NCA v Aziz & Ors: Foreign recovery proceedings and prohibition Orders under POCA

Speed read: The National Crime Agency has recently played the supporting role in US efforts to forfeit 50 prized movie posters held in the UK. In the case of NCA v Aziz & Ors [2021] Lloyd’s Rep FC 207 a prohibition order preventing dealings with the property was made following an external request by the US Department of Justice. Anita Clifford examines the conditions required to be met for an order of this kind and identifies an area of uncertainty.

The strength of UK / US cooperation in civil recovery proceedings was tested recently in the case of NCA v Aziz & Ors [2021] Lloyd’s Rep FC 207. The decision of Mr Justice Freedman is a notable addition to the few reported cases considering a proceeds of crime order in a context other than domestic confiscation under Part 2 POCA or civil recovery under Part 5 POCA.

The NCA applied for a prohibition order preventing dealings with 50 prized movie posters, including for The Wizard of Oz and A Midsummer Night’s Dream (depicting ‘spectacular’ nymphs), held by a UK dealer. The order was sought to assist the US DOJ, pursuant to Article 141A of the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 (as amended). The posters, it was alleged, had been acquired with proceeds traceable to the 1MDB fraud.

Mr Aziz and his film company, the second respondent, opposed the application. The third respondent, the dealer, was neutral. Provided with the posters for valuation and possible sale, it had submitted a SAR prompting the NCA to contact the DOJ. In the recovery of property alleged to be tainted by the 1MDB scandal, the DOJ are playing the starring role. As the judgment notes at paragraph [6], it has recovered more than USD 1 billion in property as at July 2020.

The application turned on questions of construction and ownership. In 2018, the film company settled civil forfeiture proceedings brought by the DOJ for USD 60 million. That settlement permitted ‘artwork’ owned by the film company and its officers acting in that capacity to be retained. The respondents argued that on a proper construction of the settlement agreement, the movie posters were outside the scope of forfeiture in the US and the application for the prohibition order, sought to assist the DOJ as it prepared to request mutual legal assistance in executing a warrant to seize the movie posters, should fail.

Working closely with the US DOJ, the NCA had a two-pronged position. It distinguished the posters from ‘artwork’ and contended that, in any event, they were not owned by the film company. These arguments found favour with court. In respect of the latter, there was insufficient evidence that the film company owned the movie posters. The prohibition order was made and in so doing, there was helpful discussion of the conditions that must be satisfied.

Three conditions for prohibition orders

Following a careful review of the framework, the court distilled that a prohibition order was subject to discretion and three conditions. These are:

  1. That there are reasonable grounds to believe the property may be needed to satisfy an external order which has been or may be made (ie., an overseas civil recovery order) and that an external request has identified the property;
  2. That proceedings have not already been taken to enforce an external order relating to the property; and
  3. That the property has not already been paid to a claimant who in civil proceedings in the UK or elsewhere is bringing a claim based on the defendant’s criminal conduct.

The three conditions were met in this case and the court declined to exercise its discretion against the making of a prohibition order. In relation to the first condition, the court took note of the observation of Gross LJ in NCA v Abacha [2015] Lloyd’s Rep FC 41 that this was, at the end of the day, a “fairly low threshold”. There was evidence that the US DOJ had commenced in rem proceedings against the movie posters and a Californian court had made an interim order in relation to them. No order for recovery in relation to the movie posters had yet been made. The third condition, however, required intellectual flexing with submissions sought on whether it should be interpreted broadly or narrowly. The parties explored whether the contemplated claimant is an enforcement authority or is not so limited. Also discussed was whether ‘the property’ referred to in the third condition must mean the property specified in the external request or could be something wider, and whether it included property not just paid to the claimant but permitted to be retained by agreement with the claimant.

On the facts of this particular case, the court did not need to prefer one argument over the other and did not express a view. It may be that the bounds of the third condition, which operates as an important exception to the making of a prohibition order and prevents recovering twice, will be returned to in a future case. Where an external request relating to property has been made but recovery proceedings brought by an authority, wherever located, have settled or there is judgment or settlement of civil proceedings brought by a victim or class of victims, the parametres of the third condition may come into sharper focus.

Timing and cooperation

Finally, from a practical perspective, the case highlights the speed of UK contact with the US over questionable property. The SAR was submitted by the dealer on 16 June 2020. The NCA considered it in detail on 18 June 2020. By 24 June 2020 the US authorities had already confirmed they would be commencing recovery proceedings against the posters. In the light of this, before seeking the prohibition order, the NCA obtained Crown Court orders to extend the moratorium period twice. It would seem that absence of a domestic investigation does not make a moratorium extension application any less compelling. The case is an example of the NCA’s swift use of different components of the POCA toolkit to assist a foreign enforcement authority.