Overview:
On 25 July 2012, the Supreme Court handed down its judgment in
Perry and others v Serious Organised Crime Agency. The
judgment provides valuable guidance on the extra-territorial effect
of the Serious Organised Crime Agency
("SOCA") and the UK courts' powers
under the Proceeds of Crime Act 2002
("POCA").
The Supreme Court ruled that the jurisdiction to make a civil
recovery order (or a freezing order in support of it) was limited
to property located in the UK and that SOCA was not permitted to
serve notices under POCA disclosure orders on persons outside the
jurisdiction. The Court also made obiter comments that
suggest SOCA will be required more specifically and narrowly to
draft applications in future when describing the property to be
frozen or disclosed. This may serve to require the
authorities to prepare more thoroughly before seeking these onerous
forms of relief and sanction.
While the judgment does not go so far as to define the
extra-territorial jurisdiction of the primary money laundering
offences under POCA, it gives a strong indication of the approach
that the courts will take in interpreting the apparently wide ambit
of the legislation in the future.
To view the article in full, please see below:
Full Article
Overview:
On 25 July 2012, the Supreme Court handed down its judgment in
Perry and others v Serious Organised Crime Agency.
The judgment provides valuable guidance on the extra-territorial
effect of the Serious Organised Crime Agency
("SOCA") and the UK courts' powers
under the Proceeds of Crime Act 2002
("POCA").
The Supreme Court ruled that the jurisdiction to make a civil
recovery order (or a freezing order in support of it) was limited
to property located in the UK and that SOCA was not permitted to
serve notices under POCA disclosure orders on persons outside the
jurisdiction. The Court also made obiter comments
that suggest SOCA will be required more specifically and narrowly
to draft applications in future when describing the property to be
frozen or disclosed. This may serve to require the
authorities to prepare more thoroughly before seeking these onerous
forms of relief and sanction.
While the judgment does not go so far as to define the
extra-territorial jurisdiction of the primary money laundering
offences under POCA, it gives a strong indication of the approach
that the courts will take in interpreting the apparently wide ambit
of the legislation in the future.
Background
Mr Perry was an Israeli national, who, in October 2007, was
convicted of fraud offences in Israel. The conviction related
to a fraudulent pension scheme that he had operated in
Israel. Mr Perry was given a substantial custodial sentence
(10 years) and fined approximately £3m by the Israeli
courts.
In May 2008, Hoare's Bank in London notified SOCA that Mr
Perry and his two daughters held accounts with the bank. SOCA
subsequently discovered funds in another account in London.
Around £14m was held in these accounts.
In August 2008, SOCA obtained a disclosure order from the High
Court, pursuant to which they served disclosure notices requesting
information from Mr Perry's wife and daughters as to his
assets. The disclosure notices contained a penal notice
explaining that failure to comply with the request would lead to
criminal sanctions. Mrs Perry and her daughters lived in
Israel. The disclosure notices were served on Mr Perry's
UK residence in Mayfair. (Disclosure orders made under POCA
require the recipients to disclose information and/or provide
documents in relation to matters under investigation by
SOCA.)
In October 2008, SOCA obtained a worldwide property freezing order
(in support of an anticipated application for civil recovery) over
eight respondents, including Mrs Perry, her daughters and entities
thought to hold assets on Mr Perry's behalf. The order
also required disclosure of all the defendants' worldwide
assets.
Earlier appeals
Mr Perry and the other appellants challenged both the disclosure
orders (the "DO appeal") and the
freezing order (the "FO appeal").
The FO appeal sought to limit the freezing order and disclosure
obligations within it to assets located within the UK. The DO
appeal challenged SOCA's jurisdiction to serve disclosure
notices on persons outside the UK.
Appeals to the High Court and Court of Appeal were rejected on the
basis that the wording in the relevant sections of POCA displaced
the presumption that legislation would not have extra-territorial
effect unless otherwise stated. Of particular note were
comments made by Ward LJ in the Court of Appeal that
"there is no reason why the whole Act should not have
extra-territorial effect and that Parliament must have so
intended." (SOCA v Perry & ors [2010] EWCA
Civ 907, para 79)
During the appeals, SOCA had argued that POCA had extremely wide
territorial application: "Parliament has decided that a
Chinese thief, living in China, who has stolen property in China
from a Chinese citizen may be the subject of civil recovery action
[in the UK]."
However, the Supreme Court departed from the decisions of the
lower courts, permitting the appeals (by a seven to two majority in
relation to the FO appeal, but unanimously for the DO appeal) and
more narrowly defining the limits of the extra-territorial effect
of Parts 2 to 5 of POCA.
The judgment
Nine Supreme Court judges decided the appeal, with the leading
judgment given by Lord Phillips. The fact that the appeal was
heard by the maximum nine judges reflects the significance and
importance of the issues in this case, as usually Supreme Court
appeals are heard by five or seven judges. Due to the
ambiguous nature of the territorial scope of the relevant parts of
POCA, the central discussion concerned the interpretation of the
individual provisions relating to confiscation and civil recovery
powers.
Parts 2, 3 and 4 of POCA are primarily concerned with confiscation
orders against a person convicted in criminal proceedings, for the
payment of a sum equivalent to the value of property or pecuniary
advantage obtained from his criminal conduct.
Part 5 of POCA empowers the court to make a civil recovery order
in respect of property, which is, or represents, property obtained
through unlawful conduct. A civil recovery order is an order
made in the civil courts against particular property, rather than a
particular person; the court approves an order for the recovery of
property obtained unlawfully, which is not necessarily restricted
to the defendant's property but can relate to property held by
others who had notice of its criminal origins. A prior
successful criminal prosecution is not required as a precondition
to obtaining a civil recovery order.
"Property" is defined within Part 5 (and
elsewhere in POCA) as "all property wherever
situated" (s. 316(4) of POCA), but the legislation does
not specify whether a civil recovery order can cover property
situated outside the UK.
It is a presumption under principles of international law that
legislation will not have extra-territorial effect unless it
clearly states otherwise. Lord Phillips acknowledged that
states have historically departed from this principle in relation
to confiscation of proceeds of crime by signing up to international
conventions. He considered that POCA must be interpreted in
light of the Strasbourg Convention on Laundering, Search, Seizure
and Confiscation of the Proceeds from Crime (the
"Strasbourg
Convention").
Lord Phillips noted that Parts 2, 3 and 4 of POCA impose a
personal obligation in respect of the defendant's property
worldwide and provides a process whereby a UK prosecuting authority
can request other states to take measures in respect of criminal
property located in their jurisdiction. This is consistent with the
obligations placed on the UK under the Strasbourg Convention.
Lord Phillips made the distinction that Part 5 focuses on
recovering criminal property generally rather than punishing a
particular defendant and unlike Parts 2, 3 and 4, it does not
contain provisions relating to foreign enforcement.
Accordingly, Lord Phillips concluded that this meant Parliament
envisaged Part 5 would only apply to property within the
jurisdiction; the UK courts did not have jurisdiction to order
recovery of property outside the UK in civil recovery
proceedings. He noted that where SOCA becomes aware of
criminal property located in another jurisdiction, the
"natural course in those circumstances will be to pass on
such information as it has about the property to the appropriate
authorities in the country where the property is
situated."
In light of this, he ruled that the freezing order (which was made
in support of anticipated civil recovery proceedings) should be
amended to cover only property based in England and Wales, not
worldwide. He also noted that he considered other elements of
the freezing order to be improper. Section 245A of POCA
requires the freezing order to specify or describe the property to
which it applies. The freezing order subject to appeal sought
to freeze generally described categories of assets; Lord Phillips
questioned whether this met the requirements of POCA, but as no
appeal had been brought concerning the description of the property
no ruling on this point was required. In relation to the
disclosure obligations within the freezing order, he questioned
whether the court had jurisdiction to impose such obligations in
this way, given that Part 8 of POCA specifically dealt with
disclosure. Again, this was not specifically ruled upon, but
Lord Phillips said if the Court was asked to approve an amended
freezing order, he would need to be convinced that there was
jurisdiction to require disclosure in this form.
In respect of the DO appeal, the Supreme Court ruled that it was
generally contrary to international law for one state to purport to
criminalise conduct occurring in another state, when the defendant
is not a citizen of the state imposing the criminal penalty.
It was therefore implicit that SOCA could not impose a positive
obligation on the Perry family (with the threat of a criminal
sanction) to provide information when they were outside the UK and
so the disclosure orders were not effective. Lord Phillips
made similar comments about the content of the disclosure orders as
he made in relation to the freezing orders, questioning whether it
is possible to seek disclosure about property that had not already
been identified as existing.
Lord Judge and Lord Clarke dissented in relation to the FO appeal
(but concurred with Lord Phillips' judgment in relation to the
DO appeal). In their joint dissent, they noted that POCA was
poorly drafted, but said that its intention was to deprive
criminals of proceeds of crime, whether in the UK or
overseas. Therefore, they thought that recovery orders could
include foreign property, although their enforcement would be
subject to local law.
One particular anomaly within POCA was identified. Section
286(2) purports to create a different position in relation to civil
recovery powers available to the courts in Scotland from that in
the rest of the UK. Lord Phillips noted that there was no
satisfactory explanation for this and it remained an enigma.
In any event, the judges concluded that it did not effect the
overall conclusions reached within the judgment.
Observations
The Supreme Court has given much needed guidance on the
very wide language of POCA and the extent to which it allows or
requires the UK courts to impose sanctions in respect of criminal
property located outside the UK. The judgment may also limit
the availability of those powers to circumstances where the
property to be confiscated or recovered is known to exist and can
be described in reasonably specific detail – general
descriptions of types of property by category may not be sufficient
and so we may see far more limited civil recovery and disclosure
orders in the future.
The judgment did not, however, go so far as to determine the
extra-territorial effect of the primary money laundering offences
themselves. That said, it has identified the courts'
approach to interpreting the often ambiguous provisions of POCA and
may be indicative of the way in which the courts will interpret
other powers if and when tested.
The anomaly identified within section 286(2) of POCA creates a
peculiar situation that could potentially enable civil recovery
orders made in Scotland to cover property outside the UK in limited
circumstances, although this was not finally decided and may result
in Parliamentary correction.
Perry & Ors v SOCA [2012] UKSC 35
A full copy of the judgment is available here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 30/07/2012.
