SFO Guidance on Corporate Co-operation

The SFO has published an amendment to its Operational Handbook on Corporate Cooperation. It states that cooperation is relevant to charging decisions and also to the appropriateness of a DPA against a corporate. According to the Guidance,

“cooperation means providing assistance to the SFO that goes above and beyond what the law requires”. Generally, this is said to include identifying suspected wrongdoing and criminal conduct at whatever level of the organisation and reporting it to the SFO in a timely manner whilst preserving the integrity of the evidence. Various examples, neither prescriptive nor exclusive, are given. Practical steps are set out, such as the preservation of digital and hard copy relevant material and their audit trails or assistance with industry-specific knowledge and practices.

The Guidance states that cooperation is “inconsistent with” protecting individuals, putting them on notice or creating a danger of tampering with evidence or testimony and, importantly, “silence about selected issues”.

Waiving LPP in the context of witness accounts is specifically addressed. As the Guidance acknowledges “the House of Lords held that the importance of legal privilege outweighs a defendant’s request for prior witness statements”.[1]

Amongst fraud lawyers, it has been a vexed question whether the SFO attitude to the waiver of LPP is necessary to demonstrate cooperation that might invoke the DPA route for a corporate. This latest guidance does not make matters much clearer: “an organisation that does not waive privilege and provide witness accounts does not attain the corresponding factor against prosecution that is found in the DPA code but will not be penalised by the SFO”. What “but will not be penalised” means is opaque in practical terms.

Any corporate claiming LPP must, of course, properly establish its claim and is at risk of challenge by the SFO but the SFO now states it “will be expected to provide certification by independent counsel that the material in question is privileged”. Does this added layer of assurance and expense indicate a lack of faith in the bona fides of lawyers acting for corporates which either voluntarily self-report or are caught in an investigation and are seeking to assist the SFO in its function as an investigator and prosecutor? Is it simply meant to make it more onerous for those with proper claims to LPP? Or is it to enable the SFO to rely on the certificate in a case (perhaps against an individual) when it is not in a position to disclose an earlier account by a witness because it is the subject of LPP? Whichever it is, despite the judgement in SFO v ENRC[2] the noose is tightening around LPP in serious fraud cases being investigated and prosecuted in England and Wales.

[1] Footnote 2 citing R v Derby Magistrates Court ex p B [1996] 1 SC 487

[2] [2018] EWCA Civ 2006

Amanda Pinto QC
33 Chancery Lane

Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to money laundering, alleged bribery and corruption and responding to investigations in civil and criminal matters. To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 020 7440 9950.

Conduct Committee responds to Transparency International report on corrupt and repressive regimes seeking influence and legitimacy through engagement with UK Parliamentarians

The Conduct Committee has published a response to the recommendations made by Transparency International in its 2018 Report (‘In Whose Interest).

In that report Transparency International, a non-governmental anti-corruption organisation, analysed how corrupt and repressive regimes seek influence and legitimacy through engagement with UK Parliamentarians and made five recommendations:

  1. Review the conduct of parliamentarians;

  2. Protect parliamentarians' independence on overseas visits;

  3. Prohibit parliamentarians from providing advisory services to foreign governments and state institutions;

  4. Better due diligence by parliamentarians; and

  5. Improvement of financial interest disclosure.

Fight against money laundering and terrorist financing: Commission assesses risks and calls for better implementation of the rules

Brussels, 24 July 2019

The European Commission is today adopting a Communication and four reports that will support European and national authorities in better addressing money laundering and terrorist financing risks. The Juncker Commission put strong EU rules in place with thefourth and the fifth Anti-Money laundering directives and reinforced the supervisory role of the European Banking Authority. The reports stress the need for their full implementation while underlining that a number of structural shortcomings in the implementation of the Union's anti-money laundering and counter terrorist financing rules still need to be addressed. Today's package will serve as a basis for future policy choices on how to further strengthen the EU anti-money laundering framework.

Frans Timmermans, First Vice-President said"We must close off all opportunities for criminals and terrorists to abuse our financial system and threaten the security of Europeans. There are some very concrete improvements which can be made quickly at operational level. The Commission will continue to support Member States in this, whilst also reflecting on how to address the remaining structural challenges."

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: "A credible framework for preventing and fighting money laundering and terrorist financing is essential to maintain the integrity of the European financial system and reduce risks to financial stability. Yet, today's analysis gives more proof that our strong AML rules have not been equally applied in all banks and all EU countries. So we have a structural problem in the Union's capacity to prevent that the financial system is used for illegitimate purposes. This problem has to be addressed and solved sooner rather than later."

Věra Jourová, Commissioner for Justice, Consumers and Gender Equality said: "We have stringent anti-money laundering rules at EU level, but we need all Member States to implement these rules on the ground. We don't want to see any weak link point in the EU that criminals could exploit. The recent scandals have shown that Member States should treat this as a matter of urgency.”

The Towards a better implementation of the EU's anti-money laundering and countering the financing of terrorism framework Communication gives an overview of the four reports published today: the supranational risk assessment report provides an update of sectorial risks associated with money laundering and terrorist financing. The assessment of recent high-profile money laundering cases in the financial sector, the Financial Intelligence Units and the interconnection of central bank account registries' reports analyse the shortcomings in current anti-money laundering supervision and cooperation, and identifies ways to address them.

Assessment of money laundering risks across the internal market

The supranational risk assessment report is a tool to help Member States identify and address money laundering and terrorist financing risks. It is adopted every two years by the Commission since 2017.

The report shows that most recommendations of the first supranational risk assessment have been implemented by the various actors. However, some horizontal vulnerabilities remain, particularly with regard to anonymous products, the identification of beneficial owners and new unregulated products such as virtual assets. Some of these will be addressed by the upcoming transposition of the fifth Anti-Money Laundering Directive. The report also recalls that Member States still have to fully transpose the fourth Anti-money laundering directive. The Commission calls upon Member States to implement the directive fully and follow the recommendations of this report. This would improve cooperation between supervisors, raise awareness among obliged entities and provide further guidance on beneficial ownership identification.

Assessment and lessons from recent money laundering cases

Following a number of exchanges with the European Parliament and a request from the Council in December 2018, the European Commission has analysed ten recent publicly known cases of money laundering in EU banks to provide an analysis of some of the current shortcomings and outline a possible way forward.

While not being exhaustive, the report shows that:

Banks, in a number of the cases analysed, did not respect effectively or sometimes did not comply at all with anti-money laundering requirements. They lacked the right internal mechanisms to prevent money laundering and did not align their anti-money laundering/counter terrorism financing policies when they had risky business models. The findings also highlighted a lack of coordination between such policies, either at the level of individual entities or at group level.

  • National authorities responded with significant differences in terms of the timeliness and effectiveness of their supervisory actions. There were major divergences in terms of prioritisation, resources, expertise and available tools. More particularly with respect to the supervision of a banking group, the supervisors had a tendency to rely excessively on the anti-money laundering framework of host Member States and this impinged on the effectiveness of supervisory actions in cross-border cases at EU level. In addition, the division of responsibilities led to ineffective cooperation between anti-money laundering authorities, prudential authorities, Financial Intelligence Units and law enforcement authorities.

These deficiencies point to outstanding structural issues in the implementation of EU rules, which have been addressed only in part. The regulatory and supervisory fragmentation, coupled with the diversity of tasks, powers and tools available to public authorities, create weaknesses in the implementation of EU rules. Shortcomings in anti-money laundering policies and supervision are more prominent in cross-border situations, both within the EU but also in relation to non-EU countries. While significant actions have been taken by banks and supervisors, more remains to be done. There is, for instance, a need for further harmonisation across Member States and strengthened supervision.

The need for reinforced cooperation between Financial Intelligence Units (FIU)

Financial Intelligence Units play a key role in identifying money laundering risks in each country. The EU FIU's Platform, which is an expert group of the Commission, has greatly improved the cooperation over the last years, but the Commission has identified remaining issues:

  • Access by FIUs to information: due to their different status, powers, and organisation, some FIUs are not able to access and share relevant information (financial, administrative and law enforcement).

  • Information sharing between FIUs remains insufficient and is often too slow.

  • IT tools: FIUs also sometimes lack the proper IT tools to efficiently import and export information to/from the FIU.net.

  • Limited scope of the EU FIUs' Platform, which cannotproduce legally-binding templates, guidelines and standards.

The report suggests some concrete changes, such as a new support mechanism, that would further improve the cooperation between Financial Intelligence Units (FIU) across the EU.

Interconnection of central bank account registries

The report on the interconnection of central bank account registries sets out a number of elements to be considered for a possible interconnection of bank account registries and data retrieval systems. The Commission suggests that such a system could possibly be a decentralised system with a common platform at EU level. To achieve the interconnection, legislative action would be required, following consultation with Member States' governments, Financial Intelligence Units, law enforcement authorities and Asset Recovery Offices.

Next steps

Today's reports will inform the future debate on further action in this area, including with regard to the obligations of financial institutions and the powers and tools necessary for effective supervision. The current degree of integration of the banking market will also require further work on the cross-border aspects of the anti-money laundering/terrorist financing framework. The Commission will continue to monitor closely the implementation of EU anti-money laundering rules by the Member States.

Background

Under the Juncker Commission, the EU has strengthened the anti-money laundering/ counter terrorist financing framework by adopting the fourth Anti-Money Laundering Directive that had to be transposed by Member States by June 2017. The Commission is assessing the transposition of the fourth Anti-Money Laundering Directive, while also working to verify that the rules are correctly implemented by Member States. The Commission has launched infringement procedures against a majority of Member States as it assessed that the communications received from the Member States did not represent a complete transposition of this Directive.

The fifth Anti-Money Laundering Directive will improve the powers of Financial Intelligence Units, increase the transparency around beneficial ownership information, as well as regulate virtual currencies and pre-paid cards to better prevent terrorist financing. Member States are due to transpose the Directive into national law by January 2020.

Following the uncovering of several money laundering cases in 2018, the Commission set up in May 2018 a joint working group together with the European Supervisory Authorities and the European Central Bank. On the basis of the working group's recommendations, the Commission issued in September 2018 a Communication on strengthening the AML and prudential frameworks and new rules to strengthen the role of the European Banking Authority. This led to the reinforcement of the anti-money laundering and terrorist financing dimension in prudential banking legislation through the adoption of the fifth Capital Requirements Directive in December 2018.

For More Information

Q&A                                                                         

You will find on the page EU anti-money laundering framework the following documents:

  • Communication: Towards a better implementation of the EU's anti-money laundering and countering the financing of terrorism framework

  • Report on the assessment of recent alleged money laundering cases involving EU credit institutions

  • Supranational Risk Assessment report

  • Financial Intelligence Unit report

  • Report on the interconnection of central bank account registries


Recent Reports on Bribery and Corruption: OECD (Greece) and Fraud Advisory Panel (UK)

In recent days, serious concerns over the state of bribery in Greece and Britain have been published by the OECD and the Fraud Advisory Panel respectively. The OECD is an international organisation in which governments identify good practices and promote decisions and policies that improve economic and social well-being of people around the world. The Fraud Advisory Panel is an influential charity with members from the public and private sectors and academia. It encourages the prevention, detection, investigation, prosecution and deterrence of fraud and corruption.

Greece and the OECD

The OECD Working Group on Bribery expressed serious concerns that recent steps taken by Greece may leave the country in breach of the OECD’s Anti-Bribery Convention. On 11 June 2019, Greece amended the Criminal and Criminal Procedure Codes converting the main active bribery offence from a felony to a misdemeanour, a less serious offence. The Working Group is concerned that this amendment may have far-reaching ramifications, ranging from the closure of ongoing corruption-related investigations and prosecutions, to possible hindrance of international cooperation in future cases and shorter limitation periods. The Codes came into force on 1 July 2019.

As a result the Working Group on Bribery will conduct a further review of Greece, jointly with the Council of Europe Group of States against Corruption (GRECO), reporting in December 2019. The OECD Working Group will send a letter to the Greek Prime Minister outlining its concerns about the potential impact of the revised anti-corruption criminal measures.

Britain and the Fraud Advisory Panel

The UK has had an anti-corruption strategy since 2017, running until 2022. Its six priorities are:

1. Reduce the insider threat in high risk domestic sectors.

2. Strengthen the integrity of the UK as an international financial centre.

3. Promote integrity across the public and private sectors.

4. Reduce corruption in public procurement and grants.

5. Improve the business environment globally.

6. Work with other countries to combat corruption.

But the Fraud Advisory Panel expresses the concern that the government is not focused on domestic corruption risks. Its report “Hidden in Plain Sight”, published in July 2019, sets out concerns about the attitude to domestic bribery in the UK. The list of high-risk domestic sectors (policing, prisons, border control, defence and local authorities) has some “surprising” omissions, including finance, central government itself, and the democratic process. Quoting Corruption Watch, the report suggests that Austerity is itself a driver for corruption and that, although the UK is a world leader in addressing overseas corruption, it is failing to confront and deal with the situation at home. There is no doubt that with decreased resources in policing and prosecuting authorities’ budgets, fraud and corruption is not a priority. A piece of research at Manchester University states that from 2016-2018 there has been an average of 2-3 bribery cases, per police force, per year reported in the UK (327 in total) of which a third resulted in a definite outcome. This data is at odds with the growing evidence of money-laundering and fraud domestically and overseas corruption committed by British companies.

Both reports highlight ongoing worries about how governments approach the problem of bribery in fact, in contrast to the stated aims to eradicate corruption both domestically and internationally.

 

Amanda Pinto QC
33 Chancery Lane

Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to money laundering, alleged bribery and corruption and responding to investigations in civil and criminal matters. To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 020 7440 9950.

Anti-money laundering and counter-terrorist financing: supervision report 2017 to 2018

The Treasury has just published its annual report for 2017-18 on the effectiveness of anti-money laundering (AML) and counter-terrorist finance (CTF) supervision in the accountancy and legal services sectors. The UK’s AML and CTF supervisory regime is comprehensive but the results of supervision have proved inconsistent across the supervisors.

The Money Laundering Regulations 2017 require supervisors to ensure that regulated firms who contravene relevant requirements are liable to effective, proportionate and dissuasive measures. Supervisors may use enforcement measures and sanctions such as fines, public censure, suspension or withdrawal of the right to provide services.

In the accountancy and legal services sectors, the Treasury report criticises the supervisory functions of all but three entities: the FCA, HMRC and the Gambling Commission, each of which is said to have a stronger understanding of the ML/TF risks than the other 22 supervising professional bodies. However, the Treasury report does not distinguish between the different types of work and the consequent likelihood of failings amongst those supervised. For example, the Bar Council of England and Wales has not sanctioned anyone for AML/TF breaches in 2017/18, but barristers do not normally handle client funds so the possibility of them being used to launder money is far lower than, for example, solicitors who are supervised by the Law Society. Weaknesses in supervision and sanctions are a significant issue leading also to a reduction in the quality of intelligence. According to the report, the UK has put (unspecified) steps in place to address these issues.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/815240/AML_supervision_report_2017-2018.pdf

Amanda Pinto QC
33 Chancery Lane

Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to money laundering, alleged bribery and corruption and responding to investigations in civil and criminal matters. To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 0207 440 9950.

Anti-corruption trends, challenges and good practices in Europe & the United States of America, the 19th General Activity report of the Group of States against Corruption (GRECO)

At the end of June 2019 the Council of Europe published Anti-corruption trends, challenges and good practices in Europe & the United States of America, the 19th General Activity report of the Group of States against Corruption (GRECO): https://rm.coe.int/19th-general-activity-report-2018-group-of-states-against-corruption-g/1680951d14.  In general terms for progress on anti-corruption measures, sadly the report makes for fairly depressing reading.

GRECO was established in 1999 by the Council of Europe to monitor States’ compliance with the organisation’s anti-corruption standards: its 49 Member States include the United Kingdom and the other EU Member States, the Russian Federation and the United States of America.  GRECO prides itself on 20 years of work in this area but in the foreword to the report the President of GRECO also notes that “No country is immune to corruption.  All countries, irrespective of their position in perception indexes, are required to take concrete measures to prevent and counter corruption”, observing for example that 14 GRECO Member States have not yet ratified the Civil Law Convention of Corruption of 1999 (one of three unique treaties developed by the Council of Europe to deal with corruption), and 44 Member States received at least one recommendation on whistle-blower protection. 

GRECO’s monitoring work is organised in rounds, and the current (5th) evaluation round focuses on preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, as well as checking compliance with earlier unresolved recommendations to individual Member States on themes such as identification, seizure and confiscation of corruption proceeds and reporting of corruption and whistle-blower protection (2nd round); criminalising passive and active bribery offences  and transparency of political funding (3rd round); and prevention of corruption by members of parliament, judges and prosecutors (4th round).

This report evaluated the 4th round in nearly all of the Member States and found that the UK had implemented all of GRECO’s previous recommendations on preventing corruption by MPs and prosecutors, but still had an outstanding recommendation to implement fully in relation to judges (namely, enhancing security of tenure for full-time salaried judicial office holders).

By contrast for example, France had only implemented fully a third of GRECO’s recommendations in relation to MPs and judges, and half of those relating to prosecutors; Italy had implemented only half of the recommendations for each category; Finland had implemented them all; but most other Member States still had quite some way to go, meaning that by the end of 2018 only a third of all 4th round recommendations had been implemented fully.  It is important to note that the Russian Federation and the USA (amongst others) did not make public their implementation statistics, meaning that a true picture of implementation has not been given in this report and compliance generally across the Member States is likely therefore to be even lower.  Perhaps little surprise then that the GRECO President’s foreword also observed that there is “no reason for complacency” and “in some cases GRECO is seeing regression”.

Looking forward in the 5th round of evaluation underway across the Member States, GRECO has already identified a number of shortcomings that require the UK authorities’ attention to strengthen corruption prevention in respect of ministers and senior government officials as well as law enforcement officials; including for example, making more detailed information available regarding meetings held by ministers, special advisers and senior civil servants with third parties (such as lobbyists); clarifying and broadening the scope of what are to be considered “relevant interests” in ministers’ published declarations of interests; strengthening the protection of whistle-blowers within the police service; and reaffirming the obligation for police officers to report corrupt conduct.  The UK was invited by GRECO to report on the progress of implementing these recommendations by the end of June 2019.

Meanwhile, in Transparency International’s Corruption Perceptions Index 2018, the UK scores 80 out of 100 (where 0 is highly corrupt and 100 is very clean), ranking the UK 11th out of 180 countries on perceived levels of public sector corruption according to experts and business people.  The Index’s regional analysis for Western Europe and the EU found “stagnating anti-corruption efforts and weakening democratic institutions”, warning that a number of GRECO Member States have declined in perceptions of corruption (including Malta and Turkey) whilst others should be watched carefully (such as the USA and the Czech Republic).

Update on 10 July 2019: the OECD and GRECO today announced an urgent supplementary review of GRECO Member State Greece to reflect their concerns about Greece’s decision in June 2019 to reduce its main active criminal bribery offence from a felony to the lesser offence of a misdemeanour, in potential breach of the OECD’s Anti-Bribery Convention.  This is not the first time that an OECD Working Group has decided to conduct a supplementary review into Greece’s anti-corruption activities, and in the Report discussed in the article above, Greece was found not to have implemented at all two-thirds of GRECO’s recommendations on preventing corruption by judges and 62% of recommendations in relation to prosecutors.  In an earlier evaluation report regarding Greece’s approach to dealing with sudden changes to funding of political parties, GRECO noted “multiple, often divergent legal changes within short periods of time, creates an unpredictable legal framework which may result in ineffective implementation and a substantial lack of transparency. It jeopardizes legal certainty and puts into question the credibility of the system.” 

Fiona Jackson
33 Chancery Lane

Fiona Jackson and other Members of Chambers frequently advise individuals, corporates and law enforcement agencies domestically and internationally in relation to alleged bribery and corruption and responding to investigations in civil and criminal matters.  Members of Chambers also provide high level training on anti-corruption measures in GRECO Member States and around the world on behalf of entities such as the United Nations, the Council of Europe, the National Crime Agency, the British Council and the UK’s Foreign & Commonwealth Office.  To find out more, or to instruct us, please contact Martin Adams or Chris Chiles or call 0207 440 9950.

Challenge to Disclosure Orders

R (ex p A, B and C) v SFO - 6th June 2019

In 2016, a Disclosure Order was made under section 357(1) of PoCA 2002 in respect of a confiscation order made under Part VI of the Criminal Justice Act 1988 in 2007. In 2019, notice in writing was given to the 3 Claimants (who were NOT identified in the DO) who the appropriate officer considered may have information relevant to the confiscation investigation, requiring them to attend for interview to answer questions relevant to the investigation [under s.357(4), PoCA].

The Claimants challenged the notices on the grounds that:

  1. There is no jurisdiction to issue a disclosure order under Part 8 of PoCA in respect of a confiscation order that was made under the CJA; and

  2. A disclosure order must bear on its face the name of a person upon whom a notice is issued. 


As to jurisdiction, Dove J. held that Part 8 powers are available in respect of confiscation orders made under the earlier statutory confiscation provisions (CJA/DTA): in the absence of express words in s.341 (as amended) limiting the application of Part 8 powers to PoCA proceedings, it was clear from the Explanatory Notes that Parliament intended the Part 8 powers to replace and consolidate the earlier investigative powers (which were repealed by PoCA, although the power to make confiscation orders under the CJA or DTA was retained). The jurisdiction issue was, in any event, decided by R (Horne) [2012] EWHC 1350 (Admin), [2012] 1 WLR 3152.

As to the second ground, the Court noted that Parliament had expressly provided that a DO authorised the appropriate officer to issue a notice under s.357; this might happen at any time after the issue of the DO for as long as the confiscation investigation is underway. That this was the correct interpretation of the statutory scheme was confirmed in Serious Organised Crime Agency v Perry & Ors [2010] EWCA Civ 907, [2011] 1 WLR 542 at §25, per Carnwath LJ., NCA v Simkus [2016] EWHC 255 (Admin); [2016] 1 W.L.R. 3481, per Edis J.  and NCA v K [2018] EWHC 3531, per Ouseley J and supported by the Explanatory Notes to PoCA, §517.  Had Parliament intended that a fresh application be made each time the officer wanted to question a person not named in the DO, it would have said so.

Martin Evans QC
33 Chancery Lane

Noticeable Increase in the use of NCA Powers to Recover Tax

In addition to UWOs and AFOs, the NCA has in its armoury a procedure for collecting taxes under the provisions of Part 6 of the Proceeds of Crime Act 2002.

 

If the qualifying conditions set out In S.317 of Proceeds of Crime Act 2002 are met the NCA will step into the shoes of HMRC (following the service of notice on HMRC to vest such powers in the NCA) to adopt its general revenue functions and seek to recover taxes. These conditions will be met where the NCA has reasonable grounds to suspect that:

 

•               undisclosed income, profits or gains have arisen or accrued in a chargeable period; and,

 

•                the income, profits or gains are chargeable to income tax or capital gains tax; and,

 

•               All or part of the income, profits or gains have arisen or accrued (directly or indirectly) as a result of criminal conduct (including the conduct of a third party).

 

If the NCA are satisfied that the qualifying conditions have been met, then notice is sent to the individual tax payer (R) to commence the process.

 

The NCA’s letter will:

(1) notify R of its decision to adopt the general revenue functions of HMRC in respect for example of R’s Income Tax and/or Capital Gains Tax liabilities and Class 4 National Insurance Contributions in relation to the stated years.

 

(2) advise R that the NCA will be responsible for assessing and recovering Income Tax, Capital Gains Tax and Class 4 National Insurance contributions owed in relation to the years stated.

 

(3) Inform R that interest is due upon any unpaid Income Tax, Capital Gains Tax and Class 4 National Insurance contributions owed In relation to the years stated and will continue to accrue.

 

(4) Inform R that he may be liable for penalties of up to 100 % of the Income Tax, Capital Gains Tax and Class 4 National Insurance contributions owed in relation to the stated years.

 

This will be a challenge for R to respond to – particularly when the burden is on R to disprove allegations implying criminality.  

We can expect, just like account freezing order applications, a rise in these types of proceedings by the NCA.

 

Barry Stancombe
33 Chancery Lane

Koza Ltd v Akcil [2019] EWCA Civ 891

This recent authority from the Court of Appeal Civil Division may well provide the basis for hitherto unsuccessful attempts to allow companies to be permitted to pay for representation of individual defendants who are also officers of the company where the company has had its assets frozen.

The case itself did not have a background of an existing freezing order but those powers were explored in the judgment. The Court held that the payment of legal expenses incurred by a Company Director resisting extradition proceedings did fall within the parameters of disposing of funds in the ordinary and proper course of its business. The fact that the Defendant may have had personal assets from which he could have met those fees was held to be a factor that carried very little weight when considering whether the payments fell within the existing remit of the order. A distinction was to be drawn with cases where a party was actually seeking a variation to an order to release funds.

The Court also held that civil litigation funding also fell within the remit of the order even where on one view the benefit to the Company was indirect in its nature.

The case will provide potential assistance for those faced with freezing orders over business assets and despite the legislative steer of s69 PCA 2002; the author suggests that there may well be some cases where this case could be deployed to secure the release of legal fees to fund criminal defence work. What I like most about it is the very useful list of propositions for a Court to consider when deciding such cases [found at paragraph 27 if you are in a hurry!].

Penelope Small
33 Chancery Lane