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