To say that is recession has been unkind to the legal profession in England, indeed worldwide, is an understatement.
The legal profession was always thought of as being if not recession proof then at least recession resistant due in large part to the profession’s adaptability to prevailing market conditions – a corporate finance lawyer could always when things slow down shift his/her practice over to an area of greater demand such as bankruptcy/insolvency/re-structuring. But no more! We as a profession have witnessed a total paradigm shift and have move into an era where not even partners are safe from the unemployment axe.
The economic downturn as especially been hard on the sole and small practitioners; the High Street lawyer – for my non UK readers, the High Street is a generic term used for the main street or streets running through a town. Many High Street practitioners have been forced during this recession to either to cease operating all together, merge or seek out rescue buy-outs and now to add insult to injury some have found themselves the target of criminals.
Law firms, the new criminal cash cow?
According to the Solicitor’s Regulation Authority (SRA) it is working with several police forces across England investigating suspected infiltration of distressed law firms by criminal organizations. The SRA is an independent arm of the self-governing solicitor’s regulator – The Law Society of England and Wales – charged with the responsibility to “set, promote and secure in the public interest standards of behaviour and professional performance necessary to ensure that clients receive a good service and that the rule of law is upheld.”
Lawyers and law firms have long been the targets of criminal organizations, which is not surprising given the position of trust lawyers hold. However, these latest criminal efforts have taken on a whole new insidious flavour. The criminals have been brazen enough to go as far as to allegedly open sham offices and have even enlisting newly qualified solicitors, some as willing participants while others can only been seen as unwitting dupes or subjected to coercive methods (to put it mildly). In either case it is very troubling, indeed.
As a newly qualified lawyer myself I know full well the bright eyed exuberance, hunger and yes, the pressure of securing the first post qualification job. And now to hear that criminals in England are taking advantage of this positive energy at a time when the pressures to find that first job can overwhelm the exuberance are of grave concern.
It is important to note that concerns about these criminal infiltrations are part of a much larger discourse over the quality of practice management of failed or distressed firms.
Wachovia bank has agreed to pay $160 million to US authorities in order to settle charges brought against it. The bank was accused by the US Justice Department and banking regulators of not having sufficient controls in place to prevent Mexican drug cartels from laundering millions of dollars through the bank using exchange houses –casas de cambio - that dot the US-Mexican boarder.
The Justice Department have agreed to stay the charges against Wachovia for 12 months, provided the bank fulfill its obligations under the settlement. A key plank of this agreement is for Wachovia to hand over the proceeds of narcotics sales being held in its coffers – $110 million – and it must also pay a $50 million fine to the US Treasury.
How did Wachovia find itself in this situation?
With the ratcheting up of the drug trade and its related violence along the US-Mexican border there were growing concerns by many banks in the US for the potential for money laundering. To address these concerns many of the banks either or both put in place additional monitoring procedures or curtailed their dealings with the casas de cambio. However, this was not the case with Wachovia. Between 2004-2007, while other banks were pulling back from their dealings with the boarder exchanges, Wachovia increased its.
It is worthy of note that since its acquisition in 2008 by Wells Fargo, Wachovia has ended its dealing with the exchanges.
Four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek by all accounts gain compensation in South Africa.
A South African court has ruled recently that the farmers have the right to seek out and seize Zimbabwean government property in South Africa. The North Gauteng High Court ruled that the judgment in favour of the farmers handed down in December 2008 by a Southern African Development Community (SADC) tribunal was fully enforceable in South Africa. With this ruling the High Court made it clear, if there was any doubt, that as a signatory of the SADC treaty South Africa has an obligation to uphold and enforce judgments coming from a SADC tribunal.
The ruling clears the path for non-diplomatic property owned by the government of Zimbabwe to be subject to a writ of attachment, seized, and possibly sold to satisfy the judgment. Additionally, it also clears the path for similar moves by other white farmers.
But why South Africa? Zimbabwe is also a signatory of SADC, why not enforce the tribunals judgment there?
The simple answer is that for these farmers South Africa wasn’t so much a matter of choice but one of necessity. In fact the same could be said of the use of the SADC tribunal. The framers only tuned to the tribunal when it was clear that they could not get justice at home – the Zimbabwean judges being either complicit or too afraid to stand up to the Mugabe regime.
The SADC tribunal’s ruled in December 2008 that the farm seizures were racist and were an act of thief. It ordered the government to compensate those farmers that had lost their property and to leave those farmers remaining unmolested to continue their farming activities.
This was a great victory for the farmers, well so they thought until they tried to get the tribunal’s judgment registered and enforced in Zimbabwe. There they encountered the usual judicial opposition, this time with a judge dismissing their application because of the enormity of reversing the President’s land seizures.
Imagine that a judge dismissing your case because of the enormity/implications for an illegal government policy; just imagine. To that I have these words and I shall say them thrice: Rule of Law, Rule of Law, Rule of Law.
Fortunate for the farmers the High Court in South Africa knows and will fully up hold the Rule of Law.
While terrorism, terror financing and constitutional principles such as the rule of law and Parliamentary supremacy are not the usual subjects covered here at Commercial Law International, this seeming break from tradition is in fact not such a stretch.
As our moniker indicates Commercial Awareness is Global – it is important to note and as will soon become clear, coverage of this case in no way departs from this.
This landmark ruling is instructive for the “normal” subjects covered on this blog because it illustrates the legal limits imposed on the state – read the government – as it pertains to its ability to interfere with the assets of an individual (natural or juridical). These limits are even justified, as their Lordships have ruled, when combating the scourge of international terrorism. As the Deputy President of the Court, Lord Hope of Craighead, put it: “Even in the face of the threat of international terrorism, the safety of the peoples is not the supreme law.” In other words the government of the day only has as much power as Parliament has allowed it to have; the will of Parliament being express of course in the laws its passes.
Unlike in many other countries the United Kingdom under its UN obligations did not pass legislation in order to give effect to the Resolutions. Instead, the Chancellor issued these Orders, empowering Her Majesty’s Treasury (Treasury) to seize the assets of suspected terrorist, Al-Qaeda and or Taleban members or supporters. The seizures could take place on mere suspicion without an hearing and would not be under scrutiny of the courts through judicial review.
The case was the first to be heard in the newly minted Supreme Court when it opened last year. The appeal was brought by five men whom successfully argued their case in the High Court that the Orders were unfair and breached their fundamental right guaranteed by the laws of Britain; however, they were later over turned by the Court of Appeal.
The question before their Lordships though a simple one was non the less a profound one. And it was this when Parliament empowered the Treasury to make orders did it in turn give the Treasury the power to “interfere so profoundly with individuals fundamental rights without parliamentary scrutiny[?]”
With word such as “oppressive,” “paralysing” and “draconian” peppering the decision, their Lordships answered the question with a resounding NO!
In a nation such as Britain, with a “unwritten constitution” it must always be remembered that Parliament is supreme and it is only through Parliament that the government has the exercise power. Moreover, when such power involves the interference with an individual’s basic rights such authorization cannot be implied but must be explicit. In any democratic-capitalistic society access to the courts and property rights are sacrosanct. As Lord Phillips of Worth Matravers, the President of the court put it: “Access to the court to protect one’s rights is the foundation of the rule of law.” And without the rule of law there can be no liberal-democracy.
For those that would say that this ruling is just another example of judges legislating from the bench in breach of Parliamentary supremacy, Lord Philips has a stern rebuke. His Lordship countenanced with “on the contrary it upholds the supremacy of Parliament in deciding whether or not measures should be imposed that affect the fundamental rights of those in this country” without explicit grant by Parliament.
It is important to not that Supreme Court are not saying that these laws are in and of themselves illegal – not at all. However, what their Lordships are saying is that if the government of the day wants exercise such extensive powers they much first seek and then be granted Parliamentary approval. Lord Hope put it best: “If the Executive considers that such far-reaching measures are necessary or expedient for combating terrorism or honouring the United Kingdom’s international obligations it must obtain approval for them form Parliament.”
In response to the judgment the Gordon Brown’s is rushing through Parliament the Terrorism Asset-Freeze (Temporary) Provision Bill which is expected to have retrospective effect and by and large mirror the quashed Orders. If all goes to plan the Bill will become law some time this week.
The UK taxman is now using YouTube to get its message across. I mean literally the “UK Taxman” – Permanent Secretary for Tax in HM Revenue & Customs (HMRC), Dave Hartnett.
And what is his message. Well you guessed it, pay your taxes or else.
Yes I know, that’s just a little bit too simplistic but it none the less still holds to be true. The video, however, has a specific target audience, more than simple the general taxpaying public. It seeks to engage, and gently remind those taxpayers whom may have undeclared offshore savings that they have a legal duty to declare such holdings and those that do not will be prosecuted to the fullest extent of the law – as I said gentle.
The Permanent Secretary or the UK Taxman or as I have taken to calling him, in the video – the first and I suspect not the last use of social media by HMRC – also urges undeclared offshore holders to come forward and take advantage of the HMRC’s tax amnesty program. The New Disclosure Opportunity (NDO) was launched this July and offers tax evaders a chance to avoid criminal prosecution in exchange for declaring offshore accounts, and paying the taxes owed along with a relatively small penalty.
The NDO is set to expire on November 30 of this year. Those who declare on or before this date by phone or in writing have until January 31, 2010 to settle their bill with the UK Taxman. Those that chose to notify by email, interestingly enough, have more time, March 2010 to settle up. Those who do not could face the full rigour of the law – criminal prosecution.
Way the difference? I really can’t tell you, notice is notice is notice and it should not matter the medium. However, I would venture to guess that some policy considerations, taking account of the differences in mediums, must have gone into making this decision – well, I hope that there are policy considerations.
This tax immensity program is the second such for HMRC. Its 2007 campaign nabbed the Treasury £400 million after 45, 000 evaders came forward. The Taxman and his colleagues have taken an increasingly hard line stance on tax evaders, especially those with undeclared offshore accounts, in the wake of dwindling tax revenues during the recession.
Yes, you read that correctly that 22.5 Billion with a B. The suit was brought by the Russian Federal Customs Service in 2007 alleging that BNY was at the centre of illegal money transfers from BNY account out of Russia between 1996 and 1999. BNY it was alleged assisted its clients to avoid the payment of taxes, import duties and to hide the proceeds of crime.
The Russians brought the suit after a BNY vice-president and Russian émigré, Lucy Edwards and her husband plead guilty to charges in the US of conspiracy in relation to the illegally transferring $7.5 billion. The two were sentenced to six months house arrest, ordered to pay a fine of $ 20,000 and $685,000 in compensation, and put on five years probation. BNY was never charged in relation to the incident and cut a non-prosecution deal with US authorities.
These convictions formed a central pivot in the Russian claim. Authorities there invoked US anti-racketeering law to arrive at the $22.5 billion figure – three times the mount originally transferred out of Russia.
The suit however has now been drop with BNY agreeing to pay the $14 million legal cost of the Russian Federal Customs Service. And incidentally – both sides claim this to be totally unrelated – BNY has proved two unnamed Russian state banks with a renewable loan facility of $4 billion over five years. What timing, eh.
A 47 year old former engineer from the Ford Motor Company has been charged with stealing some of the company’s trade secrets.
The engineer, a one Xiang Dong Yu, also known as Mike Yu, was charged last week after traveling from China to the US. Mr. Yu is accused of unauthorized computer access; theft, and attempted theft of trade secrets.
But what exactly is he accused of steeling?
It is alleged that he copied thousands of electronic documents containing designs for power systems, mirrors, doors, steering wheel assembles, wipers and other vehicle components. Authorities, say that much of what Mr. Yu is accused of doing occurred in December 2006, just before he quit to take up a post with a Chinese competitor.
If found guilty Mr. Yu could face a maximum sentence of 10 years in person.
The Act seeks to make convictions of companies with respect to deaths at the workplace much easier. Under English law a corporation as a juridical person is capable of both committing and being convicted of crimes. However, as an artificial non-human legal creation, a corporation can only act through people. Thus, from both a legal and a practical perspective this made it very difficult to even get a corporation charged much less convicted. This was in large measure due to the difficulty in assigning the requisite mens rea of many crimes to a corporation. It was far too easy for corporations to disavow the acts of an employee/servant by saying: yes they did act but it was not the act of the corporation it was their own.
Corporations were able to get away with this defense because there was often insufficient evidence to prove that the employee/servant was of such seniority as to constitute the controlling mind of the corporation. And even where such seniority could be found the corporation would simply claim that while the employee/servant under normal circumstances is a controlling mind, he/she was not acting in such a capacity when the death was caused.
But not anymore.
The Act makes it an indictable offense if the way in which a corporation’s activities are managed or organized caused the death of a person that amounts to a gross breach of duty of care owed to the deceased. Therefore, corporations can now no longer disavow the acts of an employee/servant, senior or not, as not belonging to the controlling mind of the corporation. The presence or absence of a controlling mind while an important factor is now no longer the deciding factor.
Cotsworld Geotechnical Holdings Ltd has been charged with manslaughter in connection with the death of a young geologist when a trench in Stroud, Gloucestershire collapsed on him.
As a penalty the corporation faces an unlimited fine or has to publicize its failure or can be ordered to remedy the breach.
UBS, the world´s largest wealth manager, has found itself embroiled in a diplomatic row between Washington and Bern. At issue is the interpretation of the current US-Swiss double taxation treaty and at stake is the newly inked, yet to be ratified, revised US-Swiss double taxation treaty.
Does the future of the revised US-Swiss double taxation treaty depend on the outcome of the UBS case?
As much was indicated by Doris Leuthard, the Swiss Economy Minister, as she called for a speedy resolution of the case. What the Minister is expressing in her pronouncements is simply the reality of the situation. Swiss maintain that the issues in the case are diplomatic and ought to be resolved in forum more appropriate to friendly relations between nations – face-to-face closed door negotiations – rather an the public spectacle of a courtroom. Secondly, while the treaty has been finalized it has yet to be ratified by the Swiss Parliament, a parliament that will be slow to give its blessing if it is dissatisfied with the outcome of the case.
So what exactly is going on in this case? This is a very good question for I myself was a bit confused for two reasons. The first is that UBS already plead guilty to assisting thousands of Americans to evade US taxes in a case brought by the Department of Justice (DOJ) in February of this year. In the same case it also paid fines of $750 million and disclosed 250 names of its US clients. So the case ought to be over, right? Well, yes and no. This was the criminal leg of the – and I am going to substitute strategy here for case to avoid any legal confusion – US authorities strategy to gain the names of as many as 52,000 believed to be evading US taxes.
The current case before the courts is the civil leg of the strategy brought by the Internal Revenue Service (IRS). They have served on UBS a John Doe subpoena in an effort to force UBS to reveal the names, so those people can in turn answer to the authorities.
While I know that criminal and civil matters are wholly different creatures, this smacks of double prosecution – persecution if you will. Or is it?
The second thing that was puzzling me was this IRS case seems to have stepped outside the four corners of the existing double taxation treaty. The treaty only requires UBS, through Swiss authorities, to co-operate with US tax evasion investigations if the IRS can provide the specific names of the holders of secret offshore accounts. It is clear from the IRS´s actions, issuing a John Doe subpoena, that it clearly does not know the names of the suspected tax evaders. So that should be the end of it, right. Well, clearly not.
Now, what the IRS is doing is clearly is not only not double prosecution/persecution, it is well within, I believe, the scope of the treaty. In fact I would go as far as saying that it is share genius. This was revealed to me in a brief filed by the IRS in response to one filed by UBS. To see what I mean just take a look at section 2 of the brief, the head tells it all: ¨Nothing in the Tax Treaty Limits the IRS´s Authority to Enforce a Duly Authorized Summons Issued to a Third-Third Party Witness within the United States, or Requires the IRS to Exhaust its Treaty Rights With a Foreign Government Before Seeking to that Summons.¨
Unfortunate for UBS, and as rightly pointed out by the IRS ¨the existence of a treaty….does not limit the rights granted to the United States under the laws of this country¨ (the bold being original). Well, that is in part, it should read doesn’t limit those laws so limited by treaty obligation.
What the IRS has done is not too circumvent the treaty but simply not to bring it into the equation at all. It has kept the issue entirely domestic. As I said, share genius.
In any event the prospects are dim for UBS if a negotiated settlement is not reach soon. If UBS loses, which it looks increasingly probable, it will be faced with either defying US law by refusing to reveal the names or reveal the names and be in violation of Swiss banking law which carries with criminal sanction.
Now that a Floridia judge has agreed to postone the case the excutives at UBS will surely be working over time to reach an amecible resolution of the case.
The doctrine of Forum non conveniens offers a court the opportunity to decline, in the interest of justice, to exercise jurisdiction, where the suit is between aliens or nonresidents, or where for kindred reasons the litigation can more appropriately be conducted in a foreign tribunal.
Placing the above in context, what is Kenya’s interest in a British ship flagged in Bermuda, carrying goods destined to India, with a Filipino crew? Well the US and the EU have both signed protocols with Kenya in a bid to secure the Indian Ocean and the Maritime trade routes. The latter has facilitated the arrest, investigation and prosecution of suspected pirates. So far at least three groups of Pirates have been brought before magistrates courts at the Kenyan port of Mombasa. The total number of captured pirates currently stands at 111 handed over to Kenyan authorities.
A concern often raised in applications of the forum non conveniens doctrine is the matter of forum shopping, or picking a court merely to gain an advantage in the proceeding. Well it could be argued that there is no suitable forum and therefore the courts of Kenya are the closest available to be ceased of the criminal actions. The latter argument would lack merit on the grounds that the US transported a Somali pirate to the US for a trial after they successfully hijacked the Maersk Alabama and its American crew.
Suitable forum
In Spiliada Maritime Corp. v Cansulex Ltd one of the tests stipulated for the doctrine to apply was that: English judges will have to decline jurisdiction when a trial is likely to be more suitable elsewhere for the interests of all the parties and for the benefit of justice. As a caveat the defendant must show to the court that another forum with these characteristics is available. Somaliland anyone?? The Somaliland courts have tried pirates before and have actually incarcerated several pirates.
One would think that the restoration of a stable government in Somalia would be the top priority on the current international agenda and not the transfer of individuals from one neighbouring country to be imprisoned in the next.
In this particular instance I believe that the US and EU have managed to indulged themselves in forum shopping and the Kenyan government has fallen foul of the bargain hunter/windowshopper.
Note: The doctrine is used for only indicative purposes as it is largely used in civil cases between two parties.
