancellor in paragraph 92 of his judgment, SIB is the defendant. SIB, therefore, is not a “person other than the defendant”. It is unnecessary to ask whether the liquidator constitutes a “person other than the defendant” since s 84 (2)(d) POCA (see above) states that “references to property held by a person include references to property vested in his…liquidator” and the liquidators accordingly cannot show that any property is “held” by them for the purposes of POCA or ERO (except perhaps, which was not argued, if the liquidators' claim was purely in their capacity as trustee). In any event the liquidators, in their capacity as agents, of SIB must be treated as in the same position as SIB itself by virtue of the application of the maxim qui facit per alium facit per se.

That leaves the question whether the unsecured creditors of SIB in its liquidation could be persons “other than the defendant”: they derive their title from SIB, but then so would any purchaser of an asset from SIB or the recipient of a gift. The reference to the “defendant” cannot cover every successor in title by means of gift or, it would follow, a purchase, since recipients of tainted gifts are separately mentioned and excluded. Moreover, if a recipient of a tainted gift is excluded, a recipient of other gifts must be included, and if they, being volunteers, are included it is difficult to see why creditors, who gave value for their debts, should not be included too if they have an interest in the assets. In those circumstances, in my judgment, if creditors could show an interest in the assets of SIB it is at least reasonably arguable that they are persons “other than the defendant” and I need not consider the matter further as the matter has not yet been fully argued. There is certainly no express statutory provision which states that, for the purpose of Article 46(3)(a), an unsecured creditor should be considered as one and the same as his debtor in liquidation.

By Article 46(3)(a) Parliament has laid a duty upon the courts to allow a person other than the defendant to retain or recover the value of any interest held by him.

In my judgment, Article 46(3)(a) imposes a duty on the court of its own motion. However, Parliament would have imposed that duty with the knowledge of our adversarial system, and accordingly, in my judgment, the duty imposes no obligation on the court actually to investigate whether a person has in fact got an interest: it is up to that person to pursue it, and the court must of course give him an appropriate opportunity to be heard.

If the court on which the Article 46(3)(a) duty is imposed is aware that a person may be entitled to claim an interest, in my judgment, it would be better to make this known to the world by including in the order a reservation about that person's possible interest. I accept that such a reservation is not necessary, but, in my judgment, it is desirable, especially in a case such as this where the point has already been put in issue. It does no harm, and I would not regard it as inappropriate.

It may turn out that neither the SFO nor the liquidators wants the question of whether the unsecured creditors of SIB has an “interest” in the assets the subject of the restraint order to be determined. If so, so be it. But, if not, my provisional view is that that issue could most efficiently be determined by this court or under its directions, thus minimising any delay. Consideration could be given at the same time to the question whether a representative creditor should be joined for this purpose. I need hardly add that the point is of importance not just in the liquidation of SIB but also to others concerned with the proceeds of crime legislation.

RECOGNITION OF THE ANTIGUAN LIQUIDATORS – APPEAL AGAINST THE ORDER OF LEWISON J DATED 3 JULY 2009

I agree with the judgment of the Chancellor, with the following amplifications.

Importantly, I agree with the Chancellor that Lewison J was correct to apply the decision in Eurofood to the interpretation of the UNCITRAL model code. I agree with the Chancellor that this is likely to lead to fewer conflicts between the decisions of courts of the member states of the European Union. However, it does not entirely eliminate the risk of conflict since the question of where the COMI is situated depends in part on the facts, and the evidence placed before different national courts may be different.

In my judgment, it should be noted that the position of the US Receiver must depend on his powers as they presently stand. In other words, if he acquires more powers, he may be entitled to be recognised as a foreign representative if such a course were to serve any purpose.

In determining the location of the COMI, the key question appears to be where the head office functions are based. The COMI must be determined on an objective basis and be ascertainable by third parties. It does not appear to be a question of where the principal place of business is conducted since this would give rise to uncertainty. There can in principle only be one place where head office functions are carried out, and that makes it easier to identify the COMI. The test is designed to achieve speed and ease of recognition. There are, however, difficulties in the test and some of them are described by Gerald McCormack in Reconstructing European Insolvency Law (2010) 30 Legal Studies 126 at 129-133, and in articles listed in the footnotes to those pages. The difficulties do not have to be considered in this case.

I respectfully differ from the Chancellor to a small extent on the test to be applied to review the first instance decision on where the COMI is situated. What the judge has to do is make findings as to what activities were conducted in each potential COMI, and then ask whether they amounted to the carrying on of head office functions and then quantitatively and qualitatively whether they were more significant than those conducted at the registered office. Where the judge’s findings as to where particular activities were carried on are challenged, the appropriate test for the appellate court will be that laid down in Assuricazioni Generali SpA v Arab Insurance Group [2002] EWCA Civ 1642 at [17], where it was said that “Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellant court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence.” (That passage, which quoted a passage from the earlier case in this Court of Todd v Adam, together with [16] cited by the Chancellor, was approved by the House of Lords in Datec Electronic Holdings v United Parcels Service [2007] UKHL 23 at [46]). It is where the challenge on appeal, as here, is to the assessment made by the judge as to whether the presumption that the COMI was at the registered office was rebutted, that the separate test in Designers’ Guild v Russell Williams (Textiles) [2000] 1 WLR 2416 and Assuricazione at [16] applies.

That still leaves the question what order Lewison J should have made if informed of the making of a restraint order (and assuming that the same had not been then discharged). It is not meaningful to ask this question because of subsequent developments in this case. There is an outstanding application for relief in connection with the declaration that the Antiguan proceedings is the foreign main proceeding for the purposes of Article 2(g) of UNCITRAL. That application may show that it was important to determine that questions determined by Lewison J irrespective of the making of the restraint order. However, it is also possible that the unsecured creditors of SIB have a sufficient interest in the assets sought to be restrained and it is possible that it would have been sufficient for that claim to be made without the time and expense involved in establishing the status of SIB's liquidators under UNCITRAL. In those circumstances, the appropriate course might well have been simply to adjourn the proceedings in the Chancery Division and await the outcome of the proceedings for a restraint order.