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subsequently withdrawn.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.
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