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Potential corporate fraud amendment to Bribery Act 2010

Jul 2014
Fraud updates
The Solicitor General, Oliver Heald QC, is planning on hosting a meeting across the Government to discuss possible amendments to the Bribery Act 2010 (“the Act”). Amongst the amendments likely to be discussed includes a proposal by David Green, the head of the Serious Fraud Office, to extend the ambit of section 7 of the Act, so that corporate liability to prevent acts of employees is increased to cover “financial crime” generally, not just bribery, as is currently the case. Such an amendment would extend the scope of the SFO’s powers to impose US style fines on businesses that do not have adequate systems and procedures in place to prevent financial crime being perpetrated by their employees. In February 2014, in an interview with the Daily Telegraph, Mr Green was cautious to say that the power would be used only in “exceptional cases”, for example where a company had made a profit from the criminal behaviour of its employees, a position that seems to take aim at organisations such as banks which may well have become culpable in the wake of the Libor rigging scandal had such legislation been in place at the time. It is also envisaged that the proposed amendment could prevent firms convicted under the revised Act from bidding for public contracts under EU procurement rules, which could be both a commercial blow and a potential stigma against such firms. The proposed amendments to the Act would need to be approved by Parliament, however they are likely to receive strong support from law enforcement agencies and consumer groups. If such proposals are passed, it will be even more incumbent on senior management to understand their obligations to prevent fraud within their own organisations and to implement rigorous systems to prevent, monitor and report such activity. Read More

India targets overseas tax evaders

Jun 2014
Fraud updates
India's new Prime Minister, Narendra Modi, has delivered a bold statement of intent directed against India's tax evaders. In one of his first acts as India's new premier, he has made the recovery of billions of dollars transferred into overseas accounts for the purpose of evading tax a top priority for his administration. One calculation puts the figure as high as $2 trillion. Modi has set up an investigative task force of former judges and current regulators to trace, track and repatriate assets sent abroad. This move follows similar moves in recent years by the UK and USA to close the net on individuals and corporates illegally moving funds overseas. In 2011, the South Asian continent ranked third in the world behind only China and Russia in respect to the illegal movement of money abroad according to a 2013 report by Global Financial Integrity. It is as yet unclear which methods the Indian government will deploy to seek the return of assets hidden overseas. There is a well-established principle of English law that the English courts will not involve themselves in the enforcement of another sovereign state's revenue law. However, to the extent that India's investigations give rise to claims that are not tax claims per se, but are instead civil or criminal claims of a different character, the English Courts are well placed to assist the Indian state in its legal processes. Provisions under the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005, and s.25 of the Civil Jurisdiction and Judgment Act 1982 grant the English Court dynamic powers to assist overseas claimants with civil or criminal asset recovery procedures. Moreover, the willingness of the English Court to assist overseas governments was emphasised in the recent case of United States v Abacha [2014] EWHC 993 (Comm), which highlighted the importance of international judicial cooperation in the fight against fraud. Read More

June 2014

Jun 2014
PCB news
A Major European Bank has retained PCB Litigation to pursue claims in multiple jurisdictions against one of their debtors.
PCB Litigation's expertise in work emanating from Russia has been recognised by the new edition of Chambers Global 2014 which notes Anthony Riem’s “great client skills”. Read More

Examining the use of digital currencies as a means of hiding assets

Jun 2014
Fraud updates
PCB Litigation’s Senior Partner, Steven Philippsohn, has been quoted in the Financial Times in an article examining the use of digital currencies as a means of hiding assets. The article is written in the context of matrimonial proceedings, however Mr Philippsohn envisages that English courts will inevitably begin to require defendants and third parties to disclose holdings of digital currencies in asset disclosure orders across all types of commercial litigation. Indeed, it is believed that ordinary disclosure orders will now routinely extend to communications made over social media such as Facebook or Twitter. Such a move would be in step with the courts of other jurisdictions such as California who are already issuing search and discovery orders over digital currencies. One of the reasons that digital currencies have found favour is that they enable their users to transact with a high degree of anonymity. As such, they have become crucial to individuals wishing to engage in fraudulent or illegal activity. By way of example, a founder of a bitcoin exchange was recently arrested on charges including money laundering whilst the website Silk Road (which only accepted bitcoins) is said to have been shut down for its links to illegal drugs. The increasing use of digital currencies will demand close attention from the civil courts too, especially in fraud cases. Digital currencies are at present unregulated, and therefore can be used to bypass the money laundering and counter-terrorist financing checks ordinarily performed by traditional currency holding institutions such as banks. Moreover, they can be switched between jurisdictions and “e-wallets” at the touch of a button, leaving a trail that will inevitably be far harder to track and trace due to disparities in legal frameworks and infrastructures (such as the data retention and disclosure obligations of internet service providers) in different countries. The utilisation of the English court’s present powers, for example the ability to order delivery up of computers or the imaging of hard-drives, provides an interesting potential solution to this situation. Given that few (if any) digital currency exchanges are thought to be located in the English jurisdiction, there may also need to be novel consideration of how third party disclosure orders against such exchanges might best be sought. This will all be coupled with more traditional and well-trodden methods of asset recovery, not least the increasing reliance upon social media, a subject on which Mr Philippsohn was also recently quoted in the Daily Telegraph.” Copyright Note The FT publication can be found online here: http://www.ft.com/cms/s/0/d1131630-9005-11e3-8029-00144feab7de.html?siteedition=uk#axzz33ZHmeT1f . Copyright in this article belongs to The Financial Times Limited 2014. The Daily Telegraph Article can be found here: http://www.telegraph.co.uk/technology/social-media/10874787/Facebook-and-Twitter-used-to-track-hidden-wealth-in-divorce-cases.html#disqus_thread . Copyright in this article belongs to Telegraph Media Group Limited 2014. Read More

Two Court of Appeal Decisions in Aid of Asset Recovery

May 2014
Fraud updates
In the recent case of Lakatamia Shipping Co Ltd –v- Nobu Su & Ors, the Court of Appeal provided useful clarification regarding the operation of freezing injunctions. It held that a controlling shareholder who was the subject of a freezing order was further restrained from directing the company to make dispositions of its assets, as to do so was likely to result in a diminution in the value of his shareholding. That would impermissibly diminish the value of his worldwide assets. The appeal was brought by the defendant who was the subject of an interim worldwide freezing order. The defendant had initially applied for a declaration that his companies’ assets were not covered by the worldwide freezing injunction, arguing that such extension of the freezing order infringed the key principle of separate legal personality of companies. Burton J held at first instance that the companies’ assets were directly affected by the injunction, on the basis that the defendant could direct the fate of the assets of the companies. As such, if a person subject to a freezing injunction could direct a company he owned to sell its assets, that would impermissibly diminish the value of his asset, namely his shareholding in the company, making such assets subject to the injunction. In dismissing the defendant’s appeal, the Court of Appeal clarified the reasoning behind the decision by stating that it was not correct to say that the companies’ assets were within the definition of assets subject to the injunction. However, in upholding Burton J’s decision, it was held that the companies’ assets were "covered” by the injunction because any dealings with them had the potential to diminish the defendant's shareholdings in the companies. As such, it was held that where the owner of a non-defendant company was subject to an injunction restraining any diminution in the value of his assets (and therefore his shareholding in a company), he was restrained from procuring the company to make a disposition likely to result in such a diminution. In a further recent development, the Court of Appeal held in JSC BTA Bank –v- Ablyazov and Others that the Court had jurisdiction to try the issue of a non-defendant company’s ownership. The main defendant was the subject of freezing and receivership orders and there was a good arguable case that he had entered into an agreement with third parties that concealed his beneficial ownership of the company in question. The decision may assist claimants faced with defendants who it is believed are using third parties to conceal the true ownership of assets.” Read More

May 2014

May 2014
PCB news
PCB Litigation are advising on a billion dollar multi jurisdictional arbitration in which bribery and fraud procurement allegations have been made. Read More

April 2014

Apr 2014
PCB news
PCB Litigation has been retained by a leading specialist contractor in the construction industry in a dispute with a former shareholder.
PCB Litigation has been retained on behalf of a European State Organisation to seek interim relief in aid of foreign proceedings relating to a $ multi million fraud claim.
PCB Litigation are acting on behalf of a European Bank to recover assets located in several jurisdictions.
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Commercial Court applies civil remedy to freeze alleged proceeds of crime

Apr 2014
Fraud updates
In the case of United States v Abacha [2014] EWHC 993 (Comm), Mr Justice Field delivered an important judgment in continuing a Freezing Injunction in aid of foreign proceedings. That injunction was granted under s.25 of the Civil Jurisdiction and Judgments Act (“the CJJA”) on behalf of the US, so as to “hold the ring” until a judgment could be obtained in the US against the defendants and enforced in the UK under the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (“the Order”). The Defendants are alleged to have been involved in a fraud committed in Nigeria during the presidency of General Sani Abacha. Proceedings were brought in the US by the US Government against the Defendants, seeking forfeiture of assets representing the proceeds of crime. Under the Order, the US could seek enforcement of a civil forfeiture order, once obtained in the US, in the UK. However, it was not able to obtain an interim freezing order under that instrument due to expiry of the relevant limitation period. As such the US obtained a Freezing Injunction under the CJJA instead. It was argued by the Defendants that the Freezing Injunction should not be continued as a) the foreign proceedings to which it related were not civil but in fact criminal proceedings, and b) that it would be inexpedient to continue the Order for various reasons. Dismissing the first point, Field J drew the distinction between criminal proceedings involving the prosecution and sentencing of an individual in a criminal court, and the present foreign proceedings which concerned a claim seeking the vesting of property in the US Government which were the proceeds of crime. Field J considered the latter were properly construed as civil proceedings within the meaning of s.25(1) CJJA. On the second issue Field J stated “it is unquestionably expedient for this court to render the assistance sought… Corruption, like other types of fraud, is a global problem and it and its consequences are only going to be dealt with effectively if there is co-operation… between the courts of different national jurisdictions.” Read More

March 2014

Mar 2014
PCB news
In the 2014 edition of Chambers Global that has just been published, Fraudnet was the only ranked international network of fraud law firms. PCB Litigation is a member of Fraudnet and one of its Founding Members.
PCB Litigation has been retained by minority shareholders to advise on a multi jurisdictional joint venture dispute.
PCB Litigation has been retained by shareholders in a multi million dollar arbitration dispute. Read More

Major Bank defeats contrived fraud claim

Feb 2014
Fraud updates
PCB defeats prominent US law firm in obtaining judgment that allegations of fraud against major bank were contrived. PCB has succeeded in obtaining judgment handed down today, for many millions of dollars on behalf of a major bank which had been accused of corporate raiding. The Judge held that the allegations against the bank had been contrived and that the bank should have judgment. Partner Anthony Riem said "outrageous allegations were made against a very substantial bank in an effort by a wealthy businessman to avoid a foreign judgment being enforced in this jurisdiction. Those allegations included an attack on the impartiality of a foreign court, as well as fraud by the bank on that court. The bank however has prevailed in persuading the English court that these allegations were contrived and the defences raised were devoid of merit." Read More

February 2014

Feb 2014
PCB news
PCB Litigation has been instructed on an US$800 million corporate dispute involving two international companies.
PCB Litigation has been instructed by a major natural resources company in its dispute with its financial advisors.
PCB Litigation has been retained by an international hotel chain in relation to multi million dollar claims involving several chains.
PCB Litigation has been instructed to commence proceedings in the Commercial Court seeking permission to appeal against two arbitration awards in respect of claims for breach of contract.
PCB Litigation has been instructed by a Ukrainian businessman in the defence of committal proceedings in a claim commenced in this jurisdiction as part of a large scale dispute with his former employer.
PCB Litigation are advising on the remedies open to a European corporate victim of identity fraud. Read More

January 2014

Jan 2014
Latest news
PCB Litigation has been instructed in arbitration proceedings arising from a dispute between shareholders of a Cypriot company, involving numerous allegations of wrongdoing against the majority shareholders.
One of PCB Litigation’s cases has been named by The Lawyer as one of the top cases of 2014. The Lawyer reports that this “is expected to be one of the largest claims in the Commercial Court in 2014”. PCB acts for the principal defendant to a claim in the region of US$1 billion involving numerous allegations of wrongdoing, as well as findings already made by the Court that the Claimants provided dishonest evidence, which led to the discharge of injunctive relief. Read More