Author: Nicola Sharp
24 September 2014
4 min read
The National Crime Agency (NCA) is being sued for £220m by a tycoon who claims that his assets were illegally frozen. The case is a high-value reminder that assets forfeiture is a volatile area of law.
In one case, at least, the tables appear to have been turned. Tycoon Israel Perry is claiming £220M in damages from the NCA because he believes it illegally froze his worldwide assets.
In June this year, the NCA abandoned a claim against Mr Perry’s assets and paid his legal costs. Mr Perry is now on the warpath, alleging that the unlawful freezing of his assets stopped him pursuing investment opportunities worth hundreds of millions of pounds.
It is the latest twist in a saga that began when the NCA’s predecessor, the Serious Organised Crime Agency (SOCA), obtained a High Court Order to freeze £22M worth of Mr Perry’s UK and worldwide assets. SOCA’s argument was that these assets were frozen because they were derived from over-charging from a pension scheme for life insurance, for which Mr Perry was convicted in Israel.
When Mr Perry appealed against the freezing order in 2012, the Supreme Court in this country ruled that it was illegal for SOCA to seize his possessions outside the UK. It made it clear that only Mr Perry’s assets in the UK could be targeted. SOCA and then its successor the NCA disputed this.
An amendment to the Crime and Courts Act 2013 – in Section 48 – then allowed for assets to be pursued outside the UK if they had some connection to this country. This gave the NCA the power to pursue all of Perry’s worldwide assets. But this action was dropped in June – and now Mr Perry is suing the NCA for “loss and damage” of income and investment opportunities. The NCA says it will vigorously defend what it calls a speculative application.
There is no doubt that the whole saga has been a problem for the NCA. Not only is it now facing a massive legal action – the case could have serious implications for its ability to pursue other people’s assets. After all, if any unsuccessful attempt to seize assets is likely to lead to a huge claim for damages, as in Mr Perry’s case, will the NCA deem it to be a risk worth taking in many cases?
To put it mildly, civil recovery has been a difficult issue for the government in recent years. The freezing of assets has been an issue of legal fighting this decade, with Parliament and the courts becoming the battleground for a series of skirmishes.
It was once the case that being beyond British shores made someone safe from UK civil recovery proceedings. That can no longer be accepted as gospel. The 2012 ruling in Perry and others V SOCA severely limited both SOCA’s ability to recover assets from abroad and its powers regarding people outside the UK. It made it clear that no civil recovery order (CRO) or property freezing order (PFO) made under the Proceeds of Crime Act could be made regarding assets outside the UK. The ruling also explained that a disclosure order (DO) – that compels someone to answer questions, provide documents or other information - made under POCA could not be made against a person outside the UK’s jurisdiction.
Yet while the ruling in the case of Perry and others V SOCA made it clear that UK authorities could not seize assets, it also spawned the amendment to the Crime and Courts Bill, which effectively reversed this ruling. As mentioned earlier, this amendment allowed the authorities to go to court and seek orders against any property regardless of where it is, as long as there is a connection to the UK. The Crime and Courts Act also allows for an investigation to begin with a person and - as property is identified and more is known about it - then become an investigation into property. Similarly, an investigation may begin with property and, as information about it emerges, it can become an investigation into a particular person.
Civil recovery has given SOCA and then the NCA, not to mention many other organisations, widespread powers under the Proceeds of Crime Act 2002 to bring court proceedings against anyone it believes owns assets which are, or represent, property obtained through unlawful conduct. Crucially, the issue of a criminal conviction is not central to the authorities’ ability to freeze a person’s assets. There is no requirement for there to have been a criminal conviction as proof of the unlawful conduct required for assets seizure. Civil recovery action can be instigated against someone found not guilty of a crime that is supposedly connected to the assets that the NCA or another agency is seeking to recover.
Mr Perry is far from being the little man in the battle with the NCA. He is an incredibly wealthy man who is not afraid to issue legal challenges to those who pursue him. His actions have helped shaped law regarding the freezing of assets and, with his latest legal activity, his influence looks set to continue. Whatever the outcome of his latest showdown with the NCA, there is no doubt his ongoing fight will ensure that the issue of assets recovery remains in the legal spotlight. And rightly so.
At Rahman Ravelli, we have made no secret of our belief that the legislation gives the authorities every possible advantage when it comes to recovering what they believe to be the proceeds of crime. We have gone as far as seeking leave to appeal to the European Court of Human Rights (ECHR) in the case of SOCA V Gale, to challenge the universal application of the civil standard of proof (on the balance of probabilities) in civil recovery proceedings. In that case, our clients have been acquitted of criminal charges in Portugal and yet SOCA continued to pursue them. That is because civil recovery requires very little from the authorities. There is no need for them to prove criminal wrongdoing, they can freeze a person’s assets without that person knowing about it and, as the Perry saga has shown, they have been able to have the law changed in their favour.
As the legal situation unfolds with Mr Perry, it may well be that more articles are written. His case is one that has put the whole issue of assets recovery in a state of change. Whether he succeeds in his action against the NCA remains to be seen. But perhaps more importantly we need to keep watching to see exactly what further legal developments may unfold.
Mr Perry’s legal claim may well seem excessively large. Yet for years, civil recovery has given the authorities a hugely unfair advantage when it comes to seizing someone’s assets. The seizing has often been based on little or no evidence of wrongdoing and out of all proportion to what a person has been accused of. With this in mind, it is perhaps no surprise that the NCA now finds itself on the end of a legal action that it believes is speculative and out of proportion. Which may help it understand how some of those who it has pursued have felt.
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.