Court Of Appeal Rejects Challenge To U.K.'s First Unexplained Wealth Order

The English Court of Appeal has dismissed an appeal1 against a decision of the High Court that upheld the U.K.'s first Unexplained Wealth Order (the "UWO").

UWOs are a tool available to the U.K. authorities to require explanations of how assets were acquired, when there are grounds to suspect that the owner's legitimate income is not sufficient to have obtained the asset. The Court of Appeal's decision contains guidance on the meaning of a politically exposed person ("PEP") for the purposes of the Proceeds of Crime Act 2002 ("POCA").

The National Crime Agency (the "NCA") obtained a UWO in February 2018 against Zamira Hajiyeva, the wife of a former Chairman of the state-owned International Bank of Azerbaijan (the "Bank").

The High Court rejected Ms Hajiyeva's challenge to the UWO (discussed in more detail in our previous alert memorandum here), and the Court of Appeal has upheld that ruling. Ms Hajiyeva is now required to explain her interest in the property that is the subject of the UWO and how it was obtained, including how the costs of obtaining it were met. If a respondent does not comply with an UWO, the property that is the subject of the order is presumed to be recoverable in any civil recovery proceedings brought under POCA.

Background

Since 31 January 2018, the NCA has been able to apply to the High Court for an Unexplained Wealth Order.2 In summary, for the Court to make an UWO against a person in respect of particular property, the Court is required to be satisfied that:

first, there is reasonable cause to believe that the respondent holds the property, and that the value of the property is greater than £50,000; second, there are reasonable grounds for suspecting that the known sources of the respondent's lawfully obtained income would have been insufficient to obtain the property; and third, either: the respondent is a PEP, or there are reasonable grounds for suspecting that (a) the respondent is, or has been, involved in serious crime (whether in a part of the United Kingdom or elsewhere), or (b) a person connected with the respondent is, or has been, so involved. On 27 February 2018, the High Court made the UWO against Ms Hajiyeva on a without-notice application in respect of a property in London (the "Property"), that was purchased in 2009 for £11.5million by a company incorporated in the British Virgin Islands. Ms Hajiyeva applied to set aside the UWO on eight separate grounds, all of which were unsuccessful before the High Court.

The Appeal

In the appeal, Ms Hajiyeva argued that the High Court was wrong not to discharge the UWO on five grounds, including four that had been rejected by the High Court. Each of the grounds of her appeal were dismissed for the reasons set out below.

Ground 1 - The judge erred in his interpretation of the statutory test for identifying a PEP.

The definition of PEP set out...