The Republic of the Philippines v Maler Foundation and others and other appeals  SGCA 66
In 1986, the President of the Philippines, Mr Ferdinand E. Marcos, was deposed by a non-violent coup later popularised as the ‘People Power Revolution’. During his tenure, Mr Marcos, his family and close associates are alleged to have illicitly looted public assets to amass a huge personal fortune. The Presidential Commission on Good Government (“PCGG”) was set up to recover the proceeds of the overthrown regime's corruption. Assets belonging to Mr and Mrs Marcos were located in Swiss bank accounts and were frozen following Mr Marcos’s fall from power. Following mutual legal assistance proceedings involving the Swiss and Philippines authorities, the Swiss deposits were released by the Swiss authorities to the Philippine National Bank (“PNB”) to hold as escrow agent pending the outcome of recovery proceedings in the Philippines. PNB deposited these sums in various banks in Singapore, including funds of $16.8 million and £4.2 million (“the Funds”) in a Singapore branch of WestLB AG (“WestLB”).
A number of parties sought entitlement to the Funds including plaintiffs in a human rights class action suit initiated by the human rights victims of the Marcos regime (“the Human Rights Victims”). The United States District Court of Hawaii had ruled in favour of the Human Rights Victims in February 1995, ordering sums in excess of $1.9 billion to be paid by the Marcos Estate. Subsequently, a deed of assignment ( “the Chinn Assignment”) was executed by the US District Court assigning “all right, title and interest” to the Swiss accounts for the benefit of the Human Rights Victims which in theory included the Funds. The Human Rights Victims claimed entitlement to the Funds based upon this assignment.
Entitlement to the Funds was also claimed by a number of foundations (“the Foundations”), the original owners of the Swiss accounts which had held the deposits. The Republic of the Philippines (“the Republic”) also claimed entitlement to the Funds based upon a decision (“the Forfeiture Judgment”) of the Supreme Court of the Philippines forfeiting the Funds held in escrow by PNB. When PNB later attempted to procure the release of the Funds from WestLB, the bank refused due to the competing requests as to ownership of the Funds and issued interpleader proceedings to determine entitlement to the Funds.
In August 2012 the High Court of Singapore dismissed the entitlement claims by the Human Rights Victims, the Foundations and the Republic and held that PNB had legal title to the Funds. All three parties appealed.
On 30 December 2013, the Court of Appeal of Singapore dismissed the appeals, holding that none of the Appellants had satisfied the Court of Appeal that they held legal title to the Funds. The Court of Appeal affirmed the High Court’s finding that PNB held legal title to the Funds as the original named account holder with WestLB prior to the commencement of the interpleader proceedings.
The Republic had at first instance claimed legal and beneficial title of the Funds on the basis that:
(a) foreign acts of state (“the Forfeiture Judgment”) had transferred and vested ownership of the Funds in the Republic, and the Court should recognise the validity of the Republic's title; and
(b) the Human Rights Victims and the Foundations were estopped from re-litigating the act of state doctrine by reason of a decision of the Hawaiian Court.
The Judge at first instance dismissed the act of state doctrine proposition as a “red herring” because the Forfeiture Judgment was not a legislative or executive act; the key issue for the Court was whether the Forfeiture Judgment validly vested beneficial title of the Funds in the Republic. The Judge determined that as the Forfeiture Judgment was a judgment in rem the Judge could not recognise it as such as it purported to affect title to property that was not situated in the Philippines at the time. Further, Singapore Courts were not permitted to enforce foreign penal law under conflicts of laws principles which the Forfeiture Judgment was deemed to be (albeit indirectly).
On appeal the Republic slightly nuanced their case moving away from a position that they already had legal title to the Funds and arguing:
(a) that, inter alia, the act of state doctrine applied because the Forfeiture Judgment should be regarded as constituting an act of state, and the Judgment was not penal even if it were relevant to said doctrine; and
(b) the Republic was entitled to the Funds by virtue of it having satisfied the conditions of the escrow agreements which created an express trust, namely obtaining the Forfeiture Judgment (called the “Green Line” argument).
The Court of Appeal disagreed with the Republic's line of argument and, following a review of the development of the act of state doctrine, stated that “we are not prepared to accept such an expansive notion of the doctrine or to extend its application to judgments of a foreign court which relate to assets not situated within its jurisdiction. In our view, whether the act of state doctrine is considered in the “territorial act of state” sense or judicial abstention sense, it has never been conceived as additionally mandating a positive approach, viz, that the courts should recognise the legal effect of a foreign judgment or other actions that flow from governmental or legislative acts so as to give effect to the intended consequence of particular acts of state”. The Court of Appeal also disagreed with the argument that the Forfeiture Judgment could itself constitute an act of state. The Court of Appeal refused to consider the Green Line Argument because it was not raised at first instance.
It is worth noting that the Singapore Court regarded the Forfeiture Judgment as “penal” and that was a further reason for non-recognition. It regarded civil forfeiture as penal because “it was directed towards the forfeiture of the property of public officials that is presumed to have been derived from illegal sources. The property is forfeited in favour of the State and the proceedings instituted by the State…".
The Court of Appeal additionally contemplated whether the recognition of PNB’s legal title would constitute indirect enforcement of a penal law; this was because a representative of PNB had given evidence that if PNB was awarded legal title to the Funds they would be released to the Republic in accordance with the escrow agreement. The Court of Appeal highlighted that there was, in principle, a distinction between recognition and enforcement, and in any case PNB’s legal title to the Funds arose from the private contractual relationship between PNB as depositor and WestLB as depositee prior to the interpleader proceedings. Consequently it would be incorrect to say that PNB required the assistance of the Court of Appeal to establish its legal title in Singapore. So PNB’s claim did not therefore require the Court to give effect to the Forfeiture Judgment.
With regard to the Human Rights Victims, the Court of Appeal noted that “whilst we emphasise that we would not in any way wish to deny the moral claims of the Human Rights Victims and acknowledge that the Human Rights Victims deserve redress for the grievous wrongs that they have suffered, we are compelled to reject the Human Rights Victims’ claim to the Funds in these proceedings as the Chinn Assignment did not have the legal effect of transferring a proprietary interest in the Funds to the Human Rights Victims at any point in time”. On application of Swiss law, the transfer of proprietary rights could not have been effective; the Swiss deposits were subject to a freezing order at the time of the Chinn Assignment and the foreign order had not been recognised or enforced through proceedings before a Swiss Court.
The Court of Appeal held that the Foundations’ legal title to the Funds had been lost once the Swiss authorities authorised the transfer of the Swiss deposits to be held in escrow. There was no legal basis for the Foundations’ claim to ‘default’ legal title; an extinguished legal title could not be revived simply because ownership of the Funds could not be determined by interpleader proceedings. The Foundations did not claim that they were the beneficial owners of the Funds.
The Court of Appeal noted that what PNB decided to do with the Funds was not subject to its intervention; given PNB’s obligations under the escrow agreement, the Presidential Commission on Good Government of the Philippines understandably welcomed the Judgment. Indeed, it appears from recent press reports that the PCGG has received the funds held in Singapore and remitted them to the Government.
At a news conference, Andres Bautista, Head of the PCGG, stated that with the US$658 million the PCGG recovered in 2004, the return of the Funds brings total recoveries from Switzerland to US$687 million. He confirmed that “This is the last from the (Marcos) Swiss accounts”. However, he has confirmed that the Government is still targeting a further US$1.1billion. Mr Bautista concluded on 12 February that:“There is still a lot of work that can be done in respect to pursuing ill-gotten wealth…We should not allow ill-gotten wealth, the taking of ill-gotten wealth, to go unpunished.” Nearly thirty years after the late President was removed from power, other significant corrupt assets associated with his regime remain elusive. What more can be done to assist the victims of grand corruption, particularly by those countries where the assets are laundered? It would be unsatisfactory say if in another thirty years we are still discussing the return of stolen assets from, for example, Egypt, Libya or Tunisia or worse still maybe even the Philippines; but that is presently likely to be the case. We need greater openness about the hurdles, more dialogue about solutions, and genuine political will to implement further change, either policy or legislative, where necessary – but that change needs to be international to achieve success. UNCAC provided a framework and platform for greater cooperation in asset recovery; it was ground-breaking. But the practical realities of each signatory’s domestic laws and legal systems, and the lack of resources devoted to law enforcement in this area, means that there is a lack of cogency and tangible progress in the area of asset recovery.