In proceedings for a civil recovery order, the Serious Organised Crime Agency (the SOCA) had obtained a property freezing order under section 245A of the Proceeds of Crime Act 2002 (the Act), freezing the defendants’ assets and property in the United Kingdom and abroad. In this case, the three defendants appealed that freezing order, applying to have it varied to exclude assets and property outside the United Kingdom on the ground that Part 5 of the Act did not enable the recovery of assets situated abroad. The application was refused. This was an important decision in asserting the courts’ authority to make property freezing orders over property situated abroad.
Background to the property freezing order
In October 2007, the first appellant, a lawyer, was convicted in Israel of offences arising out of a pension scheme which he had set up. He had allegedly profited a total of £110 million from fraudulent activities and was fined and sentenced to 12 years’ imprisonment in Israel (later reduced to 10 years on appeal). The Israeli authorities had taken no steps to freeze any assets or to bring the Israeli equivalent of recovery proceedings against any assets belonging to any of the appellants, either in Israel or abroad.
Subsequently, the SOCA became aware of funds totalling approximately £14 million which were held in London in two bank accounts in the name of the first appellant or members of his family. The SOCA applied to the Administrative Court and, pursuant to s245A in Part 5 of the Act, obtained a worldwide property freezing order which listed properties in London, Tel Aviv, Jerusalem, New York and Villefranche-sur-Mer, as well as bank accounts in England and Wales, and antiques and works of art.
The appellant’s case
The first, second and third defendants appealed on the ground that the judge had erred as a matter of law in determining that a civil recovery order and a property freezing order under Part 5 of the Act could be made in respect of any property wherever situated.
The appellants pointed to a number of provisions of Part 5 and the wider legislative scheme which they asserted showed that it was never intended that civil recovery orders could be made in respect of property situated abroad:
- Unlike other sections of the Act, Part 5 does not make special provision for the enforcement abroad of confiscation orders made in England and Wales. By way of example, s74 in Part 2 of the Act which deals with confiscation orders made by criminal courts following conviction, makes special provision for enforcement abroad. Similar provision is found in Parts 3 and 4 which deal with confiscation orders made by criminal courts following conviction respectively in Scotland and Northern Ireland2. The appellants argued the absence of a provision in Part 5 shows that Parliament did not intend that civil recovery orders could be made in respect of property situated abroad.
- Similarly, the appellants pointed to examples in Parts 2 – 4. Section 443 makes provision for the function of a receiver appointed under Parts 2 – 4 to be exercised in other parts of the United Kingdom; however, there is no such power for the functions granted to persons under Part 5 to be exercised in Scotland and Northern Ireland, let alone countries further abroad.
- By way of contrast, the appellants pointed to bankruptcy law which provides an exorbitant extraterritorial reach in relation to foreign property automatically vesting in the trustee for bankruptcy, affecting innocent third parties. The appellants pointed out that that is a necessary consequence in private law in order to collect together worldwide assets to be distributed to worldwide creditors. In contrast, they argued, it is a completely different matter to ascribe to Parliament an intention that the enforcement authorities are to have power to confiscate assets anywhere in the world for the benefit of the United Kingdom Treasury.
The appellants therefore submitted that the Act did not provide for orders in respect of property situated abroad, and it was not possible to ascribe to Parliament that intention.
SOCA denied specific provision for orders in respect of property situated abroad were necessary, both in principal and in practice. By way of example, SOCA produced evidence of the recognition by a Luxembourg court of an unrelated property freezing order made by the High Court here in respect of a bank account in Luxembourg. The Luxembourg court referred to the Strasbourg Convention as justification of the recognition.
The question for the Court was summarised by Hooper LJ at :
“This appeal against the decision of Mitting J  1 WLR 2761 raises the following issue: does a court in England and Wales have the power under Part 5 of the Proceeds of Crime Act 2002 to make a recovery order in favour of the trustee for civil recovery in respect of recoverable property outside this jurisdiction, whether moveable or immoveable?”
The Court held that it does have power to make such an order but, in the case of property outside the jurisdiction, a civil recovery order gives the trustee for civil recovery a personal right against the person who is the subject of the civil recovery order to enforce the order and such other rights, if any, to which the trustee is or becomes entitled under the law of the place where the property is situated. The effect of an order vesting property in the trustee is the same whether the property is here or abroad. The difference is that, where the property is abroad, it is unlikely that the law of the place where the property is situated will give the trustee the very full rights given to him by English law.
The Court placed importance on the Strasbourg Convention (the Convention) whose preamble refers to the need to establish a well functioning system of international cooperation to deprive criminals of the proceeds of crime. The Court held the Convention applies to the enforcement of orders made in civil proceedings and, therefore, SOCA may seek to enforce both interim and final Part 5 orders abroad in those countries in which the Convention is in force. The fact no specific provision was made in Part 5 was not considered an obstacle to seeking enforcement.
Although the Court has no jurisdiction in relation to the title to foreign land, there is not any restriction at common law on making orders which relate to immoveable property abroad provided the Court has jurisdiction over the defendant3. The bankruptcy cases, as well as cases dealing with worldwide freezing orders, demonstrate the absence of any restriction at common law.
The Court agreed with the previous decision of Mitting J who said that Part 5 is, “by its clear terms” extraterritorial and that “nothing within it prevents it from being so”. The Court noted that although it had the power to grant a civil recovery order in respect of property abroad, enforcement will be dependent on laws of the country in which the property sits.