United States of America (USA) v Abacha & Ors

This is an application to continue a Freezing Injunction granted under s.25 of the Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”) ex parte by Teare J on 25 February 2014 and continued by Walker J on 25 March 2014 until today.

The Claimant also applies for disclosure in the event that the injunction is continued. This judgment is concerned only with the question whether the Freezing Injunction should be continued.

The foreign proceedings in aid of which the Freezing Injunction is sought are an in rem forfeiture claim brought by the Claimant against certain assets held by certain of the Defendants (“the US claim”). The Claimant alleges that these assets are derived from the proceeds of corrupt misappropriations carried out by the former President of Nigeria, General Abacha, and certain of his relatives and associates and are liable to forfeiture under 18 USC § 981 by reason of having been involved in money laundering within the jurisdiction of the US.

The US claim was accepted by the US District Court for the District of Columbia on 18 November 2013. The decision to bring the US claim is part of the US Kleptocracy Asset Recovery Initiative and was taken at a high level in the US with the approval of the US Assistant Attorney General for the Criminal Division. On 28 August 2012 the Federal Republic of Nigeria (the “FRN”) presented a request to the US Department of Justice pursuant to Articles 54 and 55 of the UN Convention against Corruption to order the confiscation of property corruptly acquired by General Abacha.

The principal allegation of corruption made in the US claim is described as the “Security Votes Fraud” which involved the theft of more than US$2 billion from the Central Bank of Nigeria under cover of instructions approved by General Abacha that were issued on the false basis that the money was required for emergency security purposes. The money so obtained was then laundered through the purchase of Nigerian Par Bonds (“NPBs”).

A further fraud relied on in the US claim is the “Dumez Extortion” which involved the extortion by General Abacha of US$97,375,543 from the Dumez Group, a French civil engineering concern, in return for allowing the payment of contractual sums totalling US$389,787,400 due to the Dumez Group on government contracts.

The 1^st Defendant, Mohammed Sani Abacha ("D1”) is the second son of General Abacha. The 2^nd Defendant, Abubakar Atiku Bagudu ("D2"), was an associate of General Abacha and remains an associate of D1. He continues to be a member of the Nigerian Senate. The Claimant alleges, it would appear with good cause, that: (i) D1 and D2 misappropriated assets belonging to Nigeria acting on their own behalf and/or on the instructions of General Abacha and transported the stolen assets out of Nigeria. It is further alleged that D1 and D2 control the assets which are the subject of the forfeiture claim.

The 3^rd to 6^th Defendants (“D3”,“D4”, “D5” and “D6”) are companies owned and/or controlled by D1 and D2 and used by them to hold assets as to which there is a good arguable case that they were stolen from Nigeria in the manner alleged in the US claim. D3 and D4 are themselves subject to forfeiture in the US Proceedings. They are BVI companies that have been struck off the BVI Companies Register for non-payment of statutory fees.

D1, D3 and D4 have been served with the Claim Form, the Freezing Injunction granted by Teare J and related documents (“the pertinent documents”) but they have not acknowledged service and did not appear and were not represented at the hearing.

Various unsuccessful attempts have been made to serve the pertinent documents on D2 in Nigeria. There is, however, no doubt that he is well aware of these proceedings since the evidence includes an affidavit sworn by his brother which makes this abundantly clear.

D5 and D6 (together "Blue Holdings") are Singaporean companies owned by a trust for the benefit of D2’s family. D2’s brother, Mr Ibrahim Bagudu, is a director of both companies which have been served with the pertinent documents. It is not in dispute that proceeds from the Security Votes Fraud can be traced into the assets held by Blue Holdings.

The 7^th to 11^th Defendants (the "Institutions") are banks and other financial institutions which are believed (as at dates in the last few years) to hold assets which are subject to the forfeiture claim. No allegation of wrongdoing is made against these defendants, all of which have been served with the pertinent documents and have themselves served acknowledgements of service. As it was entitled to do, the Claimant has made them Defendants in these proceedings pursuant to the Chabra (Footnote: ² ) jurisdiction.

The 8^th to 11^th Defendants do not resist the continuation of the Freezing Injunction. The 7^th Defendant (“Standard Bank”) contends that it should not be party to the proceedings herein and the Claimant has indicated that if the Freezing Injunction is continued it would be willing to release Standard Bank from the proceedings after determination of the Claimant’s related disclosure application, provided that the 7^th Defendant agrees to comply with the Freezing Injunction and complies with any disclosure order made against it.

There are three classes of Institutions and accounts: (1) Standard Bank which holds assets totalling US$21.7 million in two accounts in London in the name of D3; (2) the 8^th and 9^th Defendants (“HSBC”) which hold assets totalling US$1.6 million and £940,000 in accounts in the name of the D1; and the 10^th and 11^th Defendants which it is alleged hold assets totalling €95 million in four accounts in the names of companies owned by a trust for the benefit of D2 and certain members of his family.

The money in the accounts in the name of D3 held at Standard Bank is very arguably traceable to the Security Votes Fraud. During the period November 1997 – January 1998 monies obtained through the Security Votes Fraud were transferred from D2's account in Nigeria to accounts with Standard Bank in London in the name of D3. These monies were then used to purchase (on a leveraged basis) NPBs which were transferred to Banque SBA in Paris and a residual balance was left in accounts with Standard Bank. It is believed that this balance is in the sum of approximately £21.7 million and is held in account numbers 100318409 and 100130688.

There is also a strongly arguable case that D1’s accounts at HSBC are the proceeds of the Dumez Extortion and the Security Votes Fraud. In October 1997, US$11,114,983, which had been allegedly extorted from Dumez by General Abacha, was paid into a bank account (the "Golders Green Account") in the name of D1 at the Golders Green branch of Midland Bank (now HSBC). These monies were then mixed with other monies in the account, which included funds which very arguably resulted from the Security Votes Fraud.

In June 1998, US$4 million of the funds in the Golders Green Account were used to purchase Capital Protected Bonds and International Life Bonds from Midland Life International Limited (now called HSBC Life (Europe) Limited). HSBC Life (Europe) Limited is an Irish registered company.

In June 1998, US$1 million was transferred from the Golders Green account into a fund called "Midland Offshore Global Investment Portfolio Limited". This investment was redeemed in September 1999 and is now held in a fund called the HSBC International Select Fund, which appears to be a sub-fund of the Golders Green Account. As at June 2012, the balance of this fund was approximately £940,000. Certain other monies in the Golders Green Account were transferred to accounts in Jersey. The Golders Green Account was closed in June 2012, and the closing balance (approx. US$1.6 million) is held by HSBC in an internal account.

The HSBC monies therefore comprise (a) the closing balance on the Golders Green Account; (b) the investment in the HSBC International Select Fund; and (c) investments held by HSBC Life (Europe) Limited, administered either in London or from Ireland.

There is a good arguable case that the Blue Holdings and Hambros accounts contain funds traceable to the Security Votes Fraud. Monies allegedly stolen through the Security Votes Fraud were transferred to a bank account at ANZ London in the name of companies owned and controlled by D1 and D2. The monies were mixed with monies from other companies owned or controlled by D1 and D2 and used to purchase (on a leveraged basis) NPBs with a face value of US$490 million. In November 1998, the NPBs were transferred to a number of different institutions, one parcel going to an account in the name of Ridley Group held at Crédit Agricole Indosuez London. These NPBs were subsequently liquidated and paid into accounts with Waverton Investment Management Limited (then called J.O. Hambro Investment Management Limited). The monies were subsequently transferred into accounts in the name of Blue Holdings with Waverton Investment Management Limited, and with James Hambro & Partners LLP.

In March 1999 Compagnie Noga d’Importation et d’Exportation SA (“Noga”) brought proceedings (the “Noga Proceedings”) in the Commercial Court (1999 Folios No 404, 405) against certain Defendants including D2, claiming that Noga had been wrongfully deprived of the benefit of the sale of certain Nigerian debt instruments. The transaction was known as the “Ajaokuta debt buy back” (hereinafter “the Ajaokuta transaction”).

In the course of these proceedings D2 swore an affidavit dated 26^th April 1999 disclosing his assets and those in which he had a beneficial interest, including the existence of the Ridley Group Trust and that it held NPBs of a face value of US$90 million held by Ridley Group Limited. He also set out his knowledge of what had become of the proceeds of the Ajaokuta transaction.

In June 1999 the FRN started its own proceedings in the Commercial Court (the “Ajaokuta proceedings”) against D2 and others alleging that the Ajaokuta transaction was a corrupt transaction obtained with the help and influence of the late General Abacha the profits of which were corruptly obtained by the Defendants.

There was then a dispute as to whether the Noga and the Ajaokuta proceedings had been settled. This dispute was decided by Rix J after a trial of preliminary issues at which evidence was given both as to the Ajaokuta transaction and the Security Votes Fraud. Rix J’s decision that a binding settlement agreement had been concluded between the FRN and the Defendants, but not between the Defendants and Noga, was upheld by the Court of Appeal.

In July 2001, the FRN brought proceedings in the Chancery Division against certain defendants, including D2, asserting a proprietary claim in respect of monies that were alleged to have been corruptly taken from the Central Bank of Nigeria in the course of the Security Votes Fraud (the “Security Votes Fraud proceedings”). In the course of this action a Freezing Injunction was granted by Hart J on 25^th September 2001 and pursuant to that order D2 swore a further affidavit disclosing his assets and explaining his understanding of the flow of funds from the Security Votes transfers to the assets then held by Ridley Group Limited. This Freezing Injunction defined “Security Votes Monies” as meaning the monies withdrawn from the Central Bank of Nigeria listed in Annex 1.

On or about 21^st August 2003, a settlement agreement signed on behalf of the FRN by the Nigerian Attorney General was concluded between the FRN and D2 on behalf of himself and his “Affiliates” (viz trusts, anstalts and foundations in which D2 has, had or is alleged to have had an interest) and “Named Affiliates”. The matters resolved under the settlement included the claims made by FRN in relation to the Security Votes Fraud proceedings and the Ajaokuta proceedings and it was provided that D2’s Affiliates should have the full benefit of the release granted by the settlement. The settlement also provided for the transfer by D2 of sums held in variously named accounts for the benefit of the FRN and for the renouncement by FRN of any interest whatsoever in certain scheduled assets that would be held by D2 free from any claims by FRN. Included in those scheduled assets are assets the forfeiture of which the Claimant seeks in the US Claim.

It is pertinent to note that: (1) although the Nigerian Request for Mutual Assistance addressed to the US Department of Justice under the UN Convention against Corruption stated that proceeds of crimes committed by the Abacha criminal organization have been frozen and a total exceeding US$ 1.2 billion had been recovered by the FRN following judgments or voluntary restitution, it made no mention of the fact that under the settlement with D2 he and his affiliates were permitted to retain free from any claim by the FRN the scheduled assets; and (2) the Claimant was unaware that the FRN had agreed that D2 and his affiliates could retain the scheduled assets until after these proceedings for relief under s. 25 of the 1982 Act were begun.

By Article 143 of the 2005 Order, proceedings for a “recovery order” pursuant to an “external order” may be taken by “the enforcement authority” in the High Court against any person who the authority thinks holds recoverable property. An “external order” is an order made by an overseas court whereby property is found to have been obtained or is believed to have been obtained as a result of or in connection with criminal conduct (i.e. conduct which is an offence in the UK or would constitute such an offence in the UK if it occurred there).

The “enforcement agency” is the National Crime Agency or the DPP or the Director of HM Revenue & Customs Prosecutions or the Director of the SFO. A recovery order vests the property to which it relates in the Trustee for Civil Recovery (see Article 177 (3)).

The Strategic Centre for Organised Crime at the Home Office has confirmed that the UK would seek to enforce any civil forfeiture made in the US Claim and would return the money recovered to the US on confirmation that the US would in principle seek to return it to Nigeria. However, the UK authorities have refused a request by the Claimant to apply for an interim freezing order under the 2005 Order on the ground that the applicable limitation period of 12 years prevents such an application. (Footnote: ³ )

An application by the enforcement authority for an interim order in anticipation of an external order would have been the Claimant’s preferred course of action, but that avenue having become unavailable, the Claimant has proceeded under the 1982 Act.

In relevant part, section 25 (as amended) provides:

Interim relief in England and Wales and Northern Ireland in the absence of substantive proceedings.

(1)

The High Court in England and Wales or Northern Ireland shall have power to grant interim relief where—

(a)

proceedings have been or are to be commenced in a Brussels or Lugano Contracting State or a Regulation State other than the United Kingdom or in a part of the United Kingdom other than that in which the High Court in question exercises jurisdiction; and

(b)

they are or will be proceedings whose subject-matter is within the scope of the Regulation as determined by Article 1 of the Regulation (whether or not the Regulation has effect in relation to the proceedings).

(2)

On an application for any interim relief under subsection (1) the court may refuse to grant that relief if, in the opinion of the court, the fact that the court has no jurisdiction apart from this section in relation to the subject-matter of the proceedings in question makes it inexpedient for the court to grant it.

(3)

Her Majesty may by Order in Council extend the power to grant interim relief conferred by subsection (1) so as to make it exercisable in relation to proceedings of any of the following descriptions, namely—

(a)

proceedings commenced or to be commenced otherwise than in a Brussels or Lugano Contracting State or Regulation State ;

(b)

proceedings whose subject-matter is not within the scope of the Regulation as determined by Article 1 of the Regulation;

(c)

. . . . . .

By virtue of paragraph 2 of the Civil Jurisdiction and Judgments Act 1982 (Interim Relief) Order 1997, the High Court of England and Wales now has power to grant interim relief under s. 25 (1) in a case like the instant action where foreign proceedings have been commenced otherwise than in a Brussels or Lugano Contracting State.

An applicant for a Freezing Order under section 25 must satisfy the court that: (i) the relief sought is in respect of civil proceedings brought outside the jurisdiction; (ii) the applicant has a good arguable case in those proceedings; (iii) there is real risk that in the absence of a freezing order the assets sought to be frozen will be dissipated so that a judgment in the foreign proceedings will go unsatisfied; and (iv) it is not inexpedient for the relief sought to be granted.

There has been a number of cases that have considered the requirement of expediency. In Crédit Suisse Fides Trust SA v Cuoghi [1988] QB 818 at 827, Millet LJ, having noted that Article 24 of the Lugano Convention authorised but did not require a contracting state to make protective orders in support of proceedings brought in another contracting state, said:

I recognise that an ancillary jurisdiction ought to be exercised with caution, and that care should be taken not to make orders which conflict with those of the court seised of the substantive proceedings… The principle which underlies article 24 is that each contracting state should be willing to assist the courts of another contracting state by providing such interim relief as would be available if its own courts were seised of the substantive proceedings: see Alltrans Inc v Interdom Holdings Ltd [1991] 4 All ER 458, 468 per Leggatt LJ. …

In other areas of law, such as cross-border insolvency, commercial necessity has encouraged national courts to provide assistance to each other without waiting for such co-operation to be sanctioned by international convention. International fraud requires a similar response. It is becoming widely accepted that comity between the courts of different countries requires mutual respect for the territorial integrity of each other’s jurisdiction, but that this should not inhibit a court in one jurisdiction from rendering whatever assistance it properly can to a court in another in respect of assets located or persons resident within the territory of the former.

In Motorola Credit Corpn v Uzan (No2) [2004] 1 WLR 113 at 115 the Court of Appeal said:

As the authorities show, there are five particular considerations which the court should bear in mind, when considering the question whether it is inexpedient to make an order. First, whether the making of the order will interfere with the management of the case in the primary court e.g. where the order is inconsistent with an order in the primary court or overlaps with it. That consideration does not arise in the present case. Second, whether it is the policy in the primary jurisdiction not itself to make worldwide freezing/disclosure orders. Third, whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located. If so, then respect for the territorial jurisdiction of that state should discourage the English court from using its unusually wide powers against a foreign defendant. Fourth, whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order. Fifth, whether, in a case where jurisdiction is resisted and disobedience to be expected, the court will be making an order which it cannot enforce.

In my judgment, the Claimant has satisfied requirements (ii) and (iii) as set out in paragraph 34 above and the contrary was not argued. What was argued by Mr Stanley QC on behalf of the the Blue Holdings defendants was that requirements (i) and (iv) had not been established by the Claimant and for these reasons the Freezing Injunction ought not to be continued against these Defendants.

As to (i), Mr Stanley QC submitted that the US Claim was a criminal, not a civil proceeding, having regard to the fact that the Claimant had to prove that the criminal offences relied on in the Complaint had been committed before the arrested assets could be forfeited under 18 USC § 981. I reject this submission. Looking at the substance of the Claim, although the Claimant must prove that the pleaded offences were committed before a forfeiture order can be made, the US Claim does not involve the prosecution and sentencing of any individual in a criminal court which are the hallmarks of criminal proceedings. Instead, the US Claim is a claim for the vesting in the US Government of property used in or resulting from certain crimes and as such it is in my view a civil proceeding within section 25 (1) (a).

As to requirement (iv), Mr Stanley argued that a judgment in the US Claim would not be enforceable in England at common law whether in rem or in personam and accordingly it could not be expedient to grant the relief sought in aid of the US Claim. A judgment in the US Claim would not be enforceable in rem because the property to be forfeited was outside the US and a foreign judgment in rem is enforceable at common law only if the subject matter of the proceedings was situate within the jurisdiction of the foreign court at the time of the proceedings, see Dicey, Morris & Collins The Conflict of Laws (15^th ed) (“Dicey”) 14R-108.

A judgment in personam against Blue Holdings would not be enforceable at common law because: (i) Rule 43 (Footnote: ⁴ ) in Dicey would not be satisfied; and/or (ii) the English Court has no jurisdiction to entertain an action for enforcement, either directly or indirectly, of a penal or other public law (see Dicey, para 5R-019).

Mr Stanley accepted that the machinery in Part 5 of the 2005 Order for the enforcement of an external order was a lawful statutory exception to the common law rules concerning the enforcement of a foreign judgment. But he submitted that it was not enough for the purpose of satisfying the requirement of expediency that a judgment on the US Claim could and would ultimately be lawfully enforced by the UK enforcement authority. The whole structure of the 2005 Order is explicit and clear in placing all enforcement activity in the hands of the UK authorities, not foreign sovereigns. If the enforcement machinery provided under the 2005 Act is unavailable for some reason, the Claimant ought not to be permitted to proceed in its own right under s. 25 of the 1982 Act.

Mr Stanley further argued that it was inexpedient to continue the Freezing Injunction because it would be quite wrong for the assets of Blue Holdings to be forfeit to the US for the purpose of being returned to the Nigerian people when this would be wholly inconsistent with the settlement entered into with D2 by the FRN for and on behalf of the people of Nigeria.

Finally, it was Mr Stanley’s contention that the Claimant had failed to make full and frank disclosure to Teare J when successfully submitting that it was inappropriate to require the Claimant to give a cross-undertaking in damages. At the hearing before Teare J, Counsel for the Claimant referred the judge to Financial Services Authority v Sinaloa Gold plc [2013] UKSC 11 and US Securities Exchange Commission v Manterfield [2010] 1 WLR 172 and the authorities cited therein. In Mr Stanley’s submission, the judge should have been told that under the statutory machinery for enforcing external orders there are provisions that allow for compensation where damage is suffered by reason of an order that ought not to have been made under the 2005 Order. Mr Stanley argued that if it had been made clear to the judge, as it should have been, that he was being asked to make an order which was in all material respects tantamount to an order under the 2005 Order but at the instance of a person not entitled to apply for such an order and without provision for compensation, Teare J might well have reached a different conclusion than he did on whether the order should contain a cross-undertaking in damages.

I deal first with Mr Stanley’s arguments founded on the FRN and D2 settlement agreement and material non-disclosure which were not in the forefront of his submissions in opposition to the continuation of Teare J’s order.

In my view, the settlement agreement does not render it inexpedient to continue the Freezing Injunction in order to hold the ring pending the determination of the US Claim. The Claimant is not an assignee of the FRN’s rights to the proceeds of the corrupt practices relied on and nor was it a party to the settlement agreement or the proceedings thereby settled. Whether, notwithstanding these matters, the settlement is a defence or is otherwise relevant to the US Claim is a matter for the US Court and it would not be appropriate in my judgment to pre-empt the US Court on this issue by refusing to continue the Freezing Injunction in light of the settlement.

As to Mr Stanley’s full and frank disclosure argument, in my judgment the way in which the cross-undertaking point was dealt with before the judge involved no failure to make proper disclosure to the court. As the judge appreciated, the application was being made under s. 25 of the 1982 Act because the statutory machinery was unavailable and that being so, the relevant authorities were cited to him and there was no necessity to refer to the compensation provisions in the POCA statutory scheme.

I turn then to Mr Stanley’s principal contentions. In my judgment, he is correct to submit that a judgment in the US Claim would not be enforceable in rem in England at common law for the reasons he advanced. His submission that a judgment in the US Claim would not be enforceable at common law in personam because of a failure to comply with Rule 43 is also correct and I shall assume, without deciding the point, that such a judgment would additionally be unenforceable at common law on the ground that to enforce it would involve the court in enforcing directly or indirectly a foreign penal or other foreign public law.

Attractively presented as they were, I decline to accept these submissions. This application under s. 25 is not an application to enforce a foreign judgment but to continue an order designed to hold the ring until a judgment in the US Claim can be lawfully enforced under the 2005 Order, and in my opinion the fact that the application is made by the US in the exercise of its sovereign authority rather than under the 2005 Order is not a reason for concluding that it would be inexpedient to continue the Freezing Injunction. Indeed, I have come to clear view that it is unquestionably expedient for this court to render the assistance sought by the Claimant in aid of the US Claim. Corruption, like other types of fraud, is a global problem and it and its consequences are only going to be dealt with effectively if there is co-operation and assistance not only between the governments of states but also between the courts of different national jurisdictions. Orders enforcing US arrest warrants issued in the US Claim against property in Jersey and France have been made in those jurisdictions and I have no doubt that this court should follow suit and continue the Freezing Injunction ordered by Teare J on 25 February 2014.

The question of principle having been decided in favour of the Claimant, I shall hear submissions as to: (i) whether the Order should contain a cross-undertaking in damages; (ii) any other proposed amendments to the wording of the Order; and (iii) the Claimant’s application for disclosure in aid of the Order.