In the recent case of US Securities and Exchange Commission
v Samuel E Wyly and others ORD 2012/24, the Isle of Man's
Chief Justice, His Honour Deemster Doyle confirmed that in matters
which require evidence to be provided to foreign Courts, such
Courts should be "afforded the fullest help it is possible to
give."
In this case, which is likely to be viewed as highly authoritative
in other sophisticated offshore jurisdictions, the US Securities
and Exchange Commission (the "SEC")
undertook an investigation into seventeen trusts which created and
owned over thirty Manx companies. It was alleged that these trusts
and subsidiary companies, owned and directed by the defendants,
were part of an elaborate system which enabled the defendants to
engage in a thirteen year fraudulent scheme involving the trade of
tens of millions of securities. As part of the investigation, a
Letter of Request was sent by the Honourable Shira A. Scheindlin,
asking for the High Court of Justice of the Isle of Man (the
"Isle of Man Court") to grant an Order
requiring certain respondents to attend and give testimony in the
Isle of Man for use in the civil proceedings against Samuel E Wyly
and others in the US District Court.
In his consideration of the request, Deemster Doyle had regard to
his judgment in Impex Services Worldwide 2003-05 MLR 115,
wherein he emphasised the Island's need to "recognise our
international as well as our local responsibilities". Should
any "friendly and sophisticated jurisdictions, which respect
the rule of law and human rights" request assistance, the Isle
of Man Court shall "answer the call positively and provide the
necessary co-operation and assistance". Deemster Doyle added,
as per Secilpar 2003-05 MLR 352, that where there was a
"greater public interest...in ordering disclosure than in
preserving such confidentiality as may exist", then the Isle
of Man Court would "assist the administration of
justice".
Such an assertion further confirmed the Isle of Man Court's
position on judicial co-operation, recognising the international
need for justice over the protection of information held on the
Isle of Man. As Deemster Doyle stated in Tomlinson (Deceased)
and Yerrill CP 2006/35; "in the modern global community
there is no room for an insular approach."
The Evidence (Proceedings in Other Jurisdictions) Act 1975 (the
"1975 Act") supports and further
facilitates the Isle of Man Court's view, stipulating that when
"a request issued by or on behalf of a court or tribunal...for
the purposes of civil proceedings" is received, then the Isle
of Man Court should "make such provision for obtaining
evidence". Additionally, as deemed necessary by the Rules of
the High Court of Justice of the Isle of Man 2009 (the
"2009 Rules"), such applications must be
"supported by written evidence and accompanied by the request
as a result of which the application is made". In regulating
the form and formality of the request, the existing legislation not
only enables judicial co-operation, but also ensures the procedural
integrity of any application made to the Isle of Man Court is
upheld.
Safeguards Put In Place
With regard to the content of the request, Deemster Doyle distilled seven general principles which are to be considered in matters of co-operation with international jurisdictions:
- The Isle of Man Court will assist "so far as is proper and practicable and to the extent that is permissible" under Isle of Man Law ensuring that no procedure is undertaken, or evidence obtained which undermines the supremacy of national law.
- The Isle of Man Court should decide whether it has the jurisdiction to give effect to the request, and whether it ought to accept or refuse to make such an offer.
- The Letter of Request should be examined objectively, and the substance of the matter be regarded in each case. If there is any reasonable doubt, the Isle of Man Court may allow the parties to refer back to the issuing Court.
- The Isle of Man Court should normally use its discretion unless the application is regarded as "frivolous, vexatious or an abuse of the process of the Court."
- The Isle of Man Court can accept the request in whole or in part; subject to Isle of Man Law, the Court can delete parts of the request that are "excessive". However, the Isle of Man Court should not restructure, recast or rephrase the request.
- Requests should not be denied on the grounds of "fishing", where there is reason to believe that the witness could give relevant evidence. It is necessary, however, to protect witnesses from oppressive requirements.
- The foreign Court should be afforded the fullest help it is possible to give, with effect given to that Court's rules of evidence. If not, any questions should be admitted which may be expected to throw light on the matters in issue.
With reference to his reasoning set out earlier in the case, Deemster Doyle was satisfied that the criteria set out in the 1975 Act were met, and that as the format and content of the request was not contrary to any of the principles set out above, he exercised his discretion in favour of granting the assistance. Attention was then turned to two matters concerning the execution of the procedure through which evidence would be obtained.
Use of Special Procedures
The SEC requested that as per the Letter of Request, the United
States Federal Rules of Evidence and Federal Rules of Civil
Procedures be followed during the examination, allowing for the
videotaping of the examinations. In considering the request,
Deemster Doyle regarded Article 9 of the Hague Convention on the
Taking of Evidence Abroad in Civil and Commercial Matters, which
provided that a request for a special mode or procedure to be
followed should be complied with, unless incompatible with the law
of the state of execution.
Deemster Doyle confirmed this position in stating that "the
Court will accede" to such a request, unless it is "so
contrary to Manx established procedures that it should not be
permitted".
US Lawyers' Ability to Examine Witnesses
A request for an order that the witnesses be examined by
relevant lawyers from the United States was opposed by several of
the Respondents. They argued that section 9(1) of the Advocates Act
1976 applied to prevent US lawyers carrying out the examination of
witnesses in "any cause or matter, civil or criminal", as
it states that "no person shall act as an advocate...in any
Court of civil or criminal jurisdiction...unless he holds an
advocate's commission and has not been suspended from
practice."
Deemster Doyle reasoned that the Claimant's application was
not issued or commenced by a US lawyer but rather filed in the Isle
of Man Court and presented by the US SEC's Isle of Man
advocate, whilst the Claimant, First and Third Defendants and
Respondents were all represented by Isle of Man advocates.
Additionally, in the matter of Cromer Finance Limited CLA
2002/68, Deemster Cain stated that an "examination may be
conducted with the American Counsel for the...parties present and
participating and conducting the examination", a ruling which
was subsequently supported further by the 2009 Rules, which state
that the Isle of Man Court can appoint an examiner who is not a
judge.
Deemster Doyle therefore held that whilst proceedings in the Isle
of Man Court would be caught by section 9(1) of the Advocates Act
1976, the examination before an appointed examiner was "not a
civil cause or matter requiring judicial determination". The
proceedings before the Isle of Man Court, which section 9(1) were
intended to protect, were "truly collateral to and entirely
separate from" the examination of witnesses pursuant to the
Federal Rules of Evidence and of Civil Procedure. Deemster Doyle
reached the conclusion that section 9(1) was made with a
"common sense and pragmatic approach", and that it would
be an "affront to common sense and justice" to prevent
those US lawyers who were more familiar with their respective
cases, and who were more aware of the questions which needed to be
asked of the witnesses, from conducting the examinations.
Through his judgment, Deemster Doyle not only confirmed the
Island's willingness to be co-operative on international
investigations, but took positive steps to ensure that assistance
would be actively undertaken when adequately requested, whilst
ensuring that the Isle of Man Court retains its discretion when it
comes to each request. In facilitating the special procedures
requested by the SEC, the Isle of Man Court has shown that not only
will it co-operate in collecting evidence for use in foreign
Courts, but that it will ensure that such evidence is of optimal
use in such Courts. Additionally, through enabling US lawyers to
examine the requested witnesses, Deemster Doyle has shown that the
Island is willing to co-operate by allowing the foreign Courts to
collect what evidence they require efficiently and accurately.
Summary
Overall, this judgment confirms the Island's reputation as a
sophisticated co-operative jurisdiction. Deemster Doyle, as the
Island's Chief Justice, has confirmed that the Courts here will
encourage transparency and facilitate effective exchange of
information but that they will rightly retain necessary safeguards
to ensure that due process takes place.
In the last few months, the Isle of Man has concluded Double Tax
Agreements with Qatar and Singapore and signed or brought into
force Tax Information Exchange Agreements
("TIEAs") with the Czech Republic,
Slovenia and Turkey. The Island has now signed a total of 32
agreements which meet OECD standards; 26 TIEAs and additionally 6
Double Taxation Agreements, including agreements with 7 out of the
world's 10 major economies. More specifically, it has done so
with all of the top 5 global economies – US, China, Japan,
India and Germany.
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