The team at Scarmans consisting of Queen’s Counsel, Barristers and Solicitors regularly represents individuals targeted by the NCA in civil, criminal and tax litigation and so are well-placed to protect their client’s interests. In this analysis, Barry Smith, Associate, explains the latest judgment of the Court of Appeal on Unexplained Wealth Orders and how it can be used to help those facing litigation brought by the NCA and other prosecuting agencies.
Hajiyeva v National Crime Agency [2020] EWCA Civ 108
On 5 February 2020 the Court of Appeal handed down it’s first judgment issuing guidance on the making of Unexplained Wealth Orders (‘UWOs’) under Part 8 of the Proceeds of Crime Act 2002 (‘POCA’) which were introduced by the Criminal Finances Act 2017. They form part of the investigative regime and require those subject to the order to explain whether they have an interest in property and how it was obtained. They are typically used in conjunction with freezing orders and civil recovery proceedings brought by the National Crime Agency (‘NCA’) to recover the proceeds of crime in the civil courts of England and Wales.
Under s.362B POCA, a UWO can only be made if the High Court is satisfied that:
1. the respondent holds property;
2. the property is worth more than £50,000;
3. 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; and
4. the respondent is either a politically exposed person, or is involved or connected to serious crime in the UK or abroad.
The Court of Appeal confirmed in Hajiyeva v National Crime Agency [2020] EWCA Civ 108 that when the NCA relies on foreign convictions to support their application, if it can be demonstrated that there was a breach of international norms as to the right to a fair trial, the simple fact of a foreign conviction could not form a proper ground for reasonably suspecting that lawful income was insufficient, or that someone had been involved in serious crime. Further, consideration should be given as to whether or not the information gained from a UWO will be shared with law enforcement agencies abroad, and whether or not there was the prospect of prosecution abroad, which may result the NCA giving undertakings as to the disclosure of the information, or weigh against the making of an order.
The Appellant in this case was an Azerbaijani national married to Mr. Jahangir Hajiyev. The National Crime Agency had previously succeeded in securing a UWO in relation to property in London which was purchased via a company incorporated in the British Virgin Islands. The Appellant’s husband, a former chairman of the International Bank of Azerbaijan (‘the Bank’), had been convicted following trial at the Serious Crimes Court in Baku and sentenced to 15 years imprisonment following charges of misappropriation, abuse of office, large-scale fraud and embezzlement.
Various grounds of appeal were advanced on behalf of the Appellant. It was first argued that the High Court had erred its interpretation of the statutory test for identifying a politically exposed person. The Court of Appeal considered article 3 of Directive 20185/849/EU of the European Parliament and of the Council of 20 May 2015 which applies for the purposes of determining the test for a politically exposed person (s.362B(8) POCA), and considered that the focus of the statutory wording is on the status of the entrusted person and not how that person has come to be entrusted with prominent public.
Accordingly, if the Bank were a State-owned enterprise, Mr. Hajiyev fell within the definition of a politically exposed person because he was its Chairman and thus was to be treated as ‘entrusted with prominent public functions’. The Court of Appeal held that the High Court was right to conclude, on the evidence, that as a government of a non-EEA Country had a majority shareholding in the Bank (and ultimate control) it was a state-owned enterprise. The Appellant was also a politically exposed person because she was a family member.
Secondly, it was argued that the High Court was wrong to conclude that the Appellant’s income was insufficient, relying on evidence related to an alleged unfair trial of Mr. Layijov. The Court of Appeal held that the circumstances of a foreign conviction may be such (and would be such if there was a breach of jus cogen norms ie. fundamental standards of international law) that it could not form a proper ground for reasonably suspecting that lawful income was insufficient to enable toe acquisition of material property, or that a person was involved in serious crime. However, the High Court had rightly rejected an argument that there was a denial of the right to a fair trial in Azerbaijan, and in any event the foreign conviction was only one part of the evidence relied on by the NCA.
Finally, it was argued on behalf of the Appellant that the UWO offended against the right against self-incrimination and/or spousal privilege. The High Court had found that the right only applied as regards criminal offences under the law of the UK, and that the Appellant and her husband had no right to invoke either privilege in relation to a risk of prosecution for offences outside the UK, although the risk of prosecution abroad could be a relevant factor in deciding whether to exercise a discretion to make an order. Further, the threshold test had not been met as there was not a real and appreciable risk that either the Appellant or her husband would be prosecuted in the UK. The Court of Appeal upheld the judge’s reasoning on these points as it reflected the intention of Parliament in creating the UWO regime. There was no need in this case to seek undertakings from the NCA as to whether or not the information gained from a UWO would be shared with other law enforcement agencies abroad as there was no suggestion that it would be used for any other purpose.
It follows from this case that where the NCA rely on foreign convictions to support their applications, careful scrutiny as to whether there has been a breach of the right to a fair trial must be applied so that such material can be excluded from forming a ground on which UWO and civil recovery orders can be made. Further, if it can be established that there is a risk of a future prosecution in another jurisdiction, this can be a factor against the making of a UWO, and this also may justify securing an undertaking from the NCA prohibiting the sharing of the information gained with foreign law enforcement agencies.
Barry Smith can be contacted at bs@scarmans.co.uk