The Serious Fraud Office (‘SFO’) obtained a Property Freezing Order (‘PFO’) in respect of over £4 million credited to a UK bank account, which constituted the proceeds of sale of 800,000 shares in a Canadian oil and petroleum corporation (GEI).
The defendant was the owner of the GEI shares. The SFO alleged that the acquisition of the shares was one of a series of corrupt transactions involving the defendant and others, entered into by GEI in order to secure development rights over two oil blocks in Chad.
A criminal prosecution proceeded in Canada and forfeiture proceedings were commenced against the defendant but were subsequently withdrawn. An order was drafted which formalised the withdrawal of the forfeiture proceedings (the ‘Order’). The Order included wording in the recital to the effect that, as no evidence had been put before the court upon which it could be satisfied that the defendant was involved in criminal conduct, the judgment of the court was that the shares were neither crime related proceeds nor offence related property. The Order included the words “This Order/ Judgment of this Court is to be construed as a judgment in rem” (that is to say, an order in relation to the ownership of the asset and potentially binding against the public at large).
The defendant appealed the PFO in the UK on the grounds that the effect of the Order was to preclude the SFO from obtaining a PFO in the UK in respect of the proceeds of sale of the shares, given that the Order held that the shares were not criminal proceeds and that the Order was binding in rem.
The appeal was dismissed. Although the Court of Appeal accepted that a foreign judgment “which is final and conclusive on the merits” and “in rem” might preclude the SFO from obtaining a PFO, in this case the Order had not been made on the basis of a conclusive analysis on the merits of the case. The Order had been made on the basis of a lack of evidence, not on the basis of conclusive evidence of the defendant’s innocence. In this way, the Court distinguished between an order drawn up to formalise the disposal of proceedings due to lack of evidence, and a judgment issued which is based on a careful and reasoned consideration of full facts and evidence.
The result of this decision is that, where foreign orders are purportedly made in rem but are not predicated on a full consideration of the facts and evidence in the case, they will not necessarily protect property from potential recovery under the UK Proceeds of Crime regime.
A link to the judgment can be found here.