National Crime Agency v Hajiyeva (Rev 1)

This application concerns the first “Unexplained Wealth Order” (“UWO”) made under s.362A(1) of the Proceeds of Crime Act 2002 (“POCA”). The material provisions in relation to UWOs are contained in ss.362A-362R POCA, which were inserted into Part 8 of POCA by ss.1-2 of the Criminal Finances Act 2017 (“CFA 2017”).

The provisions came into force on 31 January 2018 pursuant to the Criminal Finances Act 2017 (Commencement No.4) Regulations 2018.

According to the Explanatory Notes to the CFA 2017 (at para 1):

“The Criminal Finances Act 2017 makes the legislative changes necessary to give law enforcement agencies new capabilities and powers to recover the proceeds of crime, and to tackle money laundering, corruption and terrorist financing.”

The UWO is a new investigative tool.

On 27 February 2018 I made a UWO against the Respondent, who will be referred to as “Mrs A”, in respect of one property, which will be referred to as “the Property”, on a without-notice application by the National Crime Agency (“NCA”), which is an “enforcement authority” for the purposes of these provisions.

Mr James Lewis QC and Mr Ben Watson appear on behalf of Mrs A on this application to discharge that order. Mr Jonathan Hall QC and Mr Tom Rainsbury appear for the NCA, as they did on the original application.

At the outset of this hearing Mr Lewis applied for an order that the hearing of this application be in private. I refused that application but I made an anonymity order to remain in force until further order, for the reasons I then gave.

Section 362A (“Unexplained wealth orders”) provides, so far as is relevant:

“(1)

The High Court may, on an application made by an enforcement authority, make an unexplained wealth order in respect of any property if the court is satisfied that each of the requirements for the making of the order is fulfilled.

(2)

An application for an order must—

(a)

specify or describe the property in respect of which the order is sought, and

(b)

specify the person whom the enforcement authority thinks holds the property (‘the respondent’) (and the person specified may include a person outside the United Kingdom).

(3)

An unexplained wealth order is an order requiring the respondent to provide a statement—

(a)

setting out the nature and extent of the respondent’s interest in the property in respect of which the order is made,

(b)

explaining how the respondent obtained the property (including, in particular, how any costs incurred in obtaining it were met),

(c)

where the property is held by the trustees of a settlement, setting out such details of the settlement as may be specified in the order, and

(d)

setting out such other information in connection with the property as may be so specified.

…

(5)

The order may, in connection with requiring the respondent to provide the statement mentioned in sub-section (3), also require the respondent to produce documents of a kind specified or described in the order.”

Section 362B sets out the requirements for the making of a UWO in respect of any property.

“(2)

The High Court must be satisfied that there is reasonable cause to believe that—

(a)

the respondent holds the property, and

(b)

the value of the property is greater than £50,000.

(3)

The High Court must be satisfied that there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to obtain the property.

(4)

The High Court must be satisfied that—

(a)

the respondent is a politically exposed person, or

(b)

there are reasonable grounds for suspecting that—

(i)

the respondent is, or has been, involved in serious crime (whether in a part of the United Kingdom or elsewhere), or

(ii)

a person connected with the respondent is, or has been, so involved.

(5)

It does not matter for the purposes of sub-section 2(a)—

(a)

whether or not there are other persons who also hold the property;

(b)

whether the property was obtained by the respondent before or after the coming into force of this section.

(6)

For the purposes of sub-section (3)—

(a)

regard is to be had to any mortgage, charge or other kind of security that it is reasonable to assume was or may have been available to the respondent for the purposes of obtaining the property;

(b)

it is to be assumed that the respondent obtained the property for a price equivalent to its market value;

(c)

income is ‘lawfully obtained’ if it is obtained lawfully under the laws of the country from where the income arises;

(d)

‘known’ sources of the respondent’s income are the sources of income (whether arising from employment, assets or otherwise) that are reasonably ascertainable from available information at the time of the making of the application for the order;

(e)

where the property is an interest in other property comprised in a settlement, the reference to the respondent obtaining the property is to be taken as if it were a reference to the respondent obtaining direct ownership of such share in the settled property as relates to, or is fairly represented by, that interest.

(7)

In sub-section (4)(a), ‘politically exposed person’ means a person who is—

(a)

an individual who is, or has been, entrusted with prominent public functions by an international organisation or by a State other than the United Kingdom or another EEA State,

(b)

a family member of a person within paragraph (a),

(c)

known to be a close associate of a person within that paragraph, or

(d)

otherwise connected with a person within that paragraph.

(8)

Article 3 of Directive 2015/849/EU of the European Parliament and of the Council of 20 May 2015 applies for the purposes of determining—

(a)

whether a person has been entrusted with prominent public functions (see point (9) of that Article),

(b)

whether a person is a family member (see point (10) of that Article), and

(c)

whether a person is known to be a close associate of another (see point (11) of that Article).”

If the respondent fails “without reasonable excuse” to comply (or purport to comply) with the requirements imposed by the UWO within the period specified by the court, the property is “presumed” to be recoverable property (i.e. property obtained through unlawful conduct) for the purpose of civil recovery proceedings under Part 5 of POCA, unless the contrary is shown (s.362C(2) and (5)). The presumption will apply only to the respondent’s interest in the property (s.362C(3)(a)). However, where the respondent is a politically exposed person by virtue of being a “family member” of, “close associate” of, or “connected with” an individual entrusted with prominent public functions, the respondent’s interest is “taken” to include any interest of that individual (ss.362C(6)(b) and (8)).

The NCA’s case is set out in the first witness statement of Ms Nicola Bartlett, a financial investigator employed by the NCA, dated 19 February 2018.

The NCA believes that the Property is held by Mrs A. She is a national of a non-EEA state. It is believed that she is married to Mr A.

The Property was purchased on 22 December 2009 by Vicksburg Global Inc (“VG”), a company incorporated in the British Virgin Islands (“BVI”). The price stated to have been paid was £11,500,000. VG was and remains registered as the sole proprietor of the property.

On 22 December 2009 (also the date on which the property was purchased), a mortgage was secured against the property in favour of Barclays Suisse. The charge was executed in return for a loan facility of “up to £7,475,000”.

On 23 December 2014 VG applied to the Land Registry to discharge the charge against the property, Barclays Suisse confirming that the property was no longer charged as security.

On 3 June 2015 Mrs A informed the Home Office in her application for indefinite leave to remain that she was the beneficial owner of VG.

On 31 January 2018 the BVI Financial Investigation Agency informed the NCA that the beneficial owner of VG was Mr A.

From March 2001 to March 2015, Mr A was the chairman of a bank which will be referred to as “the Bank” in a non-EEA country, which will be referred to as the “non-EEA Country”. The Bank was the largest bank in the country, in which the State had a controlling stake.

Mr A resigned from the Bank in March 2015. On 5 December 2015 he was arrested in the non-EEA Country and subsequently charged with various offences including misappropriation, abuse of office, large-scale fraud and embezzlement in connection with the Bank.

On 14 October 2016 Mr A was convicted after trial in the Serious Crimes Court in a city in the non-EEA Country. He was sentenced to 15 years’ imprisonment. In addition he was ordered to pay the Bank a sum of approximately $39m.

The NCA believes that on or around 23 June 2016, Mrs A was arrested “in absentia” by the authorities for the non-EEA Country and declared “wanted” in connection with avoiding the investigation into the Bank.

Mrs A contends that the UWO should be discharged on eight grounds:

Mrs A does not dispute that the application requirements, the holding requirement and the value requirement for the making of the UWO are satisfied.

I shall address each ground of challenge in turn.

It is common ground that (1) Mrs A is a “family member” of Mr A; (2) between March 2001 and March 2015, Mr A was the Chairman of the Board of the Bank; and (3) as Chairman, he was a member of the administrative and/or management body who was above the level of middle-ranking or more junior official.

Article 3(9) of the 2015 Directive defines a PEP as

“… a natural person who is or has been entrusted with prominent public functions and includes the following: …

(g)

members of the administrative, management or supervisory bodies of State-owned enterprises.”

Mr Lewis submits that Mrs A is not a PEP within the meaning of s.362B(4) on two grounds: first, the Bank was not a “state-owned enterprise” (“SOE”) during her husband’s tenure within the meaning of Article 3(9)(g) of the 2015 Directive; and second, further or alternatively, as Chairman of the Bank, her husband was not entrusted with prominent public functions “by an international organisation or by a State” as is required under s.362B(7)(a) of POCA.

“State-owned enterprises”

It is not in dispute that the Ministry of Finance of the non-EEA Country between 2008 and 2013 had a shareholding of between 50.2% and 60.6% in the Bank. However Mr Lewis submits that that shareholding is not sufficient to establish that the Bank is a “state-owned enterprise” for the purposes of the 2015 Directive. There is, he contends, nothing in the Directive to support the proposition that “state-owned” was intended to mean simply “a majority shareholding”. Further Mrs A relies on the evidence of one of Mr A’s lawyers, who will be referred to as “Lawyer 1”, in his second witness statement (at para 43-51), as to the status of the bank in the non-EEA Country. He states that under the law of the non-EEA Country the Bank is not a “state organisation”, but a “normal commercial entity. It is an Open Joint Stock Company”.

The parties are not aware of any decision of the European Court which defines the term “State-owned enterprises”.

Mr Lewis contends that this is an intrusive power and therefore should be construed strictly.

Mr Hall submits that the natural ordinary meaning of the words “state-owned enterprise” mean an enterprise in which the state has a shareholding (whether a full, majority or minority shareholding), and whether held directly or indirectly. This suggests a straight-forward test of “ownership”. A person will own something even if it is partly owned, or owned indirectly through another.

This construction, Mr Hall submits, is consistent with the approach in Article 3(6) of the 2015 Directive, which defines “beneficial owner” as

“any natural person(s) who ultimately owns or controls the customer and/or the natural person(s) on whose behalf a transaction or activity is being conducted”

and includes, at least in the case of corporate entities, a natural person who ultimately owns or controls a legal entity through “direct or indirect ownership” of a sufficient percentage of the shares or voting rights or ownership interest in that entity, with a shareholding of 25% plus one share (or an ownership interest of more than 25%) being an indication of ownership. However this applies “without prejudice” to the right of Member States to decide that a lower percentage may be an indication of ownership or control. In other words, Mr Hall submits, there is no requirement for a beneficial owner to hold a specified shareholding.

In further support of this submission Mr Hall refers to Recital (12) of the 2015 Directive:

“There is a need to identify any natural person who exercises ownership or control over a legal entity. In order to ensure effective transparency, Member States should ensure that the widest possible range of legal entities incorporated or created by any other mechanism in their territory is covered. While finding a specified percentage shareholding or ownership interest does not automatically result in finding the beneficial owner, it should be one evidential factor among others to be taken into account. Member States should be able, however, to decide that a lower percentage may be an indication of ownership or control.”

Such a construction is also consistent, Mr Hall submits, with the approach in Article 3(9) itself which is drafted in broad terms; it is inclusive, not exhaustive.

The definition of SOE and PEP is wide. Recitals (31)-(33) of the 2015 Directive recognise that certain situations prevent a greater risk of money laundering or terrorist financing (Recitals (31) and (32)), but note that the requirements relating to PEPs are of a preventative and not criminal nature, and should not be interpreted as stigmatising PEPs as being involved in criminal activity (Recital (33)).

Mr Lewis and Mr Hall agree that whether an enterprise is a SOE is fact dependent. SOEs are created in different ways in different countries, and “no one country generally applies one single ownership model without exceptions” (OECD (2018), Ownership and Governance of State-Owned Enterprises: A Compendium of National Practices at p.23). The OECD Guidelines on Corporate Governance of State-Owned Enterprises (2015) states (at p.14) that: “For the purpose of the Guidelines, any corporate entity recognised by national law as an enterprise, and in which the state exercises ownership, should be considered as an SOE. This includes joint stock companies, limited liability companies and partnerships limited by shares”.

The material evidence relating to the ownership of the Bank is contained in two documents: first, the PricewaterhouseCoopers (“PwC”) Auditor’s Report dated 30 June 2008, which was signed by Mr A as Chairman of the Board of Directors; and second, the Bank’s Annual Report 2013, which includes a statement of Mr A as Chairman of the Board and the independent auditor’s report of Deloitte (“the 2013 auditor’s report”). In summary the evidence is as follows:

In an interview with Swiss Style Magazine (undated, but after 13 July 2009) (produced by Mrs A as part of the third exhibit to her witness statement) Mr A is reported as stating:

“[The Bank] is the largest and most established bank by far in [the non-EEA Country] and contributes significantly to the stability of the banking system. [The Bank] represents 40-50% of the banking market in [the non-EEA Country]. We are 50.2% state-owned by the Ministry of Finance. As the National Development Bank [the Bank] investments involve structured initiatives for economic diversification.

The banking sector includes 46 banks, of which nine have international operations. [The Bank] is the only state bank… [the Bank] has strong government support in capitalisation and is an integral part of the banking system intermediating in a significant part of total business in the country.

[The Bank] has been involved with major infrastructure financing projects for the Government…”

I am satisfied on the evidence that the NCA has established that the Bank is a “State-owned enterprise”. At all material times the Government of the non-EEA Country had a majority shareholding in the Bank and had ultimate control of the Bank. It is not necessary for me on this application to determine whether the Bank would have been a “State-owned enterprise” if the Government only had a minority shareholding.

I do not accept Mr Lewis’s submission that whether or not an enterprise is a SOE raises an issue of foreign law and turns on the “lex loci”. Neither s.362B of POCA nor article 3(9) of the 2015 Directive require the NCA (or any other “enforcement authority”) to consider foreign law, nor would it be practicable for them to have to do so. Whether or not an enterprise is a SOE is a matter for the enforcement agency, and the court, to determine, applying UK law.

In any event I agree with Mr Hall that Lawyer 1’s second witness statement (at paras 45-52) does not assist the Respondent. The lawyer is not an independent expert. Further, as Mr Hall points out, he states (at para 45) that the Bank “is not a State organisation, and never has been a State organisation”, however the test for determining whether an enterprise is a SOE for the purposes of article 3(9)(g) is one of ownership and control, not legal status or powers.

“Entrusted with prominent public functions”

I also reject Mr Lewis’s submissions in relation to what he described as the second part of the definition of a “politically exposed person”, which he put at the forefront of his written and oral submission that Mr A is/was not a PEP.

Parliament has added in s.362B(7)(a) the requirement that the individual “entrusted with prominent public functions” has been so entrusted “by an international organisation or by State”. That requirement is not referred to in Article 3 of the 2015 Directive. The statutory test, he contends, does not therefore simply incorporate the definition of a “politically exposed person” from the 2015 Directive, but instead it relies on the 2015 Directive to provide the definition of the phrase “entrusted with prominent public functions”, and then adds the requirement that they have been so entrusted “by an international organisation or by a [non-EEA] State”.

Mr Lewis submits the 2015 Directive is aimed at money laundering by private institutions, whereas Parliament added the extra words concerning entrustment because the domestic law is different in purpose.

Further, Mr Lewis submits that the additional phrase cannot have been intended only to exclude those States because that analysis does not address the alternative basis on which a person may be “entrusted”, that is “by an international organisation”. The words of the statute, he submits, are clear.

The obvious inference is that heads of State and heads of government, for example, who fall within Article 3(9)(a) of the 2015 Directive, have been “entrusted with prominent public functions”. However no such inference can be drawn, Mr Lewis submits, in relation to members of the administrative, management or supervisory bodies of SOEs (who fall within Article 3(9)(g)).

Mr Lewis refers to the many well-known sovereign wealth funds which are very substantial state-owned funds that invest in the global financial markets like private equity and hedge funds. For example, the Dorchester Hotel is owned by the Brunei Investment Agency, an arm of the Ministry of Finance of Brunei, and the Qatar Investment Authority holds investments in Sainsbury’s. Mr Lewis suggests that, adopting the NCA approach, directors of the Dorchester are PEPs (Brunei being a non-EEA state with a majority shareholding). In the UK Channel 4 is a publicly owned corporation whose board is appointed by Ofcom, in agreement with the Secretary of State for Culture, Media and Sport. Does it follow, Mr Lewis asks, that Channel 4 would be considered to be a SOE and the Chairman of the Board a PEP for the purposes of Article 9(g) of the 2015 Directive.

I do not accept this submission. I agree with Mr Hall that the plain intention of the words “by an international organisation or by a State other than the United Kingdom or another EEA State” is not to include an additional condition but to exclude non-UK and non-EEA PEPs from the ambit of the provision. I accept Mr Hall’s submission that the operative component of the clause is not “by an international organisation or by a State”, but “other than the United Kingdom or another EEA State”. Further, I agree with Mr Hall that where a person is entrusted with prominent public functions it necessarily follows that they will be entrusted to perform such functions “by” a State or international body.

The definition of “foreign PEPs” in the Recommendations of the Financial Action Task Force on Money Laundering adopted in February 2012 (“the revised FATF Recommendations”) support Mr Hall’s submission that the words “by an international organisation or by a State” add nothing of substance:

“Foreign PEPs are individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state-owned corporations, important political party officials.”

Recital (4) of the 2015 Directive states that:

“With a view to reinforcing the efficacy of the fight against money laundering and terrorist financing, the relevant Union legal acts should, where appropriate, be aligned with the … ‘revised FATF Recommendations’.”

In many cases an enforcement agency will not know how a person was appointed.

I agree with Mr Hall that if there was an application for a UWO against a sovereign wealth fund, no doubt such an application would be refused on the basis that there were no reasonable grounds for suspecting that the known sources of the funds lawfully obtained income would have been insufficient for the purpose of enabling it to obtain the property (s.362B(3)).

I do not consider there is ambiguity as to the meaning of the words “by an international organisation or by a State other than the United Kingdom or another EEA State” in s.362B(7)(a). However the parties are agreed that if, contrary to this view, there is any ambiguity in the phrase, reference can be made to the passage in Hansard on which the NCA relies of the debate at the Commons Public Bill Committee stage on 17 November 2016 when an amendment was proposed which would have extended the availability of UWOs to “politically exposed persons” in the UK and EEA. The amendment was rejected.

Mr Ben Wallace, the Minister for Security, explained the intention underlying the wording of s.362B(7). The provision was intended to distinguish between PEPs in the EEA and PEPs outside the EEA. He said:

“We have confidence that, within the EEA… there are the tools to find the evidence and the ability to work with fellow law enforcement agencies around Europe to meet the evidential threshold… We have confidence in our neighbours and friends in Europe that they have the capacity to build the evidence and therefore to build a case for an unexplained wealth order… The decision on PEPs outside the EEA reflects real operational challenges that we and organisations such as the National Crime Agency have had in gathering evidence against people in some countries where there may be no properly functioning Government or, indeed, where the Government are entirely corrupt and it is very difficult to gather that evidence.

That is the reason we have had to plug that gap in that way. … That is why we have a different approach.”

I reject Mr Lewis’s submission that the passage in Hansard does not go to the actual issue, which is Parliament’s intention in requiring not just that a person be “entrusted with prominent public functions”, but that they be so entrusted either by an international organisation, or the (non-EEA) State. It seems to me that the promoter of the Bill, Mr Ben Wallace, the Minister for Security, makes clear the reason for the additional words in s.362B(7)(a), which are not in Article 3(9) of the 2015 Directive.

I conclude that Mr A is a PEP, and that accordingly Mrs A, as his wife, is herself a PEP.

It is convenient to consider these three grounds together as they all relate to the “income requirement”.

S.362B(3) requires the court to be satisfied that there are reasonable grounds for suspecting that the known sources of the respondent’s lawfully obtained income would have been insufficient for the purpose of enabling the respondent to obtain the property (see para 8 above).

The NCA contends that there are reasonable grounds for suspecting that Mrs A’s lawfully obtained income would have been insufficient to obtain the property. It can be assumed from the evidence that Mrs A paid a deposit of at least £4,050,000 towards the purchase of the property in December 2009. Further it appears that she has subsequently been able to discharge a mortgage of up to £7,450,000 over a period of only five years. There is reason to suspect that Mr A was her only source of income at the time of the purchase, and subsequently, and there is no evidence that she has received significant capital or income from any source independent from her husband.

Further the NCA contends that there are reasonable grounds to suspect that any monies originating from Mr A were not lawfully obtained. First, Mr Hall submits, there are multiple sources of evidence which suggest that Mr A has been convicted of significant fraud and embezzlement offences in the non-EEA Country, arising from his tenure at the Bank, which resulted in a large amount of money being transferred abroad. Second, there is evidence which suggests that Mr A was a State employee in the non-EEA Country between 1993 and 2015. It is very unlikely that such a position would have generated sufficient income to fund the acquisition of the property. Third, whilst there is some evidence which suggests Mr A has been associated with various companies and property transactions, this does not ultimately undermine the NCA’s suspicion that his lawfully obtained income would have been insufficient to enable Mrs A to obtain the property.

The evidence of Mrs A (in her witness statement dated 15 May 2018) is as follows:

“5.

…my husband was in 2009 a man of substantial means. He was very well-off when we married in 1997, and had accumulated capital and wealth since the early 1990’s. I understand, but have no way of evidencing the fact that he had a number of business interests before joining the [Bank], and he maintained those investments. He also had a substantial portfolio of shares in the [Bank], and was always very proud that the bank was doing so well. I have attached to this statement one document I have located which supports what I understood of my husband’s financial situation when the property was purchased, but I have no personal knowledge of its contents: see [Exhibit 1]. I have also attached at [Exhibit 2] material which was submitted to the Home Office as part of our immigration applications, and which are retained by the Home Office. I have also attached various newspaper reports which show the international standing of my husband: see [Exhibit 3].

6.

As to the purchase of the property, this was my husband’s responsibility. … I… had no knowledge of any of the payments made to purchase the property, our family home, their source, or any other details.”

Exhibit 1 is a short document prepared by “Werner Capital” dated 31 August 2011 containing “Information” about Mr A, including a personal profile, net worth statement, personal assets detail and source of wealth. As of that date his net worth is stated to be US$72,560,000. He was born in 1961. After receiving Bachelor’s and Master degrees, in 1992-1993 he obtained an MBA in the United States (and it is stated a PhD from an academic institution in another non-EEA country). The personal profile states that:

“From 1993 to 1995, [Mr A] served as Department Head of the Ministry of Foreign Economic Relations [in the non-EEA Country]. In 1995-2001, [Mr A] joined the [Bank], starting as Chairman of the Credit Committee and Director of the Credit and Investments. From 2001 to the present he has served as Chairman of the Board.”

Exhibit 2 includes letters from the Bank which show that Mr A’s net income was US$29,062, US$39,126, US$35,924, US$35,541, US$65,252 and US$70,648.70 in 2001, 2002, 2003, 2004, 2005 and 2008 respectively. It appears that Mr A also held shares in his name which generated a net dividend of US$88,911 in 2008.

The NCA has variously described Mr A’s role in the following terms: “[Mr A] was a state employee in [the non-EEA Country] between 1993 to 2015”; “He has been a Government official the entirety of his life”; “[He was] a Government functionary”; and “What Ms Bartlett has fundamentally found is he was a central banker”.

Mr Lewis submits these were serious misdescriptions made in the NCA’s evidence, its written submissions, and its presentation of its without-notice application before me (Ground 2). The assertion Mr A was a public servant is, he submits, untrue. He was, Mr Lewis contends, a well-known international banker at a commercial bank. In the light of the findings I have already made in relation to the PEP requirement, I reject this criticism. It appears that the non-EEA Country has a central bank, which since 2009 has been called the Central Bank of [the non-EEA Country]. However I was not led into serious error, as Mr Lewis suggests, when I made the order I did premised on a finding that Mrs A’s husband was “a state employee” (Ruling, para 14). That is what he was. I do not consider that there is any reason to depart from the finding I made on that application that “As a state employee between 1993 and 2015, it is very unlikely that such a position would have generated sufficient income to fund the acquisition of the Property”.

Next Mr Lewis submits that the NCA was wrong to place reliance on Mr A’s conviction in the non-EEA Country in further support of the “income requirement” (Ground 3).

The fact of Mr A’s recent conviction for fraud in the non-EEA Country is not in issue, and there is no on-going appeal of that conviction.

However, relying on a report prepared by Professor Bowring on the legal system and the general human rights position in the non-EEA Country, and statements from Mr A’s two lawyers who sought to represent him at his trial, Mr Lewis submits that their evidence demonstrates why it was completely unacceptable for the NCA to rely on Mr A’s conviction. He contends that the criminal proceedings were abusive, conducted without any regard to any defence rights, and ultimately amounted to a show trial.

Professor Bowring refers to the most recent US State Department’s report (for 2017, published May 2018) and other authoritative reports, and concludes (at para 21):

“It follows in my opinion from these and many other reports that there is no independent judiciary in [the non-EEA Country], and that the chances of receiving a fair trial by reference to international standards are effectively nil.”

Professor Bowring points to interference with lawyers (through intimidation and threats and disbarment on questionable grounds, apparently to prevent them from carrying out their work) as further factors increasing the risk of unfair trial in the non-EEA Country.

Mr A’s lawyers consider the criminal proceedings launched against him to have been without merit and improperly motivated. Lawyer 1 describes how on 4 December 2015 Mr A was summoned to the Main Department of Organised Crime. When he arrived he was met by the General Prosecutor, the First Deputy of the Ministry of Finance, the Minister of the Interior, and the First Deputy Minister of the Interior. Lawyer 1 states (at para 18 of his witness statement):

“These four senior officials told [Mr A] that they believed that all the bank’s problems were down to him. They told him that he had a choice – either he must pay them a sum of money to cover the debts from unpaid credits of the bank or he would be imprisoned. [Mr A] was stunned and told them that he could not be responsible for unpaid debts. This was the first time he had been directly accused. He was not prepared to give in to their extortionate demands, and in any event he didn’t have the sum they were talking about which amounted to 60m [in the non-EEA Country currency]. He explained that all of the money had gone to the projects in [the non-EEA Country and other named countries] and would be paid back after the work had been completed.”

Lawyer 1 continues (at para 30 of his witness statement) to relate that on 11 December 2015 he was contacted by the Main Department of Organised Crime because they needed him to participate in a procedural step against Mr A who had agreed to give a statement, following pressure that had been applied to him by the head of the investigation in his cell. Lawyer 1 states:

“I was called to witness this statement. In his statement, my client asserted (as he had done throughout his interrogations as a witness) that the projects that the [Bank] had funded were all legitimate. He denied any involvement in any crime. He signed the statement.”

Lawyer 1 describes the conduct of Mr A’s trial:

“52.

The prosecution called over 100 witnesses to give evidence. We were not permitted to cross-examine any of the key witnesses in the case, including in particular three critical witnesses who [we] were not allowed to ask a single question… I wanted to question these witnesses about their collaboration with the ruling [Head of State’s family], the illegal transactions they have been involved in, and why they had—as it seemed to my client—withheld primary documentary evidence from the prosecutors and the court, much of which was vital to my client’s defence because it would show that he had no involvement in any fraud. There were also other witnesses whom we could not ask any questions. And in other instances, the court would appear to allow us to begin cross-examining, only to interrupt and stop the cross-examination when we began.

53.

In total contravention of the [non-EEA Country] Criminal Procedural Code the prosecution did not read out any of the written evidence. We therefore remained completely in the dark as to what was actually in the file, and what this documentary evidence showed. We were also of course unable to challenge it.

54.

We made applications for 30 defence witnesses to give evidence. Every application was refused.

55.

We made numerous applications to submit written evidence. Every application was refused.

56.

Throughout the trial, I had the sense that I was the fifth wheel of the car. The way the proceedings were conducted against my client were unprecedented in [the non-EEA Country]. They were wholly contrary to [the non-EEA Country] law, and in complete violation of international fair trial standards. It seemed to me that the whole case was being directed by the Presidential administration, and that my client’s guilt had been determined by the Presidential administration in advance.”

On 10 December 2016 the Appeal Court refused Mr A’s application for a re-hearing and granted only an appeal on points of law. On 20 December 2016 Mr A appealed this decision to the Supreme Court. On 14 March 2017 the Supreme Court refused the application and remitted the case back to the Appeal Court to be heard solely in respect of an appeal against points of law. That appeal was heard on 20 May 2017. On 1 June 2017 the Appeal Court rejected the appeal. On 18 July 2017 Mr A lodged an appeal against the Appeal Court’s decision to the Supreme Court. On 12 October 2017 Mr A’s two lawyers attended the Supreme Court and withdrew his appeal because they had been denied access to their client.

Lawyer 1 states in his second witness statement (at para 38) that:

“At the time of the decision to withdraw our appeal [to the Supreme Court] [i.e. October 2017], our client was on hunger strike and being held in a punishment regime in the prison. Neither [Lawyer 2] nor myself were being permitted to see him, and we had both been threatened with criminal prosecution for assisting him to contact a journalist about his case.”

Lawyer 1 continues:

“41.

Our client is still able to lodge an appeal – he is in time. It is therefore still open to him to appeal the decision in due course, but obviously there may be consequences for him if he does so.

42.

The withdrawal of the appeal is no admission of guilt or acceptance of his fate. Rather it is symptomatic of the pressure that my client has been under in jail in [the non-EEA Country].”

In January 2018, while Lawyer 1 was in Strasbourg, and Lawyer 2 was on a prison visit, the Bar Association of the non-EEA Country convened a hearing (without notice), and determined disciplinary proceedings against them. Lawyer 1 was formally reprimanded, and Lawyer 2 was summarily suspended from practice for 12 months.

In the light of this evidence from Professor Bowring and her husband’s lawyers, Mrs A contends that no reliance whatsoever can properly be placed on the fact of her husband’s conviction. Mr Lewis submits that as a matter of principle no reliance ought ever to be placed on the conviction or judgment obtained following a flagrant denial of justice. He submits that the conviction is inadmissible, alternatively it has no probative value.

Mr Lewis relies on the conclusion of the European Court of Human Rights in Drozd and Janousek v France and Spain (1992) 14 EHRR 745, that “The Contracting States are, however, obliged to refuse their co-operation if it emerges that the conviction is the result of a flagrant denial of justice” (at para 110) (and, in the domestic context, see Joint Stock Co. Aeroflot – Russian Airlines v Berezovsky [2014] EWCA Civ 20, per Arden LJ at para 49). However those cases concerned the enforcement and neutral recognition of foreign judgments.

In the present proceedings the NCA is not seeking directly “to enforce” any judgment of the court of the non-EEA country, nor, importantly, do they concern a final order relating to the disposal of property. They are only dealing with a provisional measure. In R (on the application of Ismail) v Secretary of State for the Home Department [2016] UKSC 37, Lord Kerr drew a distinction (at paras 42-43) between serving a judgment and taking steps to ensure that it is enforced.

Mr Lewis acknowledges that the threshold for excluding reliance on a foreign conviction on human rights grounds is a high one. There would have to be a flagrant deprivation of an individual’s Article 6 rights (see In the matter of Al Zayat [2008] EWHC 315 Crim), for example, where a conviction has been wholly or very largely based on a confession obtained by torture (see SOCA v A [2010] EWHC 3759 (Admin), per Ouseley J at para 18).

There is no exclusionary rule that prevents a court from relying on the fact of a conviction even if obtained flagrantly unfairly. The exclusionary rule that exists at common law is very narrowly confined. There is a general rule that evidence obtained by torture is inadmissible in judicial proceedings (A and Others v Secretary of State for the Home Department (No.2) [2006] 2 AC 221, per Lord Hoffmann at para 97).

The serious deficiencies in the criminal system of the non-EEA Country are well known. They were acknowledged and identified by Ms Bartlett in her witness statement (at paras 75.3 and 75.4) made in support of the original application before me on 27 February 2018. At paragraph 75.5 of her witness statement she also referred to the numerous allegations and reports which maintain Mr A’s arrest and subsequent conviction were wrong, unfair and/or politically motivated. The report of Professor Bowring (with four lever-arch files of exhibits), his addendum report, and the two witness statements from Lawyer 1 plainly provide additional, and in the case of Professor Bowring’s reports, very detailed evidence of the deficiencies in the criminal justice system in the non-EEA Country. However, as Mr Lewis accepts, the only relevance of the evidence of Professor Bowring is that it provides a description of the criminal trial process in the non-EEA Country against which to judge the evidence of Lawyer 1 as to the fairness of Mr A’s trial.

Lawyer 1 raises serious concerns about the fairness of Mr A’s trial. However I do not consider that the NCA is required at this investigative stage to determine issues that may arise at a later stage, such as the fairness of Mr A’s trial, depending on any action that the NCA may decide to take.

At the time of the application the witness statement of Lawyer 1 was not before the court. Although the NCA was aware of the deficiencies in the criminal system of the non-EEA Country (see para 79 of judgment), it cannot be said that it was wrong for the NCA to rely on the conviction at that time.

Even now, on the assumption Mr A had a trial that breached his Article 6 rights, I do not accept that it is impermissible to have regard to the conviction. This is not a case where the conviction resulted from a confession or torture. As Mr Hall observes, the converse is the case. Mr A set out his defence in a statement responding to the allegations that had been made against him (see paras 61-62 above). This defence was repeated by him in his evidence at trial.

Independent of the conviction there is evidence which provides some corroboration for the allegations made against him relating to the misuse of the Banks funds of which he was found guilty. Ms Bartlett in her first witness statement at paras 20-22 summarises the information from Harrods which shows that three separate loyalty cards were issued to Mrs A. Between September 2006 and June 2016, a total of £16,309,077.87 was spent by the use of these cards under the Harrods Customer Loyalty Rewards Card Scheme. This included spending on numerous different credit cards. Enquiries show that a significant number of these cards, namely 35 American Express, Mastercard and Visa cards were issued by the Bank. I agree with the NCA that this evidence is significant in the light of the reports of Mr A’s trial that allegations made against him included abuse of his position at the Bank by issuing credit cards in the names of family members, through which large debts were run up against the Bank.

Mr A has been convicted of serious crimes of fraud and embezzlement. The general nature of the allegations is clear, as is his defence. His conviction has not as yet been successfully challenged. I am not persuaded that the evidence of Lawyer 1 demonstrates a flagrant denial of Mr A’s Article 6 rights so as to require the NCA, and this court, to ignore his conviction at this investigative stage.

In those circumstances I consider that the NCA and this court can properly have regard to Mr A’s conviction when considering the “income requirement”.

Mr Lewis submits that in the light of the matters that give rise to Grounds 2 and 3, the NCA also failed to have regard to the likelihood – sufficient to defeat any “reasonable grounds for suspicion” under the income requirement – that having been involved in finance all his working life, and having been the Chairman of a major international bank for 14 years, Mr A would have had sufficient lawful sources of income available to him to put down the deposit on the Property which he did in 2009, and then meet the mortgage payments thereafter (Ground 4).

Grounds 2 and 3 are not made out for the reasons I have stated. That being so Ground 4 adds nothing.

In any event Mr A’s conviction was only one of a number of factors relied upon by the NCA, and I am satisfied that the income requirement is satisfied, irrespective of any reliance on the conviction.

The UWO made on 27 February 2018 contains a Penal Notice which reads:

“If you [Mrs A] disobey this order you may be held to be in contempt of court and may be imprisoned, fined, or have your assets seized.”

The same warning is repeated at paragraph 3 of the “Important Notes” at the conclusion of the order in the following terms:

“Further or alternatively, any person who disobeys the Unexplained Wealth Order, or knows of either order and does anything which helps or permits another to breach the terms of the same, may be held to be in contempt of court and may be imprisoned, fined or have their assets seized.”

Mr Lewis submits that such a penal notice should not be attached to a UWO. The reason he advances is that Parliament has set out exhaustively the consequences of non-compliance with a UWO in s.362C POCA which is headed “Effect of order: cases of non-compliance”. S.362C(2) provides:

“The property is to be presumed to be recoverable property for the purposes of any proceedings taken in respect of the property under Part 5, unless the contrary is shown.”

Parliament could have provided that non-compliance would amount to an offence punishable with imprisonment and/or a fine, but it did not. The statute provides, he submits, a complete code which “covers the ground” on the effects of non-compliance with a UWO (as well as where there has been “purported” compliance with such an order: s.362D).

If his submission is correct, Mr Lewis accepts that only the penal notice falls away.

However, I reject this ground of challenge. I consider it clear from the wording of s.362C that it is concerned with the effect of a UWO in cases of non-compliance; it is not concerned with the general consequences of non-compliance. I do not accept that s.362C ousts, by implication or otherwise, the court’s power to attach a penal notice to a UWO and to enforce non-compliance with such an order through committal proceedings brought under CPR Part 81.

I agree with Mr Hall that there is a strong public interest (quite separate from investigating and recovering unlawfully obtained property) in ensuring that orders are not disobeyed at the option of a party.

Further, as Mr Hall points out, if the contention that the statute provides a complete code be correct, it would have adverse consequences which it is unlikely Parliament intended. It would leave an “enforcement gap”. Perhaps, most significantly, a third party could assist a respondent to undermine an order, for example by destroying documents.

I agree with Mr Hall that if Parliament intended to oust the court’s jurisdiction to control its own proceedings by contempt, one would expect Parliament to have said so.

It is not clear that Mrs A has a beneficial interest in the Property that can be interfered with by a UWO. VG was and remains registered as the sole proprietor of the property (see para 12 above), and on 3 June 2015 Mrs A stated that she was the beneficial owner of VG (see para 15 above). She appears to be a beneficiary of a discretionary trust. However a discretionary beneficiary, who is merely a member of a class to whom the trustees have a discretion to apply trust capital or income, has no interest in the narrow sense (see Lewin on Trusts (19^th Ed) (at para 1-008); and an object of a discretionary trust has no proprietary interest in the trust assets or capital (1-061).

Mr Lewis submits that at a minimum the UWO interferes with the interests of both Mrs A and her husband in the “peaceful enjoyment” of their property. I do not accept this is so. The UWO only concerns property in a general sense. Mere inference with the enjoyment of property is not sufficient. As Carnwath LJ stated in Thomas v Bridgend CBC [2012] QB 512 at para 38:

“To summarise, loss of a quiet and pleasant environment, without evidence of loss of value, is not enough to engage article 1 of the First Protocol; nor article 8 of the Convention unless the effects are ‘direct and serious’.”

The UWO itself does not give rise to a loss of value.

Mr Hall submits that even if (contrary to his contention) the UWO does interfere with any rights under A1P1, any interference is justified. Such an interference, he contends, is lawful, pursues a legitimate aim and is proportionate.

Mr Lewis submits that the UWO is disproportionate. Not only has there been no anterior finding that the property itself represents the proceeds of crime, still less of criminal liability on the part of either Mrs A or her husband, but Mr A is in custody in the non-EEA Country. Mr Lewis contends he is therefore unable to address the matters raised on this application, and Mrs A is in a similar position as she is severely restricted in her ability to discuss these issues with her husband. Further, Mrs A is concerned that any information she gives in response to the UWO may be shared with the authorities in the non-EEA Country, which would be likely to create additional risks for her husband and herself.

I reject this submission. I am satisfied that any interference is proportionate. In my view it strikes a “fair balance”. There are grounds to believe that the property has been obtained through unlawful conduct; and this is no more than a modest interference with the peaceful enjoyment of property. Mrs A is being asked to provide information about one residential property in which she has lived for a number of years and in circumstances where she has informed the Home Office that she is the beneficial owner of the BVI company which is the registered proprietor of the property.

Mrs A contends that the UWO offends her privilege against self-incrimination and spousal privilege given that she is the subject of an ongoing criminal investigation in the non-EEA Country (see para 20 above); her husband is in custody in that country, and is at risk of further criminal proceedings there; they both share an interest in the property; and on the NCA’s case they both could be said to be at risk of criminal prosecution in the UK.

I do not accept that the UWO offends the privilege against self-incrimination and spousal privilege. This is so for a number of reasons.

First, s.14(1) of the Civil Evidence Act 1968 (“the 1968 Act”) provides:

“14 Privilege against incrimination of self or spouse or civil partner

(1)

The right of a person in any legal proceedings other than criminal proceedings to refuse to answer any question or produce any document or thing if to do so would tend to expose that person to proceedings for an offence or for the recovery of a penalty—

(a)

shall apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law; and

(b)

shall include a like right to refuse to answer any question or produce any document or thing if to do so would tend to expose the spouse or civil partner of that person to proceedings for any such criminal offence or for the recovery of any such penalty.”

It is clear from s.14(1)(a) of the 1968 Act that the privileges “apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law”. Accordingly, Mrs A and her husband have no right to invoke either privilege with regards to the alleged risk of prosecution for criminal offences outside the UK. However, as Mr Hall correctly observes, the risk of prosecution abroad can nevertheless be a relevant factor when deciding whether to exercise a discretion to order disclosure (see para 114 below).

Second, I do not consider that the evidence discloses a real and appreciable risk that Mrs A or her husband will be prosecuted for offences in the UK (see Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [1978] AC 547). Accordingly the threshold test for the privileges to apply has not been satisfied (see Matthews and Malek on Disclosure (5^th Ed) at para 13.11). Mrs A asserts in her witness statement (at para 2) both privileges, but does not identify the requested information which gives rise to the alleged risk. Put simply, she has not said which answers to which questions might incriminate her. Mere assertion is not sufficient (JSC BTA Bank v Ablyasov [2009] EWCA Civ 1125, per Sedley LJ at para 39).

Mrs A states that she has been advised that her responses to the questions posed in Schedule 3 to the UWO, and the requirements to produce documents in Schedule 4 to the UWO could be used to incriminate her and/or her husband in criminal proceedings here in the UK, or in the non-EEA Country. However a court must be satisfied of the risk of prosecution (R (CPS) v Bolton Magistrates’ Court [2004] 1 WLR 835), which I am not.

Third, I take the view that Parliament in creating the UWO procedure has necessarily intended that the privileges be abrogated (see Bank of England v Riley [1992] Ch 475, per Ralph Gibson LJ at pp.484-485; and Bishopsgate Investment Management Ltd v Maxwell [1993] Ch 1, per Dillon LJ at p.20; and R v Hertfordshire CC ex parte Green Environmental Industries Ltd [2000] 2 AC 412, per Lord Hoffmann at p.420).

I do not accept Mr Lewis’s submission that this is not so because Parliament has determined that there should be specific exceptions to the privilege against self-incrimination (see s.362F(1)), but some of those exceptions apply to the spousal protection expressly provided by s.14 of the 1968 Act.

A UWO imposes a requirement to provide information and to produce documents (s.362A(3), (5) and (6)). These powers “would be rendered very largely nugatory if privilege applied” (see Beghal v DPP [2016] AC 88, per Lord Hughes at pp.117-118 on the privilege impliedly excluded in Sch.7 of the Terrorism Act 2000). S.362F contains a “use immunity” clause which, as Lord Hughes in Beghal (at para 62) observed often suggests a parliamentary intention to exclude the privilege.

Fourth, I agree with Mr Hall that even if POCA has not abrogated the privileges by necessary implication, they are excluded by s.13 of the Fraud Act 2006 (“the 2006 Act”) on the particular facts of this case. Whilst Mrs A has not identified the offence(s) for which she and her husband are said to be at risk of prosecution, it is probable that any offence will comprise a qualifying offence under the 2006 Act. S.13(1) of the 2006 Act excludes the privileges “in proceedings relating to property”. I consider that these UWO proceedings are proceedings for “an account of any property or dealings with property” within the meaning of s.13(3)(c).

That leaves the question of discretion. Mr Hall accepts that whilst Mrs A is not entitled to invoke the privileges as of right, any risk of prosecution in the UK or abroad can in principle be a relevant factor when determining whether to exercise the discretion to make a UWO under s.362A(1) POCA (see R (River East Supplies Ltd) v Crown Court at Nottingham [2017] 4 WLR 135, per Simon LJ at para 45).

However, I do not consider that disclosure of information under the UWO about the property will give rise to a real or appreciable risk of prosecution of Mrs A or her husband for offences in the UK or in the non-EEA Country (even assuming for present purposes that she would return to the non-EEA Country). There is no evidence that they would be at risk of further criminal proceedings in any event.

Further, in relation to any risk of prosecution in the non-EEA Country, I bear in mind that any information which is provided by Mrs A will be provided to the NCA. Mr Hall reminds me that the NCA, as a public body, has a duty to act consistently with the ECHR, and must comply with the Overseas Security and Justice Assistance guidance which includes specific processes for deciding whether disclosure to a third party would give rise to an impermissible risk. There is no suggestion that the NCA would use or disclose information sought otherwise that for the purposes of the statute (see Bank of England v Riley [1992] Ch 475, per Gibson LJ at 486). I do not consider that any further safeguards, whether by way of undertakings from the NCA or otherwise (see SOCA v Khan [2012] EWHC 3235 (Admin), per Cox J at para 46) are required.

Mrs A contends, for all the reasons advanced in support of Grounds 1-7, and the broader context to these proceedings, that even if the statutory requirements of making a UWO were made out, the court ought not to have exercised its discretion to make the order in this case.

As for those broader considerations, Mr Lewis submits that on the NCA’s own case the UWO seeks to obtain information about how Mr A obtained the property in 2009, which is the family home in London, yet Mr A is currently detained in custody in the non-EEA Country, and will be unable meaningfully to engage with this process or to participate in any civil recovery proceedings that the NCA may bring in respect of the property for many years. Further, Mr Lewis submits the court should have regard to Mrs A’s position. She is at risk of unfair criminal proceedings and thereafter of detention in conditions which, it is said, would violate Article 3 ECHR, if she were ever to return to the non-EEA Country. She also fears the effects of any disclosure on her husband’s position if any information she provides to the NCA was disclosed to the authorities in the non-EEA Country.

None of the matters raised in Grounds 1-7, individually or cumulatively, lead me to the conclusion that the order should not have been made. I consider that in all the circumstances it was, and remains, appropriate for the order to be made. The statutory criteria for making the order have been met. Any interference with Mrs A’s rights under A1P1 ECHR are proportionate, and the terms of the order are justified.

The UWO has been made at the investigative stage of this case. I agree with Mr Hall that the concern that Mr A will not be able to participate meaningfully in the UWO process is not a reason for discharging the order. It has been made against Mrs A who informed the Home Office that she is the ultimate beneficial owner of the registered proprietor of the property. It does not follow from the fact that Mr A is in custody abroad that the NCA is unable to carry out its investigation. It is clear from Ms Bartlett’s witness statement (at paras 74-108) and the documentation in this case that there are others who may well be able to assist with the investigation, and who are well placed to explain Mr A’s sources of wealth and how the charge on the Property was paid off. If, subsequently, civil recovery proceedings are instituted, Mr A claims an interest in the property or wishes to participate as a witness, consideration will then have to be given to ensuring a fair trial of the claim at that stage.

When considering Ground 7 I dealt with Mrs A’s concerns that the information she gave to the NCA would be transmitted to the authorities in the non-EEA Country (see para 116 above). As for her personal position, there is no evidence that she proposes to return to the non-EEA Country.

In my judgment, for the reasons I have given, none of the grounds advanced for discharging the UWO are made out. Accordingly, this application is dismissed.