Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
English and Welsh Courts - Miscellaneous
You are here: BAILII >> Databases >> English and Welsh Courts - Miscellaneous >> Al Zayat, Re [2008] EW Misc 3 (EWCCT) (07 March 2008)
URL: http://www.bailii.org/ew/cases/Misc/2008/3.html
Cite as: [2008] EW Misc 3 (EWCCT), [2008] Lloyd's Rep FC 390
[New search] [Printable RTF version] [Help]
B e f o r e :
____________________
| In the matter of the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 And in the matter of Mr Fouad Al Zayat |
Defendant |
|
| - and - |
||
| In the matter of Others |
Third Parties |
____________________
Charles Miskin QC & Hywel Jenkins (instructed by Philip Mobedji, Serious Fraud Office) for the Respondent
Hearing dates: 18th & 19th December 2007
____________________
Crown Copyright ©
- This is the re-hearing of an application by Mr. Fouad Al Zayat ("the Defendant") to discharge a Restraint Order, originally imposed by HHJ Elwen in the Crown Court, sitting at Southwark, on the 22nd June, 2006 ("the Restraint Order").
- In a nutshell, the procedural history is as follows:
- I record at once my thanks to Lord Brennan QC (who appeared for the Defendant) and to Mr. Miskin QC (who appeared for the SFO) and to their respective teams, for their oral and written submissions.
- It is fair to say that very little about this case is commonplace. I take as my starting point the application for the Restraint Order. By a Letter of Request ("the LOR") dated 9th June, 2006, addressed to the Secretary of State for the Home Department ("SSHD"), Judge Didar, an investigating judge of the Judicial Organisation First Branch of Investigation of the Islamic Republic of Iran ("Iran"), sought the assistance of the United Kingdom authorities in order to secure the restraint of assets within the United Kingdom belonging to or under the control (direct or indirect) of the Defendant, up to the value of US$120 million. The factual basis of the LOR, to which I shall return in somewhat more detail, concerned alleged fraud and corruption, relating to the proposed purchase of an Airbus, ultimately for the Iranian Ministry of Defence.
- This application for assistance from Iran was dealt with by the SSHD as an "external request", governed by the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (SI 2005/3181), which came into force on the 1st January, 2006 ("the 2005 Order"). Pursuant to Art. 6(3) of the 2005 Order, the request was referred by the SSHD to the Director of the SFO. The application for the Restraint Order was thereafter made by the Director of the SFO, pursuant to Art. 9(1) of the 2006 Order.
- The Restraint Order, granted ex parte by HHJ Elwen on the 22nd June, 2006, recorded that it was made against the Defendant:
- Subsequently, the SFO has accepted, for the purposes of these proceedings, that it does not seek the worldwide restraint on the Defendant's assets or the order for disclosure of his assets, wherever situated. Accordingly, the Restraint Order, while not formally varied in these respects, continues to apply only to the removal, disposal, dealing with or diminution of the Defendant's assets situated in England and Wales.
- At this stage, some introduction to the legal framework is unavoidable. It is convenient to begin with the domestic provisions for restraint orders, now contained in the Proceeds of Crime Act 2002 ("POCA"). S.41(1) of POCA, provides as follows:
- An important policy goal in recent decades has been international cooperation in combating crime, especially financial crime. To this end, provision is now made in POCA and under the 2005 Order for the grant of restraint orders in this jurisdiction but at the behest of the authorities of other countries, with a view ultimately to the realisation of that property to give effect to the order of a foreign court. So, s.444 of POCA provides:
- The subordinate legislation contemplated by s.444 POCA is to be found in the 2005 Order. It will be necessary to return to the provisions of this Order in a number of different contexts; for the moment, it suffices to set out the provisions of the Order as to the application for, making, discharge and variation of restraint orders, contained in Arts. 7 – 9 thereof:
- Pausing there, the following features of Arts. 7 – 9 of the 2005 Order may be noted:
- As is plain and was not in dispute before me, the burden of proof rests on the applicant for the Restraint Order (thus the SFO here) to show that the relevant condition in Art. 7 has been satisfied. As was also not in dispute before me, the standard of proof is the civil standard, i.e., a balance of probabilities: see, R v D&E Southwark Crown Court No.U20060160 (9th October, 2006), another judgment of HHJ Elwen. In the course of coming to this conclusion, the learned Judge (esp. at pp. 7-8 of that judgment) made a number of observations of general importance, including those which follow. Restraint orders were interim orders, having as their purpose the preservation of assets so as to satisfy any confiscation order that might ultimately be made. The power to make restraint orders was closely analogous to the jurisdiction to grant Mareva injunctions (or freezing orders) and the practice ought to be similar.
- Furthermore, as to the purpose and ramifications of a restraint order, I adopt, with respect, from the CACD judgment, this summary by Hughes LJ:
- I return to the application in this case for the Restraint Order. It was supported by a witness statement from Mr. Common - counsel seconded to the SFO - authorised by the Director of the SFO. As Mr. Common made clear, he had no personal knowledge of the case; he relied entirely on the information contained in the LOR. On the basis of that information, the SFO sought the making of the Restraint Order.
- Before leaving Mr. Common's witness statement, it should be noted that it included the following paragraph:
- I come next to the LOR. In the LOR, Judge Didar described himself as:
- Judge Didar made it clear that although he was a judge, he was acting as investigator or prosecutor and referred to himself as "an investigating judge". He drew a distinction between his own role and that of the "trial judge". He indicated that he had authority to restrain property within Iran that was the subject of criminal proceedings. He sought assistance from the authorities in the United Kingdom to prevent the dissipation of assets currently located in this jurisdiction. As set out in the LOR, the likely charges to be faced by the Defendant in Iran comprised the following:
- In the LOR, Judge Didar set out in some detail the factual allegations made against the Defendant. For present purposes, however, it is unnecessary in this regard to go at all, or at least significantly, beyond the following summary, contained in the CACD judgment (at [10] – [14]), which I, with respect, gratefully adopt:
- As to Judge Didar's investigation more generally, it would appear that allegations of corruption and fraud concerning the Ministry of Defence and Support for the Armed Forces of the Islamic Republic of Iran ("MODSAF") and the SPO began to emerge in late 2003. Those allegations were allocated to Judge Didar for investigation. In December 2003 and throughout 2004, Judge Didar continued with a domestic investigation in Iran. According to Judge Didar, in the course of his investigation, he has questioned suspects in Iran, gathered evidence and made orders seizing the proceeds of bribes in the sum of almost US$2 million. Thus far, seven Iranian nationals in Iran have been charged and are on bail. Perhaps the most prominent of those is General A who was, at all material times, head of the SPO and Deputy Minister of Defence. The principal suspect overall now, however, is said to be the Defendant, described by Judge Didar as "the prime mover" in the fraud. An arrest warrant was issued for the Defendant in December 2003 but it has not been served because the Defendant has been throughout outside the Iranian jurisdiction.
- According to his evidence, it became obvious to Judge Didar that for the investigation to advance, it was necessary to obtain evidence outside Iran. This would require international letters of request, for which he would need to be designated as a special judge with powers to carry out investigations outside of Iran with the authority of the Head of the Judiciary. Accordingly and at Judge Didar's request, on the 29th December, 2004 he was appointed by S.M. Hashemi Shahroodi, Head of the Judiciary, Iran:
- In the event, a summons ("the summons") was issued on the 11th July, 2006 and served on the Defendant in Cyprus on the 26th September, 2006. The summons stated that the Defendant was required to attend the First Branch of Investigation of the Judicial Organisation, Tehran, with his lawyers, within two months of service to defend the accusations set out therein. If he did not attend, legal action would be taken. The accusations set out in the Summons were, in summary, as follows:
- On the 29th November, 2006, Judge Didar issued an international arrest warrant and extradition request in respect of the Defendant. The charges set out in the warrant are as follows:
- Following the grant of the Restraint Order, the Defendant complained, inter alia, that the external request emanated from the Iranian military, although this fact had not been mentioned in the LOR or in any of the supporting materials then relied upon. In response, Judge Didar has produced a number of witness statements from which it is necessary to quote at some length.
- In his 1st witness statement (of this sequence) dated 1st September, 2006, Judge Didar said this:
- In his 2nd witness statement, dated 26th October, 2006, Judge Didar added the following:
- It is fair to record that the essence of Judge Didar's evidence as to the Iranian legal system and his role as an investigating judge within it, is supported by the expert evidence of, inter alia, Professor Dr. Jamshid Momtaz, an Iranian based Professor of Law. It is likewise fair to record that much of what is said in this regard by both Judge Didar and Professor Momtaz is vigorously disputed by Mr. Hamid Sabi, who formerly practised law in Iran but has not been resident there for a great many years. It may be noted that Mr. Sabi challenges the independence of the Iranian Judiciary and of Judge Didar; he complains of various excesses and of widespread and endemic violations of human rights. While I have taken these expressions of opinion into account, it is unnecessary for present purposes to delve in greater detail into the evidence of either Professor Momtaz or Mr. Sabi or, for that matter, into some other expert evidence before this court. By agreement between the parties, all such evidence was adduced in statement form and no witnesses were tendered for cross examination.
- As explained in the Elwen judgment (pp.6E and following), the Defendant sought the discharge of the Restraint Order on a variety of grounds, which it is unnecessary to set out here. The essence of the learned Judge's reasoning and his decision to discharge the Restraint Order on the single ground of non disclosure, was contained in the following passage (at pp.13D – 14C):
- Following the Elwen judgment but before the matter was heard by the CACD, Judge Didar produced a 4th witness statement, dated 19th December, 2006, essentially addressed to the issue of non disclosure. He said that he had not appreciated that this court might consider it material that the case had been allocated to the Military Branch of the Judiciary. He repeated that he was a professional judge, at a level which meant that he dealt with more serious cases. His role was that of an investigating rather than a trial judge. His appointment as an investigating judge was not to any particular branch (i.e., military or civilian); he was simply made an investigating judge of the Judiciary. At the investigation stage, depending on whether the main suspect was a civilian or a member of the military, the case would be allocated to the Public Criminal Branch or the Military Branch, respectively. When the case came to trial, it would be allocated to trial before the branch according to the status of the principal defendant. He reiterated that:
- This statement of Judge Didar's was followed by a witness statement from Mr. Kiernan, formerly of the SFO, dated 6th February, 2007. Mr. Kiernan, a solicitor, said that he had been shown Judge Didar's 4th witness statement and asked to comment on paragraph 15 thereof. Mr. Kiernan confirmed that he had attended the first meeting with the Judge and a translator to discuss the provision of mutual legal assistance in connection with Judge Didar's investigation into matters concerned with alleged fraud and corruption. Mr. Kiernan's witness statement continued as follows:
- As the CACD judgment, with respect, makes plain (at [20] and following), the CACD focussed on the learned Judge's sole ground for coming to his conclusion. In summary, the CACD was unable to conclude that the Elwen judgment disclosed sufficient reasoning to sustain the learned Judge's conclusion. Accordingly and as already noted, the CACD quashed the order of HHJ Elwen discharging the Restraint Order and remitted the application to the Crown Court for re-hearing – a re-hearing intended to encompass all the arguments, including those other than non disclosure, upon which no conclusions had been reached.
- Pausing here, it is convenient at this stage to bring into the picture, the so-called "parallel proceedings" to which reference was made in the course of argument.
- By reference to the rival submissions, the principal issues in dispute on this application may conveniently be dealt with under the following broad headings:
- The rival cases: For the Defendant, Lord Brennan submitted that, so far as could be ascertained, there was no precedent for the English court granting a restraint order at the behest of any Iranian authority, still less military investigating authority. Neither POCA nor the 2005 Order contemplated a request from a military court or investigating authority purporting to exercise criminal jurisdiction. Participation of the military in politics might be one thing; military participation in judicial affairs was quite another. As a matter of Iranian law, it had not been demonstrated that Judge Didar was the proper authority for making the external request. But regardless of the position under Iranian law, as a matter of English law, the trial of civilians in military courts (save in the most exceptional of circumstances) would breach Art. 6 of the European Convention on Human Rights ("ECHR"): see, amongst other authorities, Ergin v Turkey (No.6) (Application no. 47533/99) ECtHR Decision of 4 May 2006. If so, then acceding to the LOR would involve this court in either ignoring s.3 of the Human Rights Act 1998 ("the HRA"), or acting contrary to s.6(1) thereof, or both; those sections provide as follows:
- For the SFO, Mr. Miskin submitted that the "overseas authority" was not Judge Didar but the Judicial Organisation of Iran; as such it was a competent "overseas authority" within the meaning of s.447 of POCA and the 2005 Order and the "external request" was likewise properly made. There was no doubt that Judge Didar was properly authorised to issue the LOR – both on the basis of his own evidence and in the light of the terms of his appointment from S.M. Hashemi Sharoodi, Head of the Judiciary, Iran. On a proper understanding of the organisation of the judiciary in Iran, the Military Branch was akin to a Division of the High Court and not to a Court Martial tribunal. In a helpful appendix to his skeleton argument, Mr. Miskin articulated the following propositions:
- Discussion: While at first blush Lord Brennan's submissions do give pause for thought, upon reflection, I have no real hesitation in preferring the submissions of Mr. Miskin on this Issue. My reasons follow.
- First, the fact, if it be the fact, that this might be the first restraint order granted by this court following an external request from the Iranian authorities, seems to me to be neither here nor there. The POCA regime, unlike the predecessor regime contained in the Criminal Justice Act 1988 ("the CJA 1988") and the delegated legislation made thereunder, does not limit external requests to "designated" countries or territories. Parliament having thus done away with a regime limited to designated countries, it is unsurprising that external requests should now be received from countries, including Iran, which were not designated under the "old" CJA 1988 legislation.
- Secondly, on the material before this court, there is no reason to doubt that, as a matter of Iranian law, the external request has emanated from an authority, viz., the Judicial Organisation, which has responsibility for the matters set out in s.447(11) of POCA. On the evidence, the Judicial Organisation is acting through Judge Didar, who was properly authorised to issue the LOR. I reach this conclusion both on the basis of what Judge Didar has himself said and in the light of the evidence (set out above) of his authorisation by the Head of the (Iranian) Judiciary to carry out investigations outside of Iran. It may be that this conclusion, as to the law of the requesting state, is sufficient to dispose of the present Issue; on the natural meaning of the language found in s.447, POCA, the Judicial Organisation is an "overseas authority" competent to make an "external request". However, as the matter was fully argued, I go on, nonetheless, to consider the objections of the Defendant under English law – and, in particular, by reason of Human Rights considerations - to treating the Judicial Organisation as a competent "overseas authority" within the meaning of s.447 POCA.
- Thirdly, in order to address these submissions of the Defendant under English law in their proper context, I must have regard to the evidence as to the organisation and role of the Iranian judiciary. On that evidence, I reach these conclusions:
- Fourthly, in the light of these conclusions, I am unable to accept that there is some objection under English law to treating the Judicial Organisation as a competent "overseas authority" within the meaning of s.447 POCA. In particular:
- I accordingly conclude that the answer to Issue (I) is that there has been an external request from a competent overseas authority, within the meaning of s.447, POCA and Arts. 7-8 of the 2005 Order. I turn to Issue (II).
- (1) Is there relevant property in England and Wales: While I did not understand Lord Brennan QC to make any formal concessions in this regard, there can be no sensible dispute that the LOR sufficiently identifies relevant property in England and Wales. This topic was also fully addressed in Mr. Miskin's skeleton argument (at paras. 27 – 28) and, as I understood it, no argument to the contrary was addressed to me at the hearing.
- (2) Has a criminal investigation been started in Iran? On the material already set out, the answer to this question is, manifestly, "yes".
- (3) Is there reasonable cause to believe that the Defendant has benefited from criminal conduct? The Defendant's lengthy and, in its own way, admirable, skeleton argument is noteworthy for its attenuated treatment of the underlying "merits". It is fair to say that both in those written submissions and in oral argument, Lord Brennan QC made play with some of the curiosities (or apparent curiosities) in the case. So, for example, there was the reference to Saffat not commencing civil proceedings against the Defendant – which may or may not be surprising, given the case against the Defendant as to where the ultimate loss fell. There was, it was suggested, the oddity, if this was a fraud, of the Defendant having paid significant sums to Lufthansa. There is the suggestion, that the Defendant has set-offs or counterclaims over-topping the claim – which, depending on the applicable law – may or may not be well-founded in law, having regard to the nature of the claims against the Defendant. There was much reliance on the alleged kidnapping of the Defendant in the Lebanon in 2004, allegedly by agents of the Iranian state, a matter hotly in dispute between the parties before me and which, fortunately, I do not need to resolve, even provisionally. There was, overall, the submission that this was a commercial dispute not a criminal case involving fraud.
- In my judgment, none of this begins to provide any or a proper answer as to what has happened to the approximately US$118 million admittedly received by the Defendant. Nor does it provide any or any proper explanation as to why, having received this significant sum of money, no Airbus has been supplied to any relevant Iranian party. The receipt of the moneys and the failure to supply the Airbus are facts crying out for explanation. So too, are the payments of large sums of money to Iranian officials. I bear in mind that I do not need to reach a final conclusion, even to the civil standard, as to any liability on the part of the Defendant – and I do not do so. I am dealing and only dealing with a restraint order, a provisional measure; I need to be satisfied of no more than that there is reasonable cause to believe that the Defendant has benefited from criminal conduct. Of that, I am readily satisfied. My conclusion is reinforced by the knowledge that had I been sitting in the Commercial Court, then, so far as concerns the underlying "merits", I would have had no hesitation whatever in granting or continuing a freezing order.
- I have not lost sight of the contention advanced by the Defendant that given his concerns about flagrant human rights abuses in Iran and his alleged kidnapping, he has been advised not to deal in any detail with the allegations made against him. That is as it may be – but it leaves me with such evidence as has been before the court. On the basis of that evidence, I have no doubt that the present condition has been satisfied.
- It also necessarily follows that in considering any of the questions going to my discretion, I am doing so in the context of a Defendant against whom there is, at the least, what might be termed a good arguable case of benefiting from (colloquially) "fraud". That is a fixed point in the argument, regardless of any concerns as may properly be expressed as to the fact that the Restraint Order has been granted at the behest of Iran. Even rogue states, so-called, may have good claims against alleged rogues.
- (4) Is there a reasonable possibility that an Iranian confiscation order may eventually be made? This condition was raised for consideration by Mr. Miskin. It appears to originate in s.76(3) of the CJA 1988. When considering that statutory provision, in Government of India v Quatrocchi [2004] EWCA Civ 40, Buxton LJ said this, at [19]:
- In my judgment it plainly has. It is undisputed – or not seriously in dispute – that the penal code of Iran makes provision for the making of a confiscation order or its equivalent and has done so from a time pre-dating the alleged offences committed by the Defendant. Beyond that, for the reasons already given when dealing with the previous condition, I am readily satisfied – on the merits - that there is a reasonable possibility that an Iranian confiscation order may eventually be made. I deal with questions of delay, separately, below.
- Pausing here, so far as concerns this Issue, the SFO has thus far satisfied me – without undue difficulty – that the conditions for the making of the Restraint Order, pursuant to Art. 7(2) of the 2005 Order, have been satisfied.
- (5) Is the matter affected by the fact that Mr. Common's witness statement appears to rely on Art. 7(3) rather than Art. 7(2) of the 2005 Order? This is a short point. As articulated in the Defendant's skeleton argument, it comes to this: the application for the Restraint Order was made by reference to Art. 7(3) but that condition was not satisfied, no proceedings against the Defendant having then been commenced. Indeed (subject to a very recent development, dealt with below), the SFO's evidence, in particular that from Judge Didar, goes to the starting of a criminal investigation (relevant to Art. 7(2)) rather than the starting of proceedings (relevant to Art. 7(3)).
- HHJ Elwen was not impressed by this submission and rejected it, tersely, "as a matter of no moment": the Elwen judgment, p.5 B-F. I respectfully agree with HHJ Elwen. At worst, Mr. Common's witness statement got it wrong. But that says nothing about the LOR which plainly focussed on Art. 7(2) and furnished the evidence for doing so. There is nothing in this point. The Court was – and is – in a position to make a restraint order pursuant to Arts. 7(2) and 8 of the 2005 Order.
- (6) Assuming that the relevant condition is, or is to be regarded as, that contained in Art. 7(2) of the 2005 Order, must the Restraint Order now be discharged, by reason of delay under Art. 9(7) of the 2005 Order? The question here arises in this way: assuming that the conditions for the making of the Restraint Order had been satisfied, ought it now to be discharged by reason of delay?
- In the course of his submissions, Lord Brennan placed much emphasis on delay:
- Mr. Miskin's submissions, in response, proceeded along the following lines. There was a need for realism as to the time taken in completing investigations in cases of serious fraud, especially with an international dimension. Experience in this country did not suggest otherwise. Further, in considering the complaints of delay, it was necessary to take into account Iranian procedure; so, the transfer to the Public Criminal Court would take place once the investigation was complete. Moreover, it did not lie well in the Defendant's mouth to complain of delay when he was vigorously contesting proceedings at every turn and refusing to return to Iran. There was no extradition treaty between Cyprus and Iran. But work on the investigation was nonetheless continuing, as evidenced by the Swiss proceedings. There was no basis for suggesting any lack of intent to bring the matter to trial.
- Pausing there, in the light of the way the case had been conducted, the relevant condition in Art. 7 of the 2005 Order was Art. 7(2) and the issue for decision went to Art. 9(7) of the 2005 Order. However, in a letter dated 19th December, 2007 from Judge Didar to the SFO (a letter placed before the court on the final day of the hearing), he said this:
- Against this background, I gave the parties time, subsequent to the hearing, to produce further evidence and submissions as to (inter alia) whether criminal proceedings had been started in Iran.
- A little to my surprise, given, as I have said, the manner in which the case had hitherto proceeded, Judge Didar, in his 5th witness statement, dated 9th January, 2008, has asserted that proceedings in fact commenced against the Defendant in December 2003. Unfortunately, this witness statement (1) contained no supporting materials; (2) did not explain why the case had proceeded as it had done hitherto; and (3) was unsupported by any further submissions from Mr. Miskin or his Junior. In the circumstances, I accept the submission advanced by the Defendant's counsel in their Note dated 24th January, 2008 that the court should not be satisfied that proceedings have indeed been started in Iran against the Defendant. It follows that the case remains one in which Arts. 7(2) and 9(7) of the 2005 Order are relevant, rather than Arts. 7(3) and 9(6). For the avoidance of any doubt, I do not see this recent exchange as casting doubt on Judge Didar's credibility or candour (see below); I am simply not persuaded without more, on a somewhat technical point, that his assertions are well-founded.
- I come, therefore, to the question of whether Art. 9(7) of the 2005 Order obliges me to discharge the Restraint Order. In my judgment, it cannot yet realistically be said that proceedings have not been started within a reasonable time. Accordingly, Art. 9(7) does not oblige me to discharge the Restraint Order. My reasons are these:
- (A) A high degree of scrutiny: In the first "chapter" of his argument under this heading, Lord Brennan urged a "high degree of scrutiny" for any such application, from the SSHD, the SFO and the Judge considering the application. Insofar as these submissions served to highlight the fact that the exercise by the court of its powers under the 2005 Order was discretionary, requiring careful scrutiny – given the intrusive nature of a restraint order – I readily agree. The court must necessarily balance the public interest in the preservation of assets to satisfy any confiscation order which may ultimately be made and the public interest in protecting personal and property rights against infringement and invasion: see, by analogy, R v Crown Court at Lewes, Ex parte Hill (1991) 93 Cr App R 60, at 69, per Bingham LJ (as he then was). Given the tension between these two interests, the court should proceed with care and caution (ibid). Further and insofar as both the SSHD and the SFO ought to exercise independent judgment before proceeding with an external request, rather than simply acting as unthinking conduits, I also agree. But, ultimately, the task for the court considering an application for a restraint order is to consider the strength of the material before it. If that material, for example, originating from the overseas authority, suffices to justify the making of a restraint order, then it is difficult to see a sensible basis for refusing such an order, simply because the SSHD or the SFO have not exercised the appropriate degree of independent judgment. It is not the court's task to engage in some abstract judicial review of the workings of the SSHD or the SFO.
- Be all this as it may, I can see no proper basis for criticism of the SSHD or the SFO here (deferring for the moment, questions of non disclosure to which I shall come). I am unable to accept that there was anything inappropriate in the SSHD referring this external request to the SFO or in the SFO proceeding to seek a restraint order. Realistically, it is not at all surprising that Mr. Common should have had no personal knowledge of the underlying facts. Nor is it improper that the case must stand or fall on the material furnished by Judge Didar. Thus far, therefore, this submission does not seem to me to advance the Defendant's case, other than to underline that the court has a discretion, to be exercised with care and caution – a submission very much, if I may say so, pushing at an open door.
- (B) Human Rights considerations: (1) The rival submissions: This was a major area of contention between the parties. For the applicant, Lord Brennan has urged a wide-ranging, Human Rights based approach, very much focussed on the alleged failings of the Iranian legal system, thus – if I may say so - deflecting attention from the nature of the order sought and the alleged wrongdoing of the Defendant. That Human Rights based approach was not to be "compartmentalised"; the court was obliged (by ss.3 and 6 of the HRA) to have such considerations in mind throughout and not to ignore them until the confiscation stage. Moreover, in the light of decisions such as Soering v United Kingdom (1989) 11 EHRR 439; Chahal v United Kingdom (1996) 23 EHRR 413; R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323 and Gov of USA v Montgomery (No.2) [2004] UKHL 37; [2004] 1 WLR 2241, Lord Brennan went so far as to submit that the Restraint Order should be discharged unless the SFO established (the burden being on it to do so) that there was "no plausible risk" of unfairness in any trial of the Defendant in Iran.
- For the SFO, Mr. Miskin, concentrating instead on the alleged misdeeds of the Defendant rather than the Iranian legal system, contended for a narrow discretion, having regard in particular, to the interim and provisional nature of a restraint order. The real point in time for considering the Human Rights jurisprudence was if or when a confiscation order came to be enforced. This case was nowhere near the Soering line of authorities; a restraint order was quite different from extradition, deportation or confiscation. If and insofar as a restraint order was a draconian remedy, it was so intended by Parliament – acknowledging that the public interest in the preservation of the fruits of crime might sometimes rank above the free movement of property.
- Furthermore, Mr. Miskin relied on the wording of Art. 46 of the 2005 Order and the contrast between the wordings of Art. 21 and Art. 8 of that Order. Art. 46 provides as follows:
- Art. 21 provides as follows:
- Mr. Miskin contended, first, that Art. 46 (2) contained a "legislative steer" in favour of making a restraint order. Secondly, he contrasted the saving for the Human Rights Act contained in Art. 21(4) with the absence of any comparable provision in Art. 8; the court should be slow to imply any such condition into Art. 8, "save in the most flagrant and obvious cases". This, he submitted, pointed to the "reserving" of Human Rights considerations to the confiscation stage, when the fairness of any trial could be accurately assessed. In his skeleton argument, he submitted that, by abolishing designation and by providing the differing wording to be found in Arts. 21 and 8:
- Lord Brennan submitted that the making of a restraint order remained discretionary. Art. 46(2) only came into play after a decision in principle had been made to make a restraint order; it had no bearing on the decision whether or not to make the restraint order. Such legislative "steer" as there was, went only to matters directly pertaining to the preservation of assets and their value.
- So far as concerned the contrasting wording in Arts. 8 and 21 of the 2005 Order, Lord Brennan submitted that the SFO contention was misconceived. First, the court was in any event bound by ss. 3 and 6 of the HRA, to act compatibly, at all times, with Convention rights. Secondly, if there was no prospect of giving effect to a confiscation order because of Human Rights considerations, then the making of restraint order would be futile. Thirdly, Art. 21(1) was couched in mandatory terms – see the use of the word "must"; unless, therefore, there was some saving such as that contained in Art. 21(4), then the court would have no discretion in the matter. By contrast, Arts. 7 and 8 were discretionary throughout – but, in the exercise of that discretion, Human Rights considerations were not to be ignored.
- (2) Art. 46 of the 2005 Order: I can take this issue shortly. First, I was not persuaded by Lord Brennan that Art. 46(2) is only applicable once the decision has been made to make a restraint order. Secondly, however, while the exercise of the discretion is undoubtedly informed by the underlying purpose of a restraint order (see, per Hughes LJ, at [3] in the CACD judgment, set out above), so that to such extent the "legislative steer" contained in Art. 46(2) is a relevant and important consideration, it is not in any way conclusive; the discretion under Arts. 7, 8 and 9 of the 2005 Order remains at large. As already underlined, the mere fact that the conditions in Art. 7 have been satisfied, does not mean that a restraint order must follow as a matter of course.
- (3) Human Rights – approach, timing and burden of proof: To my mind, the correct starting point for the approach to the discretion contained in Arts. 7 – 9 of the 2005 Order is a clear focus on the nature of a restraint order: it is an interim and provisional measure and a valuable weapon in the court's armoury in the fight against international crime. This country has an important public interest in not becoming a safe haven for the proceeds of international crime. That interest is not, in my judgment, limited to moneys emanating from or concerned with states whose legal systems are beyond reproach. There is something deeply unattractive about dubious funds in this country being beyond the reach of the law, simply because of concerns about the legal system in the state to which the dispute relates. I confess that, with respect, I was not attracted by the Defendant's approach, involving as it often seemed to me, a disproportionate inquiry of a nature which risked losing sight of the true, limited but important nature of the remedy in issue here. In the course of argument, I pressed Lord Brennan as to whether, given the thrust of his submissions, there could be no cooperation with Iran in connection with, say, the manifest proceeds of drug dealing. I do not think I do him injustice in saying that he could never clearly answer this question, save by saying that that was the price to be paid for insisting on the Human Rights standards to be expected in this jurisdiction. That struck me as a less than satisfactory solution. Moreover, if Lord Brennan's approach was correct and although he disclaimed any such consequences, one can all too readily envisage challenges concerning the Human Rights credentials of the legal systems of a host of friendly foreign states; a defendant would have every interest in a vigorous rearguard action of this nature (cf. Montgomery (No.2) (supra), at [7]). That does not seem to me to be conducive to international cooperation in the fight against international crime. Still further and as a practical matter, the hearing before me lasted for some 2 days; it ought to be rare that contested hearings concerning restraint orders should occupy days of court time – just as it is rare for inter partes hearings concerning freezing orders to do so.
- Informed by such considerations, it seems to me that arguments as to Human Rights issues affecting the courts of the requesting state ought to be largely concentrated on the time when or if a confiscation order comes to be sought. It is then that it will be known whether there has or has not been a fair trial – rather than subjecting the matter to invidious speculation. While I do not rest this conclusion on the contrast between the wording of Arts. 21(4) and 8 of the 2006 Order, that contrast is certainly a pointer as to the stage at which the legislature undoubtedly anticipated that Human Rights challenges would fall to be considered.
- I have deliberately said that Human Rights issues ought to be largely concentrated on the confiscation order stage; it would not be right to say that they should be entirely or exclusively confined to that stage. This court has of course well in mind its obligations to comply throughout (not only at the confiscation stage) with ss. 3 and 6 of the HRA, though, as I have sought to emphasise, always keeping proportionality and context well in mind. Further and by way of example, where it is clear that there is no realistic (or reasonable) prospect of a fair trial in the requesting state, so that, accordingly, there is no reasonable possibility of this court giving effect under Art. 21 to an external (confiscation) order, it would be futile to make a restraint order. So too, I would suppose, where it is established that there is something so offensive about the conduct of the investigation itself that it would be inappropriate for this court to offer any assistance. But such cases are likely to be rare – and, one might hope, as Mr. Miskin in effect said, that they would be weeded out by the SFO before ever reaching a court hearing.
- As to the authorities to which Lord Brennan referred, I am, with respect, unable to accept that the Human Rights jurisprudence on extradition, deportation and confiscation should be applied to restraint orders; in my judgment, that is a leap altogether too far. Judgments should not be divorced from their true context. Even putting to one side the controversial issues to which they give rise in their own sphere of application (eg. as to Chahal), there is a world of a difference between dispatching a person to a country where there is a real risk of proscribed (physical) ill-treatment (Soering, Chahal and Ullah) and a restraint order "freezing" his assets in this jurisdiction. There is simply no sound basis, whether in principle, the ECHR, the HRA or authority, for reading the "real risk" test into the otherwise clear legislative provisions governing the making of restraint orders.
- Montgomery (No.2) (supra) concerned a confiscation order made in the USA against a defendant by then resident in England. A court in the USA dismissed the appeal of the defendant under the "fugitive disentitlement doctrine" because of her status as a fugitive from justice. The US Government applied to register the confiscation order in this country, pursuant to s.97 of the CJA 1988. The issue between the parties was whether it would be contrary to the interests of justice (wording contained in s.97(1) of that statute) to register the order. The US Government succeeded at first instance, before the Court of Appeal and the House of Lords. The defendant's case was that if a court in a state, a signatory to the ECHR, had shut her out from pursuing her appeal as the US appellate court had done, it would have constituted a breach of Art. 6, ECHR.
- The House of Lords (at [17] and following) underlined the territoriality principle: the ECHR does not govern the actions of states not parties to it nor does it purport to be a means of requiring the contracting states to impose Convention standards on other states. Accordingly, even on the assumption that the operation of the fugitive disentitlement doctrine would have constituted a breach of Art. 6 had it taken place in a Convention state, the registration of a US confiscation order by this court could not constitute a direct breach of Art. 6 of the ECHR.
- What remained was, as summarised in the headnote (at p.2242):
- As emphasised in the speech of Lord Carswell, this indirect engagement of Art. 6 was a jurisdiction of an "exceptional nature"; only a flagrant deprivation of an applicant's rights would trigger it; an extreme degree of unfairness would need to be established; it would have to amount to a virtually complete denial or nullification of his Art. 6 rights, akin to a "fundamental breach" of the obligations contained in that Article: see, esp., at [24] – [27].
- Montgomery (No.2) represents the high water mark for the Defendant in connection with this line of authority. It is not a decision concerning extradition or deportation; it extends the exception to the principle of territoriality to the enforcement in a Convention state of a judgment in a non-Convention state. That said, it seems to me to fall a long way short of assisting the Defendant here. What the Defendant requires is a still further extension of the exception to the principle of territoriality, covering restraint orders in addition to confiscation orders. But confiscation orders are very different from restraint orders. They are final, not interim or provisional; the court is concerned with known facts not risks. It is one thing to refuse enforcement of a foreign confiscation order because of a known, flagrant denial of justice. It is quite another to refuse to preserve assets because of a risk of injustice in the future. If anything, Montgomery (No.2) serves to highlight the very high threshold test (fundamental breach or flagrant denial) before an exception to the principle of territoriality can be justified.
- In summary, it follows, that although not attracted to labels, I very much prefer Mr. Miskin's approach and his submission that the discretion in question is "narrower" rather than "wider". I do not go so far as to say that Human Rights issues as to the legal system in the requesting state are necessarily irrelevant at the stage of considering a restraint order - but the key is proportionality and context. A restraint order is an interim order, involving assets in this jurisdiction. In this context, Human Rights issues concerning the legal system in the requesting state should largely be concentrated on the confiscation stage, by which time this court can assess known facts rather than risks. The mere inability to negate a suggested real risk of unfairness at trial, should not by itself be a bar to the making of a restraint order; the benefits of the remedy should not too readily be lost. Finally, not the least of the attractions of such an approach is that the requesting state will thus have every incentive to ensure the fairness of the trial
- (4) The prospect of a fair trial in this case: Where then does the present case stand? I confess that I do entertain real concerns as to the fairness of the proposed trial of the Defendant in Iran.
- But all this said, I am not persuaded that on the ground of the risk of unfairness at the proposed trial, it would be futile or otherwise inappropriate to continue the Restraint Order. On the facts of the present case and on the evidence as to this investigation, I do not think that I am driven to such a conclusion. To the contrary, on this aspect of the case and as a matter of my discretion, I think that the right answer is to continue the Restraint Order; if or when an Iranian confiscation order comes to be considered, the fairness of any trial can and will be subjected to close scrutiny. That, to me, strikes the right balance between the competing interests in this case. My reasons are as follows:
- (C) Non disclosure: Here, I am concerned with the failure by the SFO to disclose the fact that the investigation was being conducted by the Military Branch of the Judicial Organisation, the question of whether such failure amounted to material non disclosure and, if it did, the consequences which should follow. I take the matter in stages.
- (1) The law: As is well established, on any ex parte application it is imperative that the applicant should make full and frank disclosure of all facts known to him or which should have been known to him had he made all such inquiries as were reasonable and proper in the circumstances: see, Brink's Mat Ltd. v Elcombe [1988] 1 WLR 1350, a case concerning a freezing order. As observed by Balcombe LJ (at p.1358):
- The same duty to make full and frank disclosure of material facts applies as much to applicants seeking restraint orders ex parte as to applicants for freezing orders: Jennings v Crown Prosecution Service [2005] EWCA 746; [2006] 1 WLR 182. In that case, the Court of Appeal upheld the decision of Leveson J (as he then was), who, on the inter partes hearing, had continued the restraint order but had ordered the CPS to pay the defendant's costs of the application to him.
- In Jennings, both Laws LJ and Longmore LJ (with each of whom Lloyd LJ agreed), went on to make specific observations concerning the proper response of the court to non-disclosure by the Crown in cases of this kind. Laws LJ began by recognising the "reality" of such applications (at [55]). The respondents to such applications were usually charged with or suspected of serious crimes involving large sums of money. Laws LJ went on to say this: (at [56]):
- Longmore LJ, dealing (at [64]) with the Crown's failure to discharge the duty of making full and frank disclosure, said this:
- Although Lord Brennan suggested that Jennings was distinguishable, in that it was a domestic case and not concerned with the status of the applicant or judicial conduct, I do not think that it is; the facts highlighted by Lord Brennan are, of course, different but they do not detract from the applicability of the approach there advocated. In considering this topic, I direct myself in accordance with the guidance contained in both Brink's Mat and Jennings. I also have well in mind the observation of Bingham LJ (as he then was), albeit in a somewhat different context, in R v Crown Court at Lewes, Ex parte Hill (supra), at p.69:
- (2) The manner in which this question arises: As already recorded, HHJ Elwen set aside the Restraint Order on this very ground. In the event, the CACD disagreed but on a basis which left the matter at large. As it seems to me, I must therefore deal with the alleged non disclosure de novo. I am not engaged in a review of HHJ Elwen's decision; nor am I constrained by the CACD judgment to decide this issue one way or another.
- (3) The rival arguments: Lord Brennan mounted a ferocious attack on the candour of Judge Didar. He sought to link non disclosure, his earlier criticisms of the Iranian legal system, together with other matters of criticism of Judge Didar, going to alleged delay and undertakings allegedly not kept. He submitted that, taken together, all this meant that Judge Didar's word could not be relied upon. Having regard, specifically, to the sequence of events relating to non disclosure, he pointed out that it was the Defendant's solicitors whose own inquiries had first revealed the involvement of the Military Branch; Judge Didar had only offered disclosure late and then in piecemeal fashion. Yet the facts not disclosed were relevant and central. There was no good reason why all the relevant facts should not have appeared in the LOR. There were other non disclosures as well, going to the factual background to the dispute. All this was either deliberate non disclosure involving a lack of candour or, even if "innocent", nonetheless serious and culpable. Either way, the right course was to discharge the Restraint Order for this highly material non disclosure. The Restraint Order had now been in place for some 18 months; in terms of justice, the non disclosure was not curable.
- For his part, Mr. Miskin submitted, first, that there had been no material non disclosure; given a proper understanding of the Iranian legal system and Judge Didar's role in it, the fact that the investigation had been allocated to the Military Branch was not material. Secondly, even if the non disclosure was material, the materiality of any non disclosure was not such as to require the discharge of the Restraint Order. Thirdly, there was no evidence of dishonesty on the part of Judge Didar or the SFO; any non disclosure was therefore inadvertent. Fourthly, in the light of all the evidence now before the court, the non disclosure had been remedied or was capable of being remedied. Fifthly, as to the "other" alleged non disclosures (going to the factual background), Judge Didar had no knowledge of them and/or they were irrelevant.
- (4) Decision: In my judgment and in the exercise of my discretion, it would not be right to discharge the Restraint Order; it should instead be continued. My reasons are these:
- There remains the question of whether, as in Jennings itself, it is appropriate to make some costs order reflecting the non disclosure which I have found. As I have not been addressed on this topic, I express no view one way or the other. But when I come to hand down this judgment, I shall consider any arguments addressed to me in this regard.
- (D) Parallel proceedings: I have already outlined the other proceedings which, so far as I am aware, either are or have been in existence. Insofar as the Defendant sought to contend that in some way they impacted on the exercise of the court's discretion to continue the Restraint Order, I regret that (as indicated during the hearing) I can see nothing in this point, at least for the time being and on the facts currently before the court. It is a commonplace that an applicant for a freezing order or restraint order will commence proceedings in a variety of jurisdictions, seeking to preserve assets wherever they are found. It is of course true that duplication is to be avoided and it would be a factor in the exercise of the court's discretion if sufficient assets had already been preserved so as to render a restraint order unnecessary. All that I readily follow.
- It was for such reasons that I sought to canvass during argument the question of whether the orders of the Cypriot court would now remain in place – and I have already summarised Lord Brennan's response. That response is, to my mind, the end of this point for the time being.
- Should, however, the time come when (1) the Cypriot orders come to be accepted by the Defendant as being beyond challenge and (2) should the assets "frozen" by those orders sufficiently protect not just MODSAF's civil claim but also the full extent of the claims of the prosecution in the criminal proceedings, then, no doubt, the Defendant can come back to court to argue that the Restraint Order is unnecessary. While I cannot pre-judge the outcome of any such application, an appropriate liberty should be built into the terms of the order to permit it to be brought. The Defendant should of course appreciate that suitable undertakings would need to be provided to guard against any hiatus.
- (E) Overall conclusion on discretion: For the reasons already set out, in the exercise of my discretion I would not discharge the Restraint Order and instead take the view that it is to be continued.
- The rival cases: For the Defendant, Lord Brennan submitted that the imposition of the Restraint Order involved impermissible retrospectivity. The offences of which the Defendant is accused were allegedly committed by him before the 2005 Order had come into force (the 1st January, 2006) and even before the relevant sections of POCA had come into force (the 24th March, 2003). Prior to POCA coming into force, provision was made by the CJA 1988 (and delegated legislation made thereunder) for international mutual assistance in this in this field – limited, however, to designated countries. There was no hiatus; that predecessor regime continued to apply in respect of external requests emanating from designated countries until the coming into force of the 2005 Order. If, contrary to Lord Brennan's submission, the SFO was here entitled to a "retrospective" Restraint Order, then: (1) there would be competing regimes in connection with external requests for offences committed prior to the 1st January, 2006; (2) Iran, a non-designated state under the "old" CJA 1988 regime, would be entitled to assistance under the new POCA regime to which it would not have been entitled under the "old" regime, the regime in force at the time when these offences were allegedly committed; (3) external requests could be made retrospectively whereas it was plain that domestic restraint orders could not be made in respect of offences committed before the 24th March, 2003: see, The Proceeds of Crime Act 2002 (Commencement No.5, Transitional Provisions, Savings and Amendment) Order 2003 ("the 2003 Order"), Arts. 2 and 5. This could not be right but if it was, then there was no limit to how far back the SFO could go in respect of offences committed in non-designated countries. The correct answer was that there was no warrant for construing POCA and the 2005 Order as having retrospective effect or, at the least, as having retrospective effect dating back to offences committed prior to the 24th March, 2003. That conclusion was fatal to the Restraint Order which should be discharged on this ground alone. As of the 1st January, 2006, non-designated countries could seek assistance under POCA and the 2005 Order – but only in respect of offences committed thereafter or, at the least, after the 24th March, 2003.
- Mr. Miskin submitted that the SFO case did not involve any retrospectivity; the operation of the 2005 Order was "triggered" by the date of the request not the date of the offence. The provisions contained in POCA and the 2005 Order contained no words limiting their application to offences committed after either the 24th March, 2003 or the 1st January, 2006. To the contrary and strikingly, in respect of external requests, there was no provision comparable to Art. 5 of the 2003 Order. This contrast between the domestic regime and the provision made for external requests was not accidental, echoing as it did a similar contrast in the CJA 1988 regime, where the restriction on domestic proceedings had been omitted in connection with external requests: see, Gov of USA v Montgomery [2001] UKHL 3; [2001] 1 WLR 196 (HL) ("Montgomery (No.1)"). The reasoning of that authority was applicable here too. There was no unfairness provided, as was the case here, that the relevant offences and the sanction of a confiscation order were part of Iranian law at the time that the offences were committed. Accordingly, even if and to the extent that the SFO case involved a retrospective construction of POCA and the 2005 Order, such a result was not unfair: see, L'Office Cherifien v Yamashita Ltd. [1994] 1 AC 486, esp. at pp. 524 et seq. There was, accordingly, no proper basis for discharging the Restraint Order on the ground of retrospectivity.
- In reply, Lord Brennan submitted that the differences between the CJA 1988 regime and the provisions of POCA (and the 2005 Order) were such that, the reasoning in Montgomery (No.1) was inapplicable. As a matter of statutory construction, neither POCA nor the 2005 Order permitted the retrospectivity upon which the SFO case depended. Questions of fairness and statutory construction should not be conflated, so that Yamashita did not assist the SFO. But in any event, fairness demanded that the 2005 Order should not be applied retrospectively, not least, given that it extended the provisions for international mutual assistance beyond the previous list of designated countries.
- The statutory regimes and the authorities: I start with the "old", CJA 1988, regime. So far as concerns "domestic" proceedings, s.102(4) of the CJA 1988 provided as follows:
- However, so far as concerned "external orders", s.96 of the CJA 1988 provided as follows:
- In turn, s.76 of the CJA 1988, as modified by para. 5 of Schedule 2 to the Criminal Justice Act 1988 (Designated Countries and Territories) Order 1991 ("the 1991 Order"), provided as follows:
- This legislative regime formed the context in which Montgomery (No.1) came to be considered. Montgomery (No.1) concerned an external (United States) confiscation order. A Panamanian company had been used to hold the proceeds of a fraud committed by the husband. Following conviction of the husband, a US court held that the shares in that Panamanian company should be forfeited. However, before the trial, he had transferred the shares to his wife. Some years later, a confiscation order was made by a US court against the wife. By that time, the wife had separated from the husband and taken up residence in this country. Later, she divorced and re-married. A restraint order, in aid of the US confiscation order, was made against the wife and her new husband. An application was made to discharge the restraint order on the ground that the 1991 Order had not been applied to the United States until 1994 and, as the original confiscation order had been made before that date, the restraint order had not been properly granted. The wife succeeded at first instance; the Court of Appeal allowed an appeal by the US government and the House of Lords dismissed the wife's (and new husband's) appeal.
- The headnote summarised the House of Lords decision as follows (at p.197):
- In the House of Lords, the principal speech was given by Lord Hoffmann. Referring to s.76 of the CJA 1988 (as modified by the 1991 Order in the terms set out above), Lord Hoffmann said this:
- Dealing with the general presumption against retrospective legislation, Lord Hoffmann went on to say this:
- Turning next to the POCA regime, the temporal restriction on domestic restraint orders is contained in Art. 5 of the 2003 Order:
- However, no provisions in like terms are to be found dealing with external requests and orders. The terms of s.444(1) of POCA were set out much earlier. S.444(2) provides that an Order in Council under that section:
- Finally, so far as concerns authority, there is the well known speech of Lord Mustill in Yamashita (supra), which contains the following passages (at pp. 524 – 5):
- Decision: Having set out the rival cases and the source materials at some length, I can state my conclusions relatively briefly. Whatever the attractions of the Defendant's case at first blush, upon analysis, I do not think it is sustainable. I very much prefer the SFO's case. I do not think that there is, here, a well-founded objection to the Restraint Order on the ground of retrospectivity. My reasons follow.
- First, there is a striking difference between the domestic POCA regime and the legislative scheme as it applied to external requests: Art. 5 of the 2003 Order has no counterpart in the provisions made for dealing with external requests. The clear inference is that the limitation applicable to domestic restraint orders, namely, that the offence must have been committed on or after 24th March, 2003, is inapplicable in the case of external requests.
- Secondly, I do not think it accidental that there was this omission of a provision equivalent to Art. 5 of the 2003 Order when the legislature came to deal with external requests. Notwithstanding some differences in language, Parliament must be taken to have had in mind the CJA 1988 regime and the decision in Montgomery (No.1). Moreover, the speech of Lord Hoffmann illuminates the rationale for the distinction between the domestic and external regimes. When dealing with an external request, the central consideration in this context is whether the conduct complained of constituted an offence in the foreign country at the time in question, punishable by, inter alia, a confiscation order. If yes, so that no retrospectivity is involved under the foreign law, it is difficult to discern unfairness in giving effect to an external request made after the coming into force of POCA and the 2005 Order. To repeat Lord Hoffmann's observation (at [30]) but substituting countries and dates, as appropriate:
- Thirdly, I am, accordingly, not minded to read POCA and 2005 Order as limited, in respect of external requests, to offences committed either after the 24th March, 2003 or the 1st January, 2006. Any retrospectivity involved relates not:
- Fourthly, for completeness:
- It follows that, for the reasons given, the objection to the Restraint Order, on the ground of retrospectivity, must fail.
- (1) Introduction: Given the view which I take of the matter, this Issue can be dealt with very shortly indeed. Stripped to its essentials, the Defendant's case is that the grant and continuation of the Restraint Order infringe the sanctions legislation currently in force against various designated Iranian entities, including, in particular, MODSAF.
- Assuming everything else in favour of the Defendant, his case on this Issue must fail unless the grant or continuation of the Restraint Order discloses a breach of Art. 6 and/or Art. 7 of The Iran (Financial Sanctions) Order 2007 (No. 281) ("the 2007 Order"). That Order contains the legislation thus far made in this country, giving effect to Security Council resolution 1737 (2006); the Defendant can do no better under any other Security Council resolution nor under the EC Council Regulation to which I was referred. I therefore go directly to Arts. 6 and 7 of the 2007 Order; these provide as follows:
- (2) Discussion: Arts. 6 and 7 of the 2007 Order are, understandably, widely drawn. Nonetheless, I am wholly unable to accept that the making (or continuation) of the Restraint Order discloses any breach of those Articles. With respect, Art. 6 does not appear to have any application whatever, in that the Defendant's assets are not "owned, held or controlled" by any designated person; so no question of "dealing with" arises. Even if that be wrong, the making or continuation of a Restraint Order does not involve any "dealing with" the assets as contemplated and prohibited by that Article. Equally, the making or continuation of the Restraint Order – so freezing the Defendant's assets in this jurisdiction – does not make those assets available "directly or indirectly, to or for the benefit of a designated person"; the Restraint Order does no more than preserve the Defendant's assets in this country.
- It is of course the case that the purpose of a restraint order is to preserve the defendant's property and so to guard against it being dissipated prior to confiscation (should the matter proceed that far). I have not overlooked the argument that the Restraint Order is futile because effect could not be given to an Iranian confiscation order on account of the sanctions legislation. At the stage when any Iranian confiscation order comes to be considered, I readily acknowledge that questions may arise as to the sanctions legislation then in force; I express, however, no view as to how those questions will fall to be resolved – save to observe that, at this point in time, the answer is plainly not so obvious as to warrant acceding to the "futility" argument. Not least, as it is not known when any such issues will come to be determined, it cannot be known what sanctions legislation will then be in force or, indeed, what exemptions will also require consideration.
- To my mind, the Defendant's objection to the Restraint Order, based on the sanctions legislation, must fail on the simple ground that no breach of that legislation is shown.
- (3) The fate of any funds recovered under an Iranian confiscation order: For completeness, I must deal briefly with this topic, though it is essentially academic – as my decision on the sanctions legislation proceeded on the assumptions most favourable to the Defendant.
- At the hearing before me, the SFO's position was that any moneys recouped under the 2005 Order following a final judgment in the criminal proceedings in Iran, would be retained by the UK Treasury and would not be remitted to Iran. It followed, that no conceivable question of the violation of sanctions legislation could arise; even if a confiscation order was made in Iran, the Defendant's assets would not be remitted there. At any rate at first blush, this was somewhat startling; for my part, I had assumed that the object of the exercise was to freeze the assets in question so that if or when an Iranian confiscation order came to be made, they would be available to be remitted to Iran.
- On instructions, however, Mr. Miskin insisted that such was not the case and that international mutual assistance in this field worked on what might very loosely be called a "knock for knock" basis. The country freezing the funds would retain them. Accordingly, if country X froze funds, at the behest of country Y, relating to an alleged fraud committed in country Y, it (X) would retain those funds if a final order was made in the proceedings in country Y. While that would appear to give country X an uncovenanted bonus, country Y would be assuaged for this reason. If, in a future case, country Y froze funds, at the behest of country X, in respect of a fraud committed in country X, then country Y could retain those funds, if or when a final order came to be made in the proceedings in country X. In this way and however imperfectly, states had an interest in cooperating in combating international financial crime.
- It is fair to say that Mr. Miskin did acknowledge, by way of partial qualification, that the only way in which the funds might be remitted was by way of diplomatic arrangements between this country and Iran; if (which he denied) this gave rise to any risk of breach of the sanctions legislation, it reinforced his argument that it was only at the confiscation stage – not now – that the issue of sanctions had any relevance.
- As this matter had not been fully canvassed at the hearing, I gave the parties time to address it thereafter. Mr. Miskin has since produced an extract from Smith, Owen and Bodnar on Asset Recovery: Criminal Confiscation and Civil Recovery (2nd ed., April 2007), which says this (at paras. IV.6. 139 – 140):
- Further still, I have since received communications from the SFO and HM Treasury, essentially confirmatory (so far as relevant) of the position stated by Mr. Miskin and as set out in Smith, Owen and Bodnar (supra).
- In response, the Defendant's legal representatives have criticised what they say is the absence of a clear "system" for dealing with and applying assets restrained under the 2005 Order. They have also, valiantly, sought to maintain the Defendant's case as to the infringement of the current legislation. Further still, they have seized on the somewhat uncertain position going to Judge Didar's knowledge as to the risk that funds – even if the subject of a confiscation order – may not be remitted to Iran. In a Note dated 8th February, 2008, signed by counsel, they went so far as to say this:
- I should at once dispose of the suggestion, advanced in this 8th February Note, that the possible fate of the frozen assets (or moneys representing those assets) in some way gives the Defendant a separate or additional ground for seeking the discharge of the Restraint Order. First, whatever the position as between the SFO and the Judicial Organisation of Iran (or Judge Didar) inter se, is wholly irrelevant so far as concerns the Defendant; even assuming (emphatically without deciding) that the Judicial Organisation of Iran had grounds for complaint against the SFO, this could be of no possible benefit to the Defendant. There is certainly no suggestion on the materials before the court of any diminished enthusiasm for these proceedings on the part of either the SFO or the Judicial Organisation of Iran.
- Secondly, if and insofar as the Restraint Order and any subsequent confiscation order might benefit HM Treasury rather than Iran, I simply fail to see how this assists the Defendant; if anything, it undermines various strands of the case hitherto advanced on his behalf.
- Save for the aspects of this matter with which I have just dealt, it is unnecessary to pursue this somewhat intriguing topic further; my interest in this case lies not with international arrangements for dealing with assets or funds frozen by restraint orders or the vagaries which might impact on otherwise beneficial international cooperation. So far as concerns the Sanctions Issue, I conclude as follows:
- It follows that, for the reasons given, all the challenges to the continuation of the Restraint Order have failed. The Restraint Order therefore remains in force. I shall be grateful for the assistance of counsel in drawing up an appropriate order and in respect of all questions of costs.
- By way of postscript, unconnected to the facts of the present case, I add this. External requests for restraint orders are capable of giving rise to issues of some delicacy, calling for a very careful balancing of competing interests. I am concerned to know more as to the general practice for listing and hearing applications concerning restraint orders and as to whether there is more to be done in this regard. I would be most grateful for any thoughts counsel may have.
Mr Justice Gross :
INTRODUCTION
i) The Restraint Order was granted by HHJ Elwen, ex parte, on the 22nd June, 2006.
ii) On the 7th December, 2006, following an inter partes hearing, HHJ Elwen discharged the Restraint Order, on the single ground of non disclosure ("the Elwen judgment") but stayed the discharge pending appeal.
iii) On the 2nd August, 2007, the Court of Appeal (Criminal Division) ("the CACD" and "the CACD judgment" as appropriate) allowed the appeal by the Director of the Serious Fraud Office ("the SFO") from the Elwen judgment: see [2007] EWCA Crim 1927. The CACD quashed the order discharging the Restraint Order and remitted the application to the Crown Court for re-hearing; the Restraint Order thus remained in force. The CACD judgment arrived at its conclusion on a basis which left all the principal issues open for decision at the re-hearing. This has been that re-hearing.
"…on the application of the Director of the ….[SFO]…('the Applicant') pursuant to an external request from the Judicial Organisation, First Branch of Investigation of the Islamic Republic of Iran. "
Subject only to various qualifications for living expenses, legal advice and so on, the Restraint Order provided that the Defendant must not, until further order of the court:
" (1) remove from England and Wales any of his assets which are in England and Wales; or
(2) in any way howsoever dispose of, deal with or diminish the value of any of his assets whether they are in or outside England and Wales. "
The Restraint Order, as then granted, also contained within it provisions obliging the Defendant to disclose details of his assets, worldwide.
THE LEGAL FRAMEWORK
" Restraint Orders
(1) If any condition set out in section 40 is satisfied the Crown Court may make an order (a restraint order) prohibiting any specified person from dealing with any realisable property held by him."
S.40, POCA, in turn provides, inter alia, that the Crown Court may exercise the powers conferred by s.41 if any of the following conditions is satisfied:
" (2) The first condition is that –
(a) a criminal investigation has been started in England and Wales with regard to an offence, and
(b) there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct."
As is readily apparent, a restraint order is a provisional measure, analogous (at least in some respects) to the freezing order in civil disputes.
" External requests and orders
(1) Her Majesty may by Order in Council –
(a) make provision for a prohibition on dealing with property which is the subject of an external request;
(b) make provision for the realisation of property for the purpose of giving effect to an external order."
The explanation of these terms is to be found in S.447, POCA:
" (1) An external request is a request by an overseas authority to prohibit dealing with relevant property which is identified in the request.
(3) An external investigation is an investigation by an overseas authority into –
(a) whether property has been obtained as a result of or in connection with criminal conduct….
(7) Property is relevant property if there are reasonable grounds to believe that it may be needed to satisfy an external order which has been or which may be made.
(11) An overseas authority is an authority which has responsibility in a country or territory outside the United Kingdom –
(a) for making a request to an authority in another country or territory (including the United Kingdom) to prohibit dealing with relevant property,
(b) for carrying out an investigation into whether property has been obtained as a result of or in connection with criminal conduct …."
" Conditions for Crown Court to give effect to external request
7. (1) The Crown Court may exercise the powers conferred by article 8 if either of the following conditions is satisfied.
(2) The first condition is that –
(a) relevant property in England and Wales is identified in the external request;
(b) a criminal investigation has been started in the country from which the external request was made with regard to an offence, and
(c) there is reasonable cause to believe that the alleged offender named in the request has benefited from his criminal conduct
(3) The second condition is that –
(a) relevant property in England and Wales is identified in the external request;
(b) proceedings for an offence have been started in the country from which the external request was made and not concluded, and
(c) there is reasonable cause to believe that the alleged offender named in the request has benefited from his criminal conduct
(4) In determining whether the conditions are satisfied and whether the request is an external request within the meaning of the Act [i.e., POCA], the Court must have regard to the definitions in subsections (1), (4) to (8) and (11) of section 447 of the Act.
Restraint orders
8. (1) If either condition set out in article 7 is satisfied, the Crown Court may make an order ('a restraint order') prohibiting any specified person from dealing with relevant property which is identified in the external request and specified in the order.
Application, discharge and variation of restraint orders
9. (1) A restraint order -
(a) may be made only on an application by the relevant Director;
(b) may be made on an ex parte application to a judge in chambers
(2) An application to discharge or vary a restraint order ….may be made to the Crown Court by –
(b) any person affected by the order.
(3) Paragraphs (4) – (7) apply to an application under paragraph (2).
(4) The court –
(a) may discharge the order;
(b) may vary the order.
(7) If the condition in article 7 which was satisfied was that an investigation was started, the court must discharge the order if within a reasonable time proceedings for the offence are not started."
i) First, the satisfaction of either of the conditions contained in Art. 7 is necessary for a restraint order to be made under Art. 8;
ii) Secondly, the satisfaction of either of the Art. 7 conditions is or may not be sufficient for the making of a restraint order under Art. 8, in that the court's power to make such an order under Art. 8 is and remains discretionary: see the wording of both Art. 7(1) and Art. 8(1);
iii) Thirdly, where the satisfaction of the condition contained in Art. 7(2) is relied upon, Art. 9(7) provides, on the face of it, in mandatory terms for the discharge of the order if "proceedings for the offence are not started" within a reasonable time; at all events, the contrary was not contended.
"3. The plain purpose of the restraint order is to prevent a person from dissipating or hiding his assets once he knows that there is a criminal investigation under way, and thus frustrating the power of the Court eventually to make an order confiscating any benefits which he is shown to have enjoyed from criminal conduct. Where the application is made on behalf of the English police or prosecuting authorities the English public interest in any potential English order not being frustrated in this way is plain to see. Where the application for a restraint order comes from a foreign country, there is still a legitimate English public interest in foreigners not being able to use this country as a place in which to shelter ill-gotten gains or their proceeds….
A restraint order is a far-reaching order. Although it takes away no property or assets from the person under investigation, and is by definition temporary in application, it prevents him from using the frozen property in any way until the criminal investigation and any ensuing prosecution is over. That may restrict him considerably in what he can do by way of business or private activity. If it turns out that the person is not shown to be guilty of crime, he may in the meantime have lost a good deal …… The order has been called draconian, and so it may (deliberately) be. "
As Hughes LJ also observed (ibid), there may well be no ability to recover any such losses from those who sought the restraint order in the case of an external request. It may be noted that there is no provision requiring the applicant for a restraint order to give an undertaking in damages, as is, invariably or almost invariably, required of an applicant for a freezing order.
BACKGROUND AND HISTORY
" 5. The Court has jurisdiction to make the order sought. The Court may make a restraint order under Article 8 of the said Act if the conditions in Article 7(1) are satisfied. It is submitted that the conditions set out in Article 7(1) are satisfied, i.e., (i) relevant property in England & Wales is identified in the request; (ii) proceedings in the country have been commenced from which the request is made and (iii) there is reasonable cause to believe that the defendant named in the request has benefited from criminal conduct."
On the face of it, this paragraph suggests that the application was made under Art. 7(3) rather than Art. 7(2) of the 2005 Order, a matter which, as will come to be seen, gave rise to one of the Defendant's arguments both before HHJ Elwen (on the inter partes hearing) and before me.
" …the judge appointed by the Head of the Judiciary of …[Iran]…to investigate and take all necessary steps in the investigation of a serious and complex fraud committed against the State Purchase Organisation…"
Judge Didar explained that the State Purchase Organisation ("the SPO") was:
"…a body of the Government of Iran whose function is to purchase items on behalf of Government Departments, including the Ministry of Defence."
" (1) Receiving and paying bribes. Bribery is an offence contrary to the Islamic Penal Code enacted in 1991.
(2) Conspiracy in governmental deals, an offence contrary to the Law for the Punishment of Conspiracy in Governmental Deals (19.3.1348H) enacted in 1969.
(3) Assisting in (1) to (2) above.
(4) Fraud."
In the event that the Defendant was convicted in Iranian proceedings, Judge Didar contemplated orders for confiscation of property and restitution to the victims, in addition to sentences of imprisonment. Judge Didar said that he was in a position to undertake that neither capital punishment nor corporal punishment would be imposed. He said that none of the offences were political in nature.
" 10. The background allegation against the Defendant…is of a large scale fraud on an Iranian government agency, the ..[SPO]…, coupled with allegations of bribery or corruption of at least one of its officers. Mr. Al Zayat is said to be of Syrian origin. It is common ground that he now has Portuguese nationality and lives principally in Cyprus. He is said to own or control property in a number of countries. On his own account he deals internationally in very large transactions. The allegation is that in 2001-02 he arranged a deal under which an airliner was to be bought from the Sultan of Brunei for US$85 million and sold on to the …[SPO]…for use as a VIP aircraft by senior members of the Iranian Government. Several companies were involved in the chain of proposed dealings. The selling price to the Iranians fluctuated during drawn-out negotiations, but settled at US$120 million. Between August 2002 and April 2003, the Iranian authorities paid up front US$120m (or perhaps $118m) which the Defendant or a company controlled by him received. The prosecutor alleges that the money was obtained dishonestly, and in part as a result of a corrupt relationship with an officer of the …[SPO]..., who, it is alleged, received substantial payments from the Defendant. The Iranian prosecutor alleges that this was thus fraud coupled with corruption. He says that Mr. Al Zayat has spent much of the money. He alleges that some of it can be traced to the purchase of a Mayfair property and some to satisfying a judgment obtained against Mr. Al Zayat in London by the Ritz Casino.
11. It is common ground that the money was paid up front, that the plane has not been delivered, and that the money has not been returned.
12. Mr. Al Zayat, for his part, says he has been advised not to answer the allegations against him. But he does say that so far as he was concerned this was a straightforward business deal which went wrong. He denies that he knew that he was dealing with the Iranian SPO (at least until late on), and says that although the plane was known to be intended for use for Iranian VIPs, his only dealings were with an Iranian company in the aircraft business, called SAviation Services. He says that the potential profit was actually much less than it seems because there were enormous expenses, including for example $20m to Lufthansa who had some interest in the plan, and further expenses upon undertakings such as conversion of the plane and ensuring that no US sanctions were broken. He appears to be saying that the sale is simply stalled over negotiations as to his expenses, but could yet be completed. There is, he says, no question of fraud; it is a simple commercial dispute. He accepts receipt of $118m. He says that he paid the SPO official no more than his expenses, and that so far as he knew, that gentleman was a director of Saffat rather than an officer of the SPO. He makes some incidental complaints of dishonest dealing against the purchasers. And he contends that since the parties fell out, he has been kidnapped and intimidated in Beirut by people acting on behalf of the Iranian Government.
14. Except that the original contract to buy the plane from the Sultan was made subject to English law at the insistence of the Sultan, there is no connection between this deal and England and Wales. None of the negotiations are said to have taken place here, nor was any English party involved. But Mr Al Zayat is a frequent visitor to England, and he is said to own real property and to have other assets here. In particular, he is said to have beneficial control, through a variety of companies incorporated in the British Virgin Isles or elsewhere, of the already-mentioned substantial property in Mayfair, worth something of the order of £9m or more, and of about 8 or 9 London flats. There are also said to be other companies owned or controlled by him registered in London, and some bank accounts here also. Thus it is that the application for the English restraint order was made. "
" as a special judge to proceed 120 million dollar fraud case regarding A340 airplane purchase, as to the foreign aspect of the case, you are asked to investigate about the case from the foreign competent disciplinary and judicial authorities and inform the results. "
i) Act of conspiracy in government contracts and defrauding the SPO, with the cooperation of S Company ("Saffat") and others, concerning the sale of the Airbus. This "count" went on to allege the receipt of US$120 million and the failure to give title to the aircraft, or to deliver the aircraft, or to return the money.
ii) Payment of "illegal amounts" to General A.
iii) Payment of "illegal amounts" to Mr. X managing director of S.
iv) The making of an "illegal payment" to the late Mr. B.
The Defendant has not attended Tehran, within the stipulated two months or at all.
i) Charge (1): Conspiracy in governmental deals contrary to the Law for the Punishment of Conspiracy in Government Transactions (19.3.1348H; 9.5.1967);
ii) Charges (2) – (4): Fraud punishable by Articles 1 and 4 of the Law for the Aggravated Punishment of those who commit Bribery, Embezzlement and Fraud (15.9.1367H; 5.12.1998);
iii) Charges (5) – (9): Bribery punishable by Article 3 of the Law for the Aggravated Punishment of those who commit Bribery, Embezzlement and Fraud (15.9.1367H; 5.12.1998) and Article 67 of the Islamic Criminal Law dealing with discretionary punishments which may be awarded by a judge.
Particulars are supplied of the charges, covering the by now familiar ground of (alleged) fraud, bribery and corruption in connection with the proposed purchase of the Airbus.
DEVELOPMENTS SINCE THE GRANT OF THE RESTRAINT ORDER
" 3. [General] A is the principal defendant so far placed under formal investigation and charged. Given his status as a serving military officer, and because the victim of the crime is the SPO (a division of MODSAF), this case has been assigned to the Military Branch of the Judicial Organisation.
9. This investigation is being conducted by me as part of the Judiciary of the Islamic Republic of Iran and not on the instructions or direction of the executive, including MODSAF and the SPO…..It is not the SPO that is running the case, it is me. The SPO's own conduct, including that of its former head, is being investigated by me. The investigation branch of the Judicial Organisation and the Military Court are independent of MODSAF and is manned by the Judiciary. All judges of both the Military Court and the General Public Court are from the Judiciary….
10.….there is important co-operation between law enforcement agencies in Iran and the UK. This co-operation covers a whole range of matters, both bilaterally and through INTERPOL. Co-operation on cases involving the illegal trafficking in drugs as well as other matters such as illegally excavated artefacts is in the public domain. This co-operation assists law enforcement both in Iran and in the United Kingdom and is particularly important in an age where cross-border criminal activity is on the increase.
83.….Having bribed a general on a deal by which the Ministry of Defence has been defrauded of US$120 million, it should come as no surprise that the case should have been allocated to the Military Branch…..
84. (2) The present case does not involve any military offences (such as desertion): the substantive offences could thus equally be heard in Public Court Number 1 (dealing with serious cases) as Military Court Number 1….
84 (4) In serious cases, the investigating judge system applies. The investigation is carried out by an investigating judge who once he has issued his final report no longer has any role in the case, the matter being left to the trial court. ….[The]…suggestion that I am both the investigating and trial judge is wrong.
84 (5) Both the military and public branches of the Judicial Organisation are parts of the Judiciary, and are not part of the executive or military."
"13. For the reasons set out in my first witness statement…this case has been allocated for investigation to the Military Branch of the Judicial Organisation….because it involved bribery of General A and transactions involving the SPO, which is the victim and part of MODSAF. When I began my investigation in December 2003, the extent of ….[the Defendant's]…involvement was not immediately apparent….It was only once I began to carry out extensive investigations in Iran and overseas jurisdictions that it became clear that …[the Defendant]…was the 'primary suspect' in the fraud. I accept that, once joined to the proceedings, …[the Defendant]…will be the principal defendant.
14. Upon the joinder of …[the Defendant]…to these proceedings, the issue arises whether the indictment against him – as a civilian – should be remitted for trial before Military Court No. 1 or Public Criminal Court No. 1. In practice generally cases are sent for trial before the same branch as the investigation. However, the fact that a case is investigated in one particular branch is not conclusive as to the trial court.
15. I confirm that on …[the Defendant's]…return to Iran, I will issue the indictment so that the trial is before the Public Criminal Court…..The trial judge…will be one who is experienced in dealing with complex financial crime….once the matter is remitted for trial I will have no further role in the present case and will take no part in the trial process…..
55. There was no attempt to mislead the SFO or this Honourable Court as to the fact that this case had been allocated to the Military Branch of the Judicial Organisation…..I confirm that the UK authorities were aware of my status in 2005, and that at the time the Letter of Request was issued in June 2006, the SFO personnel dealing with this matter knew that the case was being investigated in the Military Branch.
56. ….there is an attempt [by the Defendant] to equate the Iranian military court system with the English Court Martial system or even Guantanamo Bay: in other words, a separate system applying its own procedures and laws and staffed by members of the military….the picture painted is wholly distorted."
" Having considered carefully the competing arguments in the authorities, I am firmly of the opinion that the fact that this external request emanated from the Military Branch of the Judicial Organisation is a matter which I would have taken into account in the exercise of my discretion. It is a factor which would have influenced the decision I would have come to. The jurisdiction I was being asked to exercise is exorbitant and its effects draconian. I view the lack of candour by the overseas authority very seriously indeed. It should have been made plain in the letter of request what the true position was. The status of the requestor is not some minor matter which can be put into the category of mere oversight or lapse of memory, curable by subsequent disclosure. It goes to the heart of the matter and leads me without hesitation to discharge the restraint order."
Having decided the application on this ground, the Judge reached no conclusion on any of the other issues canvassed before him. By virtue of the stay, the Restraint Order remained in force pending appeal.
"13. In Iran (unlike some other countries), the Military Branch for investigation and the Military Courts (for trial) are not part of the military. They are part of the Judiciary and are independent of the military and the executive…..All judges are part of the Judiciary….The suggestion…that I am part of the military is false."
In particular, as to non disclosure, Judge Didar added the following:
"15. I have had numerous meetings with the …[SFO]…and met quite a number of …[SFO]…officials over the last two years. The personnel I have dealt with have changed over time. The meetings have always been in the presence of a translator from the Judiciary as I do not speak English. My initial meetings were led by Peter Kiernan on behalf of the SFO. At the outset, I introduced myself as an investigation judge. I explained the case, investigation and procedures involved in some detail. I explained the nature of the offences being investigated and that whilst the case had been allocated to the Military Branch for investigation, none of the offences were military in nature. I also pointed out that the case was in the hands of the Judiciary and that this was quite separate from the executive.
16. The fact that the case had been allocated as one in the Military Branch for investigation did not appear to me to be either significant or an issue when I issued my Letter of Request….
17. Had I appreciated that it might have been a significant issue relevant to the restraint, I would also have pointed that the case had been allocated to the Military Branch for investigation. Whether I have been mistaken is a matter for the Court of Appeal. However, in so far as I have made a mistake in this regard, which was not my intention, this is my error and no-one else's and I unreservedly apologise….This is a large, complex case and in my Letter of Request I sought to focus on the evidence, the results of my investigation, and the need for a restraint to prevent further dissipation of the proceeds of this very substantial fraud. I was not focusing on the allocation of the case within the Iranian Judiciary.
18. …..this is a very important case for the Judiciary of Iran, which is determined to deal with corruption, particularly at such a high level as would appear to be the case here…."
"4. I can confirm that the learned judge explained the background to the investigation and the fact that he was an investigating judge. He explained that he was part of the independent judiciary of ….Iran and was separate from the executive of the government of Iran and that the investigation arose from the procurement of an aircraft. I recall that the ….judge explained that the procurement was carried out within a department of the Iranian Ministry of Defence, though the procurement was not a 'defence' procurement. I recall the ….judge informing me of the fact that one of those who was under investigation was a senior person within the Iranian Ministry of Defence.
5. I do not specifically recall the ….judge explaining that the case had been allocated to him from the Military Branch…..but this may well have been said. It is also possible that some of the sense of what the ….judge was saying was lost in translation. I do recall that the ….judge stated that the allegations were not military in nature and from the explanation of the facts involved in the alleged offences it was clear that they were not military in nature."
OTHER PROCEEDINGS
i) In 2006, MODSAF commenced civil proceedings in this jurisdiction against (1) FAZ Aviation Limited ("FAZ"), a company beneficially owned by the Defendant; and (2) the Defendant. On the 8th December, 2006 (i.e., the day after the Elwen judgment, discharging the Restraint Order), MODSAF applied to the Commercial Court for worldwide freezing orders against FAZ and the Defendant, arising from the Airbus transaction. The matter was temporarily dealt with by the giving of undertakings and cross-undertakings. In April, 2007, the matter came before Langley J, in a hearing confined to jurisdiction issues. The critical question was whether FAZ was subject to the English jurisdiction; if it was, then so was the Defendant; if it was not, then there was no basis for the English court assuming jurisdiction over the Defendant. In the event, in a judgment dated 9th May, 2007, [2007] EWHC 1042 (Comm), Langley J held that the English court did not have jurisdiction over FAZ and, hence, over either defendant in respect of the claim.
ii) Very shortly thereafter, MODSAF, on the 14th May, 2007, commenced civil proceedings before the court in Cyprus, in Action no. 3210/2007, seeking worldwide freezing orders against the Defendant, FAZ and others, in the amount of US$120 million or its equivalent in Cyprus pounds (approximately Cyprus £51 million), together with other relief. On the 15th May, 2007, interim orders were made accordingly. On the material before this court, by a judgment of the court in Cyprus dated 12th October, 2007, those interim orders were made absolute. In response to my inquiries, Lord Brennan QC told me that the orders of the Cypriot court remained subject to appeal; he was wholly unable to say that the Defendant would be content to let those orders remain in place, still less to offer any undertakings to that effect.
iii) There are and have been since March 2006, as I understand it, continuing proceedings before the Federal Criminal Court in Switzerland, in which the Iranian authorities (to put the matter neutrally) are seeking the inspection of documents and the examination of witnesses, together with the freezing of bank accounts – doubtless with a view to locating the proceeds of the alleged fraud. Those proceedings have been vigorously contested by the Defendant; a judgment of the 25th October, 2007 appears to have dismissed the appeals of the Defendant and various related entities. It is, I think, unnecessary to say more of the Swiss proceedings.
THE PRINCIPAL ISSUES
i) Issue (I): Competence: Given the allocation of the investigation to the Military Branch of the Judicial Organisation of Iran, was there an "external request" from a competent "overseas authority", in accordance with s.447 of POCA and, hence, Arts. 7 – 8 of the 2005 Order?
ii) Issue (II): Conditions: Have the conditions for the making of the Restraint Order been satisfied? Even if they have, must the Restraint Order now be discharged by reason of delay? In this regard: (1) Is there relevant property in England and Wales? (2) Has a criminal investigation been started in Iran? (3) Is there reasonable cause to believe that the Defendant has benefited from his criminal conduct? (4) Is there a reasonable possibility that an Iranian confiscation order may eventually be made? (5) Is the matter affected by the fact that Mr. Common's witness statement appears to rely on Art. 7(3) rather than Art. 7(2) of the 2005 Order? (6) Assuming that the relevant condition is, or is to be regarded as, that contained in Art. 7(2) of the 2005 Order, must the Restraint Order now be discharged, by reason of delay under Art. 9(7) of the 2005 Order?
iii) Issue (III): Discretion: Should the court in its discretion grant, or, more precisely, continue the Restraint Order? Under this heading, a variety of topics were canvassed. First, the importance of a "high degree of scrutiny"; secondly, Human Rights considerations; thirdly, alleged "lack of candour and good faith" on the part of Judge Didar leading to or including a "fatal non disclosure"; fourthly, the so-called "parallel proceedings".
iv) Issue (IV): Retrospectivity: Does the grant of the Restraint Order in this case involve impermissible retrospectivity? Was it the date of the offences of which the Defendant was accused which mattered, or the date of the request? What conclusion should be drawn from the contrast between the statutory regime governing domestic restraint orders and the regime applicable to external requests? Was the making (or continuation) of the Restraint Order unfair to the Defendant?
v) Issue (V): Sanctions: Does the grant of the Restraint Order infringe the sanctions legislation currently in force against various designated Iranian entities, including, in particular, MODSAF? Additionally, a question arose as to the fate of the "frozen" assets: namely, whether they remained in this country or were remitted to Iran? Either way, did this matter?
I shall deal with each of these Issues in turn.
ISSUE (I): COMPETENCE
"3 Interpretation of legislation
(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.
6 Acts of public authorities
(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right."
If, per contra but in accordance with Judge Didar's witness statements, the case would ultimately come to trial before a civilian court, then the military investigating authority was in any event the wrong authority to make the request.
i) No military offences were in question.
ii) The substantive offences and procedures were the same whether in the Public (i.e. ordinary criminal) or Military Branch.
iii) These (i.e., the Public and Military branches) were divisions of the same Judicial Organisation. The Military Branch was not manned by military judges. Judge Didar was a specialist judge in financial crime, whose only current case in the Military Branch was this one.
iv) Cases were allocated to the Public or Military investigating branch, depending on the status of the main suspect at the time of allocation. Cases are allocated for trial depending on the status of the main defendant. Once the matter has been referred for trial, the investigating judge has no further role.
Ergin v Turkey was not in point, relating as it did to the trial (rather than investigation) of civilians before military courts. Here the trial would take place before civilian courts. In any event, the words of the statute (POCA, s.447) and the 2005 Order were plain; there was no warrant for reading into them the qualification contended for by Lord Brennan, so as to construct or create an exclusion for a military investigating authority.
i) Judge Didar is a professional Judge, not a military officer.
ii) Judge Didar is acting as an "investigating Judge", perhaps a concept more familiar to those from the civil than the common law tradition – but this relative unfamiliarity matters not.
iii) When Judge Didar's investigation is complete, he will have nothing to do with the trial, which will be conducted by the trial Judge; in short, Judge Didar is not both investigator (or prosecutor) and trial Judge.
iv) The Public and Military Branches are divisions of the same Judicial Organisation. Judge Didar is a Judge, specialising in financial crime, not a military Judge.
v) The fact that this investigation has been allocated to the Military Branch, rather than the Public Branch, is a consequence of the status, as a serving military officer, of General Argani, initially regarded as the principal defendant.
vi) There is no reason to doubt Judge Didar's stated intention that as and when the case against the Defendant comes to trial, it will come before the "ordinary" criminal court rather than a military court – an allocation which reflects the importance of the (alleged) role, as it is now understood, of the Defendant as the prime mover in the fraud.
vii) No military offences are involved and there is no difference in the procedures, regardless of whether the investigation is allocated to the Military or Public Branches of the Judicial Organisation.
i) There is nothing to indicate, to adopt the graphic language found in the CACD judgment (at [21]), that the Defendant is "being investigated by a biased or politically motivated officer with a view to a show trial with a pre-ordained end."
ii) Having regard to the conclusions as to the organisation and role of the Iranian judiciary to which I have already come, it is not apparent that the Military Branch of the Judicial Organisation is a military investigating authority of the kind to give rise to Human Rights concerns (even if such there might otherwise be). The Military Branch, on the evidence before me, is no more than a division of the Judicial Organisation; Judge Didar is a professional Judge; there are no military offences involved; the procedures are the same as those which would be followed if the investigation had been handled by the Public Branch.
iii) In any event, I am unable to accept that, by itself, the fact that the Military Branch of the Judicial Organisation is the investigating authority, gives rise to any contravention of Art. 6 of the ECHR. To use an example removed from the facts of this case, I fail to see why the mere fact that in some jurisdiction a fraud in military procurement contracts might be investigated by military police, would result in a breach of Art. 6. Accordingly, I can see no foundation for the submission that by accepting the Judicial Organisation as an "overseas authority" this court is either ignoring s.3 of the HRA or acting contrary to s.6 of the HRA.
iv) Authorities such as Ergin v Turkey are distinguishable, relating as they do to the trial of civilians before military courts, not the investigation of civilians by a military investigating authority, even if the Military Branch or Judge Didar were to be characterised as such. If, of course, the transfer of the trial to the "ordinary" criminal courts does not take place in accordance with Judge Didar's undertaking, there are other safeguards available to protect the Defendant's position at that stage.
v) Judge Didar's stated intention to transfer this matter in due course to the "ordinary" criminal courts for trial, does not in any way detract from the appropriateness of the Judicial Organisation as the "overseas authority" to have made the external request through Judge Didar. The Judicial Organisation is a single organisation of which the Public and Military Branches are divisions.
vi) I accept that the initial revelation that the investigation of the Defendant was being conducted by the "Military Branch" of the Iranian judiciary was sufficient to give rise to raised eyebrows. But in all the circumstances, I am amply satisfied that this fact does not warrant straining the construction of either s.447 POCA, or the 2005 Order, or reading some wording into those provisions, so as to exclude the Iranian Judicial Organisation from the definition of "overseas authority".
ISSUE (II): CONDITIONS
" The reasonable grounds upon which the English court can….properly rely, in coming to a conclusion that an order may be made, includes assumptions and suspicions currently entertained by the Indian courts as a basis for allowing the proceedings to go forward in that jurisdiction. Furthermore, the statute says 'may'. That does not mean 'will be made'. All that is required is that in the future such an order may be made. Without trying to paraphrase the Act further, I would say in general terms that an external confiscation [sic, restraint?] order can be made when the English court concludes, on evidence, that there is a reasonable possibility of an Indian confiscation order eventually occurring. That the matter should be put comparatively low is only to be expected when one is dealing with what is a preliminary act, that is to say a restraint or charging order…. "
I confess to some concern as to whether this is a requisite condition for the making of a restraint order under the POCA regime, or, at least, a condition separate from the previous condition. I have not been able to find, nor, I think, was I taken to, any condition in such terms in POCA or the 2005 Order. On the other hand, as discussed earlier, the purpose of a restraint order is the preservation of assets so as to satisfy any confiscation (or like) order that might ultimately be made. There are, moreover, the provisions of s.447(1) and (7) to POCA, set out above, to take into account. De bene esse, I have therefore considered whether this condition, if such condition there be, has been satisfied.
i) It had been 4 years since the issuing of the arrest warrant in Iran; 21 months since the commencement of the Swiss proceedings; 18 months since the LOR.
ii) Judge Didar had said many things but had not acted upon them. So, for example, the Summons (supra) had indicated that legal action would be taken if the Defendant did not appear in Tehran; he had not done so and nothing had happened. There had been talk, following the international arrest warrant (supra) of the Defendant being tried in absentia, if he did not return to Iran; he had not returned; nothing had happened. No trial Judge had yet been appointed. No transfer of the case to the "ordinary" criminal courts had yet taken place. No proceedings had yet been commenced.
iii) All this, submitted Lord Brennan, suggested a lamentable state of affairs and meant that the court could not accept any undertakings from Judge Didar or the Iranian authorities. There was a substantial, unexplained, delay in starting proceedings. Neither the Cypriot nor the Swiss proceedings served to explain or excuse this delay. There was the clear risk that the Iranian criminal proceedings were part of a deliberate attempt to pressurise the Defendant into settlement of the civil claims. There was, likewise, the clear risk that the criminal proceedings were a sham – i.e., there was no evidence of a serious intention to bring this case to a trial.
iv) At all events, assuming that the Restraint Order had been made on the basis of Art. 7(2), proceedings for the offence had not been started within a reasonable time, so that the court "must" discharge the Restraint Order; the terms of Art. 9(7) of the 2005 Order were mandatory.
"I should make it clear that criminal proceedings have been instituted against ….[the Defendant]…The charge file will be completed upon service on ….[the Defendant]….If…[the Defendant]…does not return to Iran, he will be tried in absentia…."
i) As with a freezing order, delay in this context is indeed troubling. Thus far, I see force in the Defendant's submissions.
ii) There is, however, a need for realism. Judge Didar has explained that this is a complex and major investigation, extending to some eight countries: see, for example, para. 15 of Judge Didar's 5th witness statement. I see no reason to doubt this evidence from Judge Didar. Moreover and as is apparent from the materials before this court, the Defendant is seeking to resist that investigation whenever he has the opportunity and at every step of the way. That may be unsurprising but it renders complaints of delay somewhat less persuasive than might otherwise have been the case.
iii) Insofar as Lord Brennan submitted that there was a risk that the criminal proceedings were (as he put it) a "sham", I am unable to accept it. The evidence is to the contrary. Judge Didar is proceeding with his investigation, methodically, in different jurisdictions. Lord Brennan was somewhat dismissive of proceedings such as those in Switzerland. I cannot agree. For my part, I think it would be quite wrong to under-estimate the complexity of the work upon which his investigation has been engaged.
iv) In all the circumstance, the time has not yet come to apply the "guillotine" furnished by Art. 9(7).
v) I add this. First, to the extent that the matter is one for my discretion (quite apart from the mandatory provisions of Art. 9(7)), I would not discharge the Restraint Order on the ground of delay. Secondly, so far as it is a matter for me, I would strongly urge that the matter be brought to finality as expeditiously as is practical; although the challenge to the Restraint Order on the ground of delay has failed on this occasion, I cannot predict the fate of a future challenge if no sufficient progress is demonstrated.
ISSUE (III): DISCRETION
"Powers of court and receiver
(1) This article applies to –
(a) the powers conferred on a court by this Part;
(2) The powers –
(a) must be exercised with a view to the value for the time being of realisable property or specified property being made available (by the property's realisation) for satisfying an external order that has been or may be made against the defendant;
(b) must be exercised, in a case where an external order has not been made, with a view to securing that there is no diminution in the value of the property identified in the external request; "
Art. 46 is found in Part 2 of the 2005 Order, comprising Arts. 6 – 48 of that Order. As an "external order" – for present purposes, a confiscation order – has not been made, it is Art. 46(2)(b) which is here relevant.
"Conditions for Crown Court to give effect to external orders
(1) The Crown Court must decide to give effect to an external order by registering it where all of the following conditions are satisfied.
(4) The third condition is that giving effect to the external order would not be incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998…) of any person affected by it."
Art. 8 contains no provision comparable to Art. 21(4).
"…Parliament intended that in the fight against international (financial) crime restraint orders should be more easily available. Restraint orders are an interim measure unlike confiscation orders. There is a high public interest in preserving the assets pending trial of those who appear to have benefited from crime. It is not in the public interest that England and Wales should become a refuge for stolen monies even from regimes which may at certain levels be inimical to our own. It is submitted that in this case the public interest in the preservation of assets to satisfy a potential confiscation order flowing from a very large and well documented fraud is superior to any alleged or actual procedural failure."
" …an exception to the principle of territoriality under which article 6 became indirectly engaged in a Convention state when removal of a person to a non-convention state would expose that person to risk of suffering a flagrant denial of justice; that that exception was capable of being applied to the enforcement in a Convention state of a judgment in a non-Convention state… "
(Emphasis added.)
The House of Lords, however, went on to conclude that the fugitive disentitlement doctrine could not be described as a flagrant denial or fundamental breach of the defendant's Art. 6 rights.
i) On the general material before the court, circulated both by the Home Office and the Foreign and Commonwealth Office, not to mention the General Assembly of the United Nations, there are well documented anxieties as to the respect for Human Rights in the Iranian judicial system. It is unnecessary to belabour the point but the documentation belies any other conclusion and the court should not shrink from saying so.
ii) It is true, so far as it goes, that, as Mr. Miskin submitted, the present case concerns (alleged) financial crime rather than "political" crime. But, again, the court should not be naïve. It is not unknown for allegations of corruption, especially of a high profile nature (such as those found here), to furnish the vehicle for the pursuit of political disputes by other means. Accordingly, the mere fact that this case concerns alleged financial crime, does not serve to dispose of my concerns.
i) There is, at the least, a sufficient case of "fraud" to warrant a freezing order, had I been sitting in the Commercial Court.
ii) It would involve a counsel of despair to conclude that there was no scope for cooperation between this country and Iran – a foreign state with which the United Kingdom has diplomatic relations – on "ordinary" criminal matters.
iii) So far as concerns this investigation by the Judicial Organisation of Iran, I am not satisfied that there is any or sufficient evidence of unfairness so as to render the continuation of the Restraint Order unconscionable or in some way involving a breach of s.3 or s.6 of the HRA. Thus far, as Mr. Miskin submitted with justification, it is at least strongly arguable that there has been an understandable and proper investigation, of a matter with a high degree of (Iranian) public interest – a "flagship case" as he put it – in which the Iranian government has lost a very substantial sum of money.
iv) It is true that even as to this matter there are troubling aspects, not least the alleged kidnapping; but – even if kidnapping there was and even if, which I doubt, it is necessary for me to form a view – on such evidence as there is, I would not have been remotely persuaded of any linkage between the kidnapping, the Iranian State, the Judicial Organisation of Iran and the fairness of the trial itself.
v) A risk of unfairness at trial there may be, for the reasons already canvassed; but there is no proper basis for concluding that there is no prospect of a fair trial.
vi) The matter is thus left, as in my judgment it should be, to the Judicial Organisation of Iran to ensure a fair trial. If it does and an Iranian confiscation order comes to be made, then the Defendant's assets in this country, "caught" by the Restraint Order will not have been dissipated before any such confiscation order is considered. If it does not, then any breakdown in cooperation will not have arisen by reason of any reluctance on the part of this court, or this country, to combat international financial crime.
" The rule that an ex parte injunction will be discharged if it was obtained without full disclosure has a two-fold purpose. It will deprive the wrongdoer of an advantage improperly obtained….But it also serves as a deterrent to ensure that persons who make ex parte applications realise that they have this duty of disclosure and of the consequences (which include a liability in costs) if they fail in that duty. Nevertheless, this judge-made rule cannot be allowed itself to become an instrument of injustice. It is for this reason that there must be a discretion in the court to continue the injunction, or to grant a fresh injunction in its place, notwithstanding that there may have been non-disclosure when the original ex parte injunction was obtained…."
Slade LJ agreed (at p.1359) that the principle was a "thoroughly healthy one" but that in its application "the practical realities" of the case before the court could not be overlooked. While not in any sense discounting the "heavy duty of candour and care" resting on those making ex parte applications, the application of the principle should not be carried to extreme lengths; the punishment should not be out of all proportion to the offence (ibid).
"It seems to me that there are two factors which might point towards a different approach being taken to without notice applications for restraint orders in comparison to applications in ordinary litigation for freezing orders; but they pull in opposite directions. First, the application is necessarily brought (assuming of course that it is brought in good faith) in the public interest….Here is the first factor: the court should be more concerned to fulfil this public interest, if that is what on the facts the restraint order would do, than to discipline the applicant – the Crown – for…failure of disclosure. But secondly, precisely because the applicant is the Crown, the court must be alert to see that its jurisdiction is not being conscripted to the service of any arbitrary or unfair action by the state, and so should particularly insist on strict compliance with its rules and standards, not least the duty of disclosure. "
Both these considerations were to be kept in mind: at [56].
"The fact that the Crown acts in the public interest does…militate against the sanction of discharging an order if, after consideration of all the evidence, the court thinks that an order is appropriate. That is not to say that there could never be a case where the Crown's failure might be so appalling that the ultimate sanction of discharge would be justified."
"…the judge should be told of anything to the knowledge of the party applying which might weigh against the making an order."
i) So far as concerns the failure to disclose the fact that the investigation had been allocated to the Military Branch of the Judicial Organisation, this did amount to material non disclosure. I reject Mr. Miskin's submission to the contrary. To my mind – and beyond peradventure – this amounted to a fact which a Judge in this country, considering an ex parte application for a restraint order, would have wished to know. It might have weighed against the making of an order. Certainly, it was for the court to weigh the significance of the fact not for the applicant to leave it out because of the view it took of the matter.
ii) It is troubling that there was this non disclosure as to the allocation of the case to the Military Branch of the Judicial Organisation and I have anxiously considered why it came about. As is clear from Judge Didar's subsequent statements, there was no difficulty in stating the full facts and there was no good reason why this was not done in the LOR. Although suspicions are thus undoubtedly aroused, I have not, ultimately, been persuaded that the non disclosure has a sinister origin. With great respect, it did not seem to me that Lord Brennan's attack on the candour of Judge Didar was warranted on the evidence; at all events, I reject it. In particular, I am not of the view that the only or most compelling inference is that the non disclosure must have been deliberate. To the contrary, I think that the likely explanation for this non disclosure lay in a combination of (1) a lack of appreciation on Judge Didar's part of the significance of this matter; (2) matters being lost in translation, as suggested by Mr. Kiernan; (3) insufficient rigour on the part of Mr. Kiernan in getting to the bottom of the matter. That this was less than satisfactory is one thing; but deliberate, dishonest non disclosure is quite another. For completeness, as to Judge Didar's want of appreciation of the significance of this matter, that is to me a credible and realistic explanation, having regard to my conclusions as to the organisation and role of the Iranian judiciary. It is likely that, against such a background, Judge Didar simply did not see how the issue of allocation to the Military Branch would be viewed by an English Judge. I therefore conclude that this non disclosure was "innocent" but nonetheless unfortunate.
iii) Knowing what I now do as to the allocation of the investigation to the Military Branch of the Judicial Organisation, I would still make the Restraint Order and need not repeat my conclusions as to the organisation and role of the Iranian judiciary. I am of course aware that the Elwen judgment came to a different conclusion; I remind myself, however, that my task is not to review HHJ Elwen's decision – and, in any event, console myself with the observation that he did not have available to him Judge Didar's 4th witness statement and Mr. Kiernan's witness statement.
iv) The fact that given full disclosure of the allocation issue I would have regarded the Restraint Order as warranted is, of course and especially in the light of Brink's Mat and Jennings, an important conclusion. That conclusion does not, however, without more, dispose of the non disclosure challenge. I have therefore gone on to consider, having regard to the factors highlighted by Laws LJ in Jennings, whether, nonetheless, the non disclosure was such as to warrant discharge of the Restraint Order. Had I reached the conclusion that the non disclosure was deliberate, I may very likely have reached just such a conclusion. In the event, I am satisfied that to discharge the Restraint Order would be a disproportionate and inappropriate sanction for the inadvertent non disclosure which occurred, as I have found. In my view, the public interest is best served by continuing rather than discharging the Restraint Order and, in the exercise of my discretion, that is the conclusion to which I have come.
v) For completeness as to the "other" non disclosures relied upon, I am not persuaded of their materiality. Judge Didar may well not have known of them but it is unnecessary to reach a final conclusion on the state of his knowledge and I do not rest my decision upon that. Enough was said in the LOR to signal that the background to this matter was likely to be highly controversial, murky and very much in dispute. Certainly, I would have approached the ex parte application on that basis. It is perhaps noteworthy that Lord Brennan, in his oral submissions, placed the weight of his argument on non disclosure entirely or almost entirely on the allocation issue, rather than on these other non disclosures which had featured in his skeleton argument.
ISSUE (IV): RETROSPECTIVITY
" References in this Part of this Act to offences include a reference to offences committed before the commencement of this Part of this Act; but nothing in this Part of this Act confers any power on any court in connection with proceedings against a person for an offence instituted before the commencement of this Part of this Act."
" (1) Her Majesty may Order in Council –
(a) direct in relation to a country …..outside the United Kingdom designated by the Order ('a designated country') that, subject to such modifications as may be specified, this Part of this Act shall apply to external confiscation orders and to proceedings which have been or are to be instituted in the designated country and may result in an external confiscation order being made there;
(2) In this Part of this Act –
'external confiscation order' means an order made by a court in a designated country for the purpose –
(a) of recovering –
(i) property obtained as a result of or in connection with conduct corresponding to an offence to which this Part of this Act applies; or
(ii) the value of property so obtained; or
(b) of depriving a person of a pecuniary advantage so obtained; and 'modifications' includes additions, alterations and omissions."
" The powers conferred on the High Court by sections 77(1) and 78(1) below are exercisable where – (a) proceedings have been instituted against the defendant in a designated country; (b) the proceedings have not been concluded….and (c) either an external confiscation order has been made in the proceedings or it appears to the High Court that there are reasonable grounds for thinking that such an order may be made in them."
" That the effect of section 102(4) of the Criminal Justice Act 1988 was to preclude the making of a Part VI Order in connection with English domestic proceedings instituted before that Act came into force; that the question whether a similar provision was to be included in the Act as it applied to foreign proceedings had been left to Her Majesty in Council under the general power in section 96 to direct that the Act was to apply to designated states subject to such modifications as might be specified, and the 1991 Order contained no such provision; ….that, accordingly, there had been power to make the restraint orders to enforce the….confiscation order…..notwithstanding that the underlying proceedings against …[the husband]…had been instituted prior to the 1991 Order's application to the United States…. "
" 28. There is nothing in the language of conditions (a) or (c) to confine them to proceedings instituted or external confiscation orders made since the commencement of the DCO [i.e., the 1991 Order]. In the case of condition (a), there is an indication that the condition was definitely not intended to be so confined. Section 102(4) of the Act expressly provided that the powers of Part VI could not be used in connection with English domestic proceedings instituted before the commencement of the Act. But this provision was omitted, and no equivalent provision included, in the Act as applied to external confiscation orders. This suggests that Her Majesty in Council intended the DCO to apply to proceedings which had been instituted before it came into force. And if this was intended to be the effect of condition (a) there seems no reason why condition (c) should be limited to orders made after it came into force."
As Lord Hoffmann put it (at [29]), Her Majesty in Council had decided to omit s.102(4) under its general power to modify the provisions of the Act in its application to external confiscation orders.
" 30. …..In the case of an imposition of a confiscation order by the criminal court, I can see that there are strong arguments for applying the presumption so as to limit the power to offences committed after the legislation came into force….. But, as Lord Mustill said in …..Yamashita…[at p.525], 'the basis of the rule is no more than simple fairness'. There is no suggestion that the Florida confiscation order was imposed in respect of an offence committed before the power conferred by RICO came into force…..In my opinion the enforcement in this country of rights conferred upon the United States by an order made before the DCO came into force is a very different matter from the retrospective imposition of a penalty. Even if there was nothing which the United States government could have done before 1 August 1994 to recover its assets from Mr or Mrs Montgomery by proceedings in this country, I see no unfairness in it now being allowed to do so."
For his part, Lord Hobhouse of Woodborough observed (at [49]) that "the powers of the foreign court are not the concern of the English courts" and were not derived from Part VI of the Act.
" Transitional provisions relating to restraint orders…
5. [Section 41]….shall not have effect where –
(a) the powers in …[that section]…would otherwise be exercisable by virtue of a condition in section 40(2) or (3) of the Act being satisfied; and
(b) the offence mentioned in section 40(2)(a) or 40(3)(a), as the case may be, was committed before 24th March, 2003. "
Consistently with this provision – and to avoid a lacuna or hiatus – Art. 10 of the 2003 Order provided as follows:
" Savings for England and Wales
10 (1) Where, under article …5, a provision of the Act does not have effect, the following provisions shall continue to have effect –
(a) sections 71 to 89…..and 102 of the Criminal Justice Act 1988…"
" …may include provision which (subject to any specified modifications) corresponds to any provision of Part 2….."
S.458 of POCA provides, so far as relevant, that the "preceding provisions" of the Act come into force in accordance "with provision made by the Secretary of State by order" – thus, in connection with external requests and orders, the 2005 Order. S.459(2)(a) provides that subordinate legislation "may make different provision for different purposes".
" ….it would be impossible now to doubt that the court is required to approach questions of statutory interpretation with a disposition, and in some cases a very strong disposition, to assume that a statute is not intended to have retrospective effect. Nor indeed would I wish to cast any doubt on the validity of this approach for it ensures that the courts are constantly on the alert for the kind of unfairness which is found in, for example, the characterisation as criminal of past conduct which was lawful when it took place, or in alterations to the antecedent national, civil or familial status of individuals. Nevertheless, I must own up to reservations about the reliability of generalised presumptions and maxims when engaged in the task of finding out what Parliament intended by a particular form of words, for they too readily confine the court to a perspective which treats all statutes, and all situations to which they apply, as if they were the same. This is misleading, for the basis of the rule is no more than simple fairness, which ought to be the basis of every legal rule. True it is that to change the legal character of a person's acts or omissions after the event will very often be unfair; and since it is rightly taken for granted that Parliament will rarely wish to act in a way which seems unfair it is sensible to look very hard at a statute which appears to have this effect, to make sure that this is what Parliament really intended. This is, however, no more than common sense……
Precisely how the single question of fairness will be answered in respect of a particular statute will depend on the interaction of several factors, each of them capable of varying from case to case. Thus, the degree to which the statute has retrospective effect is not a constant. Nor is the value of the rights which the statute affects, or the extent to which that value is diminished or extinguished by the retrospective effect of the statute. Again, the unfairness of adversely affecting the rights, and hence the degree of unlikelihood that this is what Parliament intended, will vary from case to case. So also will the clarity of the language used by Parliament, and the light shed on it by consideration of the circumstances in which the legislation was enacted. All these factors must be weighed together to provide a direct answer to the question whether the consequences of reading the statute with the suggested degree of retrospectivity are so unfair that the words used by Parliament cannot have been intended to mean what they might appear to say. "
" Even if there was nothing which ….Iran…could have done before 1 January 2006 to recover its assets from the Defendant by proceedings in this country, I see no unfairness in it now being allowed to do so. "
i) to the commission of the offence(s) under Iranian law – as already seen, no such question arises;
ii) nor to the making of the request (necessarily post-dating the 1st January, 2006);
but only to the application of the "new" regime to a request from Iran in respect of offences (allegedly) committed at a time when Iran could not have sought assistance from the SFO (as a non-designated country). On the assumption that the Defendant's assets in this country represent (arguably) the proceeds of ill-gotten gains, I cannot see that this is unfair or so unfair as to lead me to conclude "…that the words used by Parliament cannot have been intended to mean what they say": per Lord Mustill (supra), in Yamashita, at p.525.
i) I agree with Lord Brennan, so far as it goes, that it would be wrong to conflate questions of statutory construction and unfairness. As it seems to me, the starting point is to form a provisional view of the true construction of the statutory language. If that provisional view points towards a degree of retrospectivity, then, in accordance with the speech of Lord Mustill in Yamashita (supra), the inquiry becomes one of "fairness". There is no conflation involved; the fairness test has been substituted for more general formulae, in particular going to the characterisation of the statute as substantive, procedural or evidential.
ii) It may be – I need express no final view in this regard – that for designated countries, there is a degree of untidiness in this construction. The untidiness, if such there be, relates to overlapping regimes (under POCA and the CJA 1988) for requests made after the 1st January, 2006, for offences committed before that date. If so, that may be unfortunate but any disadvantages are outweighed by the advantages of the wider availability of international mutual assistance in dealing with financial crime with international aspects.
iii) Finally, while in theory Lord Brennan is right to say that, on the construction of POCA and the 2005 Order which I favour, there is, after the 1st January, 2006, no limit to how far back the SFO can go in seeking a restraint order at the behest of a non-designated country, not only is there the safeguard of the doctrine of abuse of process in extreme cases but there are also the protections for defendants at the confiscation order stage, as already discussed. At all events, no such concerns arise in the present case.
ISSUE (V): SANCTIONS
" Freezing funds and economic resources of designated persons
6. (1) A person (including the designated person) must not deal with funds or economic resources owned, held or controlled, directly or indirectly, by a designated person unless he does so under the authority of a licence granted under article 10.
(2) A person who contravenes the prohibition in paragraph (1) is guilty of an offence.
(4) In this article, 'deal with' means –
(a) in respect of funds –
(i) use, alter, move, allow access to or transfer;
(ii) deal with in any other way that would result in any change in volume, amount, location, ownership, possession, character or destination; or
(iii) make any other change that would enable use…..
Make funds or economic resources available to designated persons etc.
7. (1) A person must not make funds or economic resources available, directly or indirectly, to or for the benefit of a designated person unless he does so under the authority of a licence granted under article 10.
(2) A person who contravenes the prohibition in paragraph (1) is guilty of an offence."
" 139. It is important for overseas enforcement authorities to understand that property (or its equivalent in money) recovered under an overseas order in the United Kingdom under the POCA Order 2005 provisions is not automatically transmitted to the foreign enforcement authority or state. Property (or its equivalent in money) recovered under an overseas confiscation order is placed in the UK government's Consolidated Fund. There is no legal power or discretion which enables the UK court to remit the property to an overseas state or other recipient.
140. No agreements currently exist for the sharing of assets recovered under POCA Order 2005 and other states' authorities must request the remittance of property or sums of money on a diplomatic basis. If the requesting state is one which itself would remit property or sums of money, which it recovers in its own procedures, this is likely to give rise to a diplomatic expectation of reciprocal remittance from the United Kingdom. Where it is the case that remittance is requested by an overseas state on the basis that the property and or money would, if remitted, be returned to a victim or paid as compensation to a victim of crime the request for remittance has more force still. The Home Office deals with these requests and may agree to remit a portion of funds recovered (after obtaining the approval of the Treasury). All other funds recovered are paid to the Consolidated Fund, a UK government fund, and are not remitted to other states or persons."
"5. It follows…..that there is no evidence whatsoever before the Court demonstrating that the Islamic Republic of Iran and/or the Iranian Judge are aware of the SFO's position with regard to the transmission of assets. There is also no evidence to suggest that that the Iranian authorities would have pursued an application to the English court in the first place had they known. Indeed it seems implausible that had they known the true position they would have made their application, as it will not assist them in any material way and conflicts with the subsequent order they have obtained in Cyprus freezing Mr. Al-Zayat's assets.
6. Further and just as importantly, as matters stand at present, the restraint order made on the ex parte application of the SFO at the instance of the Iranian Judge is in fact principally for the benefit of HM Treasury. Given all the other substantive concerns raised by Mr. Al-Zayat in support of his application for discharge…..it is submitted that it is a wholly inappropriate exercise of the Court's discretion to allow such order to continue. "
i) It seems clear that if or when an Iranian confiscation order comes to be made, there can be no question of any automatic remittance of funds to Iran; the court would certainly have no power to make any such order.
ii) It may be – I go thus far with the Defendant (if it remains his case) – that, subsequently, by the route of inter-governmental negotiations, agreement might be reached for the remittance of funds representing the frozen assets. It is at that stage, not this, that any concerns about a breach of the sanctions legislation then in force, could properly be considered.
iii) In any event and whatever view is taken as to the likely fate of the Defendant's assets preserved by the Restraint Order, I repeat my earlier conclusion that no breach of the sanctions legislation has been disclosed.
CONCLUSION AND POSTSCRIPT