Civil Asset Recovery in the UK ICC Fraudnet

Civil Asset Recovery in the UK ICC Fraudnet 8 April 2010 Steven Philippsohn Head of International Asset Recovery PCB Litigation LLP Email: snp@pcblitigation. com Web Site: www. pcblitigation. com © PCB Litigation 2010

PCB Litigation 2010 • Chairman of the UK Commercial Fraud Lawyers Association • Deputy Chairman of the Fraud Advisory Panel • Member of the Asset Recovery Committee of the Serious Organised Crime Agency © PCB Litigation 2010

PCB Litigation 2010 Clients • Government Agencies • Financial Institutions • State Enterprises • International Businesses • Investors/Shareholders © PCB Litigation 2010

PCB Litigation 2010 Claims involve proceedings worldwide including: Abu Dhabi Bahamas Belgium Belize Bermuda Bulgaria BVI Cyprus Dubai France Georgia Germany Gibraltar Italy Jersey © PCB Litigation 2010 Kazakhstan Lebanon Mauritius Montenegro Portugal Russia Scotland Singapore South Africa Switzerland Turkey UK Ukraine USA Vietnam

Recent Developments • Fraud can no longer be treated as a cost of doing business • Money is the goal and/or lifeblood of all fraudsters • Taking away the money takes away the motive © PCB Litigation 2010

Effective Remedies • Movement towards justice without borders: • Accountants in Cyprus and India have been charged by the SEC with failing to employ proper procedures which would have detected fraud whilst Lloyds TSB has been charged with money laundering • Increasing rights of investigation and disclosure • Extradition / Arrest Warrants • Attacking Responsibility for Unaccountable Wealth © PCB Litigation 2010

Strategy • Whether the Recovery should be Pursued • Commercial Realities • Publicity Element • Statutory Obligations • Third Party Funding © PCB Litigation 2010

Strategy Assess and Develop Evidence • Usually start with incomplete picture • Various effective options by which further evidence is collated • Appointment of Specialists © PCB Litigation 2010

Investigating the Fraud • Covert monitoring may be admissible • The gathering of evidence by illegal means has not in general led to its exclusion under the English law of evidence • Where such evidence is of central importance such as involving impersonation or deception the Court should be informed on any without notice application © PCB Litigation 2010

Orders that may be granted l Freezing Orders l Disclosure l Search orders l Orders for examination l Surrender of passport l Committal to prison l Appointment of a Receiver l Summary Judgment l Criminal prosecution © PCB Litigation 2010

John Doe Injunctions • Microsoft uses John Doe actions to obtain subpoenas against ISP’s, forcing them to give up the names of cyber criminals • HMRC has secured the largest ever disclosure order against a bank in an attempt to reclaim almost £ 1. 5 bn in tax from fraudsters. The notice requests information on non-UK bank accounts held by UK residents in order to trace unpaid tax received as interest © PCB Litigation 2010

Third Party Disclosure • How Disclosure Orders can help The Fraudster The Competitor The ISP The Banks The Information Brokers © PCB Litigation 2010

Jurisdiction of the English Court “The High Court shall have power to grant interim relief where proceedings have been or are to be commenced. . . unless in the opinion of the Court, the fact that the Court has no jurisdiction apart from this section …. . Makes it inexpedient for the Court to grant it” S 25 Civil Jurisdiction and Judgments Act 1982 © PCB Litigation 2010

Current Legal Policies • In certain circumstances, despite a foreign jurisdiction being the natural forum for litigation, the English Courts will nevertheless try the case (Michael Cherney v Oleg Deripaska [2008] EWHC 1530 (comm)) • On the other hand, the Courts may limit the use of document disclosure (BTA Bank v Ablyazov [2009] EWCA CIV 1225) © PCB Litigation 2010

Current Legal Policies The Claimant was entitled to a worldwide freezing order where there was cogent evidence of an international fraud masterminded in London Mediterranean Shipping Co v (1) OMG International Ltd (2) Osborne Martin Grant (3) Ningbo Toptrade IMP & EXP Co Ltd [2008] EWHC 1250 (comm) © PCB Litigation 2010

Privilege against Self-Incrimination • Fraud Act 2006 removes privilege for offences under the Act • Claim to privilege considered by the Court of Appeal in BTA Bank v Ablyazov where the Court was concerned that the privilege against self incrimination may be used to defeat justice © PCB Litigation 2010

Case Study 1 • Judgment Debtor had sought to avoid payment • Aeroplane in name of third party arrest and bank accounts in various jurisdictions frozen • Numerous third party disclosure orders obtained • Investigations revealed Judgment Debtor was involved in advanced negotiations to obtain a lucrative contract • Payment made after being served with proposed Disclosure order against other parties to the Contract © PCB Litigation 2010

Case Study 2 The Eastern European Respondent had brought proceedings in England • Failed to provide full and frank disclosure when obtaining interim relief • Offered only nominal security for costs • Indulged in self help remedies © PCB Litigation 2010

Case Study The proceedings by the Respondent believed to be politically motivated • Had made criminal complaints in local jurisdiction as part of “campaign” against clients • Self help remedy seen as attempts to provide evidence on which further criminal complaint could be made © PCB Litigation 2010

Case Study Evidence that Respondent would not comply with Order for payment • Witness in one country disclosed that Respondent had been imprisoned in another country • Lawyers in that country revealed that not only had he been imprisoned but he had fled that country despite an Order prohibiting him from doing so • Respondent had forged material documents © PCB Litigation 2010

Case Study The Respondent had assets in • Switzerland • Belgium • Israel; and • Belize © PCB Litigation 2010

Case Study Almost simultaneously obtained • Interim Judgment for part • Freezing Order for balance • Order for disclosure by Respondent of his assets • Order for the attachment of certain of the assets overseas in respect of Judgment Debt and for the “freezing” of assets in respect of balance • Order for Examination of Respondent © PCB Litigation 2010

Case Study Within a few weeks • Respondent sought to obtain lifting of Freezing Order on basis of payment of part which was rejected • A number of increased offers followed so that by the day of the Hearing of the Examination, he had paid all but part • On learning that the Respondent was not in Court to be examined. The Judge indicated the possible issue of a Warrant of Arrest. At that stage, the Respondent’s lawyers revealed that they had just received the balance © PCB Litigation 2010

Civil Asset Recovery in the UK ICC Fraudnet 8 April 2010 Steven Philippsohn Head of International Asset Recovery PCB Litigation LLP Email: snp@pcblitigation. com Web Site: www. pcblitigation. com © PCB Litigation 2010