JP Morgan Chase Bank National Association & Ors v The Director of the Serious Fraud Office & Anor [2012] EWHC 1674 (Admin)

Case No CO/3159/2012;

Case No CO/3163/2012;

Case No CO/3165/2012;

CO/3170/ 2012

[2012] EWHC 1674 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 20/06/2012

Before

LORD JUSTICE GROSS

MRS JUSTICE GLOSTER DBE

Between

(1) JP Morgan Chase Bank National Association;Claimants

(2) Depfa Bank Plc; (3) UBS Ltd; (4) Deutsche Bank AGClaimant

(1) The Director of the Serious Fraud Office;Defendants

(2) The Secretary of State for the Home DepartmentDefendant

Public Prosecutor of MilanInterested Party

(Transcript of the Handed Down Judgment of

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Mr Julian Knowles QC and Mr Louis Mably (instructed by Clifford Chance LLP, SNR Denton UK LLP and Allen & Overy LLP) for First, Second and Fourth Claimants

Mr Hugo Keith QC (instructed by Simmons & Simmons) for Third Claimant

Mr Nigel Giffin QC and Mr Duncan Atkinson (instructed by The Treasury Solicitor) for First and Second Defendants

Mr Khawar Qureshi QC (instructed by Quinn Emanuel) for Interested Party

Hearing Hearing dates: 29 th& 30 th May 2012

Judgment

[1]The Claimants (collectively, “the Banks”) seek judicial review of the decisions of the Secretary of State for the Home Department (“the SSHD”) and the Serious Fraud Office (“the SFO”): i) In the case of the SSHD, the decision of the 24th February, 2012 (“the SSHD 24th February decision”), not to withdraw the referral of the Letter of Request from the Public Prosecutor of Milan, dated 4th April, 2011 (“the LOR” and “the Prosecutor” respectively) to the SFO under s.15(2) of the Crime (International Cooperation) Act 2003 (“CICA 2003”); ii) In the case of the SFO, the decision of the 24th February, 2012 (“the SFO 24th February decision”), not to withdraw two notices issued under s.2(3) of the Criminal Justice Act 1987 (“the s.2 Notices” and “the CJA 1987” respectively), pursuant to the LOR. By way of remedy, the Banks seek the quashing of these decisions, together with the prior decisions taken by the SSHD and SFO which these decisions upheld. The focus throughout will be on the SSHD 24th February decision; it was (sensibly) common ground that the SFO 24th February decision stood or fell with the SSHD’s decision.

[2]For present purposes, the background can be very shortly summarised. The Prosecutor, by way of the LOR, seeks assistance from the relevant authorities in this country in respect of criminal proceedings continuing in Italy, arising out of swap transactions agreed between the Banks and the City of Milan between 2005 and 2007. The matter is helpfully set out in the SSHD and SFO Summary Grounds:

“ 1.1 In May 2005, the City of Milan invited proposals for the refinancing of approximately €1.7 billion of the City’s indebtedness. The Claimant banks provided financial advice to the City, recommending a strategy of refinancing a portion of that indebtedness by the issue of a bond underwritten by an amortizing swap agreement with appropriate institutions. The Public Prosecutor contends that the fiduciary duty owed by the Claimants to the City required them to disclose all relevant information including details of any and all commissions and fees derived by the Claimants through their appointment as corporate finance advisers to the City. 1.2 Acting on the Claimants’ advice, between June 2005 and October 2007, the City entered amortizing swap agreements with the banks and the City issued the bond with the notional aggregate value of €1,685,347,000. The Claimants were instructed to act as arrangers of the bond issue. Under Italian law, such arrangements may only be entered into if they satisfied the requirement of ‘economic convenience’. The Public Prosecutor contends that none of the transactions in fact complied with this requirement of economic convenience, and the City has therefore incurred implicit costs of €100 million. ”

[3]For completeness, it may be noted, first, that in the Italian criminal proceedings (of which more, below) it is further alleged against the Banks that they fraudulently deprived the City of Milan of the protections available to it as an “intermediate customer” under English financial services legislation. Secondly and in fairness to the Banks, while fraud is alleged directly against various employees, it is or may well be the case that the complaint against the Banks involves administrative claims for not having suitable controls in place to prevent the crimes allegedly committed by the employees. It is unnecessary to explore either of these matters further and no more will be said of them. The Banks deny the allegations made against them.

[4]Turning to the chronology, on the 23rd October, 2007, the Prosecutor confirmed the existence of a criminal investigation in Italy, arising out of the transactions between the Banks and the City of Milan. On the 23rd January, 2009, the City of Milan commenced civil proceedings against the Banks. On the 28th July, 2009, the Prosecutor served a Notice of Closure of the criminal investigation. On the 11th November, 2009, the Prosecutor issued an indictment in the criminal proceedings and on the 25th January, 2010 the first hearing in the preliminary hearing stage of the criminal proceedings took place. On the 6th May, 2010, the main trial phase of the criminal proceedings commenced before the Court in Milan; the first hearing took place on the 19th May, 2010 and the Prosecutor began his presentation of the evidence. As already recorded, the LOR was dated 4th April, 2011. By this time, 24 hearings had taken place in the trial proceedings. On the 20th April, 2011, the Prosecutor closed his case in the Italian criminal proceedings and, subsequently, the City of Milan (a party to the criminal proceedings) closed its case on the 6th July, 2011. On the 20th March, 2012 and following an unsuccessful jurisdiction challenge by the Banks, the City of Milan and the Banks entered into a confidential settlement of the civil proceedings. The upshot is that the City of Milan will cease to be a party to the criminal proceedings and the separate civil proceedings. So far as concerns the criminal proceedings, on the material available to the Court, the defence evidence is by now substantially complete and all that remains is the evidence to be heard from a single court appointed technical expert.

[5]Pausing there, in broad outline, the stages in Italian criminal proceedings were not in dispute. They divide into(1) preliminary investigations;

(2) preliminary hearings;

(3) the main trial. Again in broad terms, the Prosecutor is in charge of directing the investigations in (1) under the supervision of the Judge for Preliminary Investigations (“the JPI”). However, once the case moves into phases (2) and (3), the Judge becomes the “master” of the proceedings – the JPI in the case of (2) and the trial Judge in the case of (3). That said, during the trial phase the Prosecutor retains residual powers of investigation pursuant to Art. 430 of the Code of Criminal Procedure (“the Code”). As will be seen, the scope of those residual powers and the question of whether the LOR came within them loomed large in the debate before us.

[6]The LOR was addressed by the Prosecutor to (in effect) the SSHD and the SFO, pursuant to the Council of Europe Convention on Mutual Assistance in Criminal Matters 1959 (“the Convention”) and the First and Second Protocols thereto. The LOR set out the factual history, summarised the proceedings to date and presented an outline of the scheme of the alleged fraud. Particular matters of importance in the hearing were dealt with as follows: i) As to the authority of the Prosecutor, the LOR records the Prosecutor stating that he was “empowered to make this request pursuant to Italian domestic law”. Furthermore, the LOR asserted that:

“ …the Public Prosecutor can investigate further and collect evidence also after the order for committal for trial has been issued and during the trial itself.” ii) The Prosecutor requested assistance: “ …in gathering the available evidence situated in the United Kingdom for the purpose of establishing which individuals were complicit in the suspected crimes, the benefit they derived from the offences and the full facts and circumstance[s] which resulted in the offences. …. ”

The categories of evidence sought were set out in a Schedule to the LOR – but it will be more convenient to set out the nature of this material by reference to the revised s.2 Notices issued by the SFO (see below). The LOR went on to say this: “ It is also requested that such other enquiries be made, persons interviewed and evidence secured as appears to be necessary to further our investigation as set out in this Letter of Request. I additionally request that any requisite court order or other order necessary to enable the provision of the above requested assistance be sought.” iii) The Prosecutor undertook, inter alia, that, if the SSHD decided to refer the LOR to the SFO, then no “document or other information obtained will be used, other than in criminal proceedings arising from the investigation …” set out in the LOR without the prior consent of the SSHD.

[7]On the 18th April, 2011, the SSHD referred the LOR to the SFO, as already recorded, under s.15(2) of CICA 2003. On the 17th May, 2011, the SFO accepted the SSHD’s referral. S.2 Notices were thereafter sent to each of the Banks and, subsequently, revised. The covering letters indicated that the Banks were required to produce accounting information, correspondence and e-mails relating to their individual dealings with the City of Milan. The object of the s.2 Notices was, inter alia, to determine what economic value the Banks derived and attributed to the transactions in question and what benefits, such as bonuses, commissions and introduction fees had been paid as a result. The s.2 Notices stated that there appeared to the SFO “good reason to exercise the powers conferred” by s.2(3) of the CJA 1987 (see further, below). As revised, the s.2 Notices required the production of all documents in the respective Banks’ possession, custody or control and relevant to the transactions in question, as follows:

“ (1) The approvals of the Board of Directors, Credit & Risk Committee …..to enter the Transaction and any subsequent variation (2) any presentation, supporting documents or calculations submitted in support of such approvals and (3) the document(s) recording the economic benefit to … [the Bank in question] ….its subsidiaries and associate companies, special purpose vehicle, agents or employees of the Transaction and any subsequent variation together also with (4) the calculation of the economic benefit to the City of Milan of entering into the Transaction or any subsequent variation. ”

ARGUMENT AND EVIDENCE AVAILABLE TO THE SSHD

[8]For better or worse, there followed several “rounds” of expert evidence on Italian law, as the Banks made repeated representations inviting the SSHD (and the SFO) not to act on the LOR and submitting that the Prosecutor lacked authority to issue the LOR when he did so. Reduced to its essentials, the Banks’ argument was as follows. During stage (1) of the Italian criminal proceedings (i.e., the preliminary investigations stage), the Prosecutor was entitled to issue the LOR without reference to the Judge. The LOR was not, however, issued until stage (3) of those proceedings (i.e., the main trial stage). At this stage, it was common ground that (subject to any separate issues) the Judge could have authorised the LOR. However, as was further common ground, the LOR had been issued by the Prosecutor without reference to the trial Judge. It was still further common ground that the Prosecutor’s authority for acting in this manner and at the time he did so depended on Art. 430 of the Code. The Banks’ contention, supported by the Italian law evidence adduced on their behalf, was that the Prosecutor lacked authority to do so.

[9]Before introducing Art. 430, it is first convenient to refer to Art. 727 of the Code, which governs the transmission of letters rogatory to foreign authorities. Art. 727.1 provides as follows:

“ The requests of letters rogatory made by the judges and the magistrates of the Public Prosecutors, within their respective powers, direct to foreign authorities for communications, notifications and evidence gathering activities, are transmitted to the Ministry of Justice, which provides for forwarding them by diplomatic means. ”

Art. 727 thus provides for the transmission of Letters of Request by both Judges and Public Prosecutors – but “within their respective powers”.

[10]Art. 430.1 is in these terms:

“ Following the issuance of the decree ordering the trial, the Public Prosecutor and the defence counsel may, for the purpose of their requests to the trial judge, undertake supplementary investigation activities, except for acts for which the participation of the accused or his counsel is required.”

[11]The Banks’ submission was that this restriction on the powers of the Prosecutor reflected the need for protection of a defendant once the trial stage had been reached, together with the importance of “equality of arms”. Accordingly, the Prosecutor’s authority to undertake “supplementary investigation activities” did not extend to “acts for which the participation of the accused or his counsel is required”. Here, the LOR, a fortiori, as given effect by the s.2 Notices, required the “participation” of the Banks or their legal representatives. The Prosecutor had acted without authority.

[12]The Banks further submitted that there was no means of challenging the Prosecutor’s request under Italian law at this stage; although, before the trial Judge, they could subsequently resist the introduction of these materials into evidence, the upshot would be a costly exercise of producing the documents before their objections could be heard. Moreover, despite the Prosecutor’s undertaking, the materials could be read and copied by all parties to the Italian criminal proceedings – including those advancing civil claims. While the City of Milan had by now settled its civil claims, that was not the case with regard to other civil parties (including, in particular, a consumer association specialising in the banking and financial fields). For all these reasons – and others going to the lateness and lack of proportionality of the LOR – the Banks submitted that as a matter of law or discretion, the SSHD (and the SFO) should not act on the LOR.

[13]Initially, the Prosecutor himself responded to these representations. In essence, the Prosecutor vigorously maintained that he was acting within the scope of his authority; the LOR was justified under the residual powers accorded to him in accordance with Art. 430 of the Code. The Prosecutor underlined that it remained open to the Banks to challenge, before the trial Judge, the introduction of the materials into evidence. In a letter of 11th August, 2011, addressed to the SSHD and the SFO, the Prosecutor said that he looked forward to confirmation that the s.2 Notices were being implemented.

[14]A number of matters can be conveniently disposed of at once, even if not all of them were apparent at the time of the SSHD’s 24th February decision. First, it was common ground that the LOR could not at that time be challenged by the Banks; there was no procedure for such a challenge in Italian law. The Banks could, however, resist before the trial Judge the introduction of the materials into evidence. Secondly, it was or became common ground that no undertaking given by the Prosecutor was capable under Italian law of preventing materials produced pursuant to the Request being seen and copied by parties to the criminal proceedings with potential civil claims against the Banks. Thirdly, insofar as the Prosecutor purported to assert authority for the issue of the LOR by reference to copy documents standing in a different position to other evidence, the submission is, with respect, untenable: it is plain that the LOR was not restricted to copy documents – nor, insofar as it is relevant, were the s.2 Notices. Likewise, to the extent that the Prosecutor sought to rely on decisions of the Italian Courts, by the end of the hearing it was clear that, with respect, they did not advance the matter one way or another.

[15]Matters did not, however, end with the clash of opinions on Italian law between the Prosecutor and the lawyers instructed on behalf of the Banks. In the event, the Prosecutor went on to instruct Prof. Giarda to produce his expert opinion and this he did, in two reports dated 26th September, 2011 (“Giarda 1”) and 20th October, 2011 (“Giarda 2”).

[16]Though admittedly not available to the SSHD at the time of the 24th February decision, it would serve no useful purpose to defer reference to the summary produced by Mr. Giffin QC (for the SSHD and the SFO) of Prof. Giarda’s analysis in six underlying propositions, broadly as follows: i) “Participation” in Art. 430 did not refer to physical or factual participation – in the sense of a defendant having to identify and hand over documents. The question was instead whether the law (i.e., Italian law) required the participation of the defence, in that the defendant was either obliged or entitled to be there as a matter of law. An act for which such provision is made is referred to as a “guaranteed act”. ii) Accordingly, the question was whether Italian law made provision for such participation by the defence. There had to be a specific provision to such effect. iii) Italian law contemplated the obtaining of evidence by search and by seizure. Specific provision was made in this regard: see, for example, Art. 248 of the Code. There was, however, no such provision where a party was requested to produce documents. A request of this nature was not specifically regulated by the Code at all and constituted “atypical evidence”. In part, at least, the reason why a request to produce documents was not so regulated was because it is not a coercive measure in Italian law – there is no sanction for refusing such a request. That said, the presence or absence of sanctions was not ultimately the point. iv) A request for documents was not a “guaranteed act” because there was no provision of Italian law to make it so. It thus did not require the “participation” of the defence. v) As the act of requesting documents, if done domestically, was not a “guaranteed act”, it did not become a “guaranteed act” if sought by way of letters rogatory. vi) How the law of the requested state treated a request for documents was neither here nor there. Thus the fact that the s.2 Notices were, as a matter of English law, backed by criminal sanctions (see below) was not relevant and did not change the status of the relevant act in Italian law. It followed that the LOR, construed as Mr. Giffin submitted it should be, as simply a request for documents came within the Prosecutor’s residual authority under Art. 430.

[17]Mr. Giffin’s summary, most helpful though it is, does not, however, cover the whole ground or dispense with the need to have regard to a number of passages in both Giarda 1 and Giarda 2 themselves. In Giarda 1, Prof. Giarda explained the reason why a request to exhibit documents was neither regulated nor considered a “guaranteed act” was because (at p.449 of the Bundle):

“….it is not coercive, and is based substantially on the hope that the accused will collaborate.”

Turning to the LOR, Prof Giarda said this (at pp. 449 – 450 of the Bundle):

“ ….if in the case in question, the Public Prosecutor had forwarded, by letters rogatory, a Request to exhibit and produce documents and, subordinately or as an alternative, a search and seizure Request, the same would have crossed the limits provided by section 430 of the Code of criminal Procedure, in that for Italian law, both evidence search and seizure presuppose the ‘participation’ of the defence as provided by the same law; in this case the letters rogatory would have been illegal. Vice versa, the Request to exhibit and produce documents, considered on its own and not accompanied by alterntive or subordinate search and seizure requests, is not a ‘guaranteed act’ according to Italian law, and does not require the ‘participation’ provided by section 430….so that it may legitimately be made subject of letters rogatory to a foreign Judicial Authority. …… The distinction between Request for production, Request for evidence seizure and search Request is quite evident: the latter two are invasive actions and thus imply a possible control of legality on their enforcement, while the former is the expression of an accepted act of collaboration (so-called ‘consensual seizure’, in the enforcement of which the control of the party is intrinsic to enforcement of the act. ”

[18]Giarda 2 said this (at pp. 473-4 of the Bundle):

“ Substantially, section 430 of the Code of Criminal Procedure is applicable to and permits all ‘non guaranteed’ activities, namely all those activities that do not require the participation of the defendant or its counsel, and which also include the simple Request for delivery of documents; on the other hand, coercive or invasive actions (such as search or seizure) for which Italian law expressly requires the possible participation of the defendant or its counsel, in order to guarantee the right of defence, are expressly excluded from supplementary investigation activities.”

[19]With the argument and evidence available to the SSHD well in mind, I turn next to introduce the legal framework governing mutual assistance, before coming to the SSHD’s and SFO’s 24th February decisions.

THE LEGAL FRAMEWORK GOVERNING MUTUAL ASSISTANCE

[20](1) The Convention: The starting point is provided by the Convention. Art. 1.1 of the Convention, as amended by the Second Additional Protocol, provides as follows:

“ The Parties undertake promptly to afford each other, in accordance with the provisions of this Convention, the widest measure of mutual assistance in proceedings in respect of offences the punishment of which, at the time of the request for assistance, falls within the jurisdiction of the judicial authorities of the requesting Party.”

[21]The policy steer of the Convention is plainly in favour of mutual assistance. To this end, the Convention provides a very limited number of categories where assistance may be refused. Thus Art. 2 provides that assistance may be refused in respect of offences considered by the requested Party to be political (and like matters) and also where execution of the request is likely “to prejudice the sovereignty, security, ordre public or other essential interests of its country”. It may further be noted that Art. 5 provides for a Contracting Party to make reservations and, as I understand it, the United Kingdom has done so in respect of certain matters (which are not said to bear on the present dispute).

[22]As is to be anticipated, the Convention provides (by Art. 5) that letters rogatory are to be executed in the manner provided for by the law of the requested Party.

[23](2) CICA 2003: The Convention has been ratified by the United Kingdom but has not been enacted into domestic law. The relevant domestic statute is now CICA 2003: see, The Law of Extradition and Mutual Assistance, Nicholls, Montgomery, Knowles, 2nd ed., at para. 17.80. As recorded in its preamble, CICA 2003 is an Act, inter alia, “to make provision for furthering co-operation with other countries in respect of criminal procedure and investigations”.

[24]For present purposes, the key provisions are found in ss.13 – 15 of CICA 2003, which are in these terms:

“ 13 Requests for assistance from overseas authorities (1) Where a request for assistance in obtaining evidence in a part of the United Kingdom is received by the territorial authority for that part, the authority may – (a) if the conditions in section 14 are met, arrange for the evidence to be obtained under section 15…. ….. (2) The request for assistance may be made only by – (a) a court exercising criminal jurisdiction, or a prosecuting authority, in a country outside the United Kingdom, (b) any other authority in such a country which appears to the territorial authority to have the function of making such requests for assistance, 14 Powers to arrange for evidence to be obtained (1) The territorial authority may arrange for evidence to be obtained under section 15 if the request for assistance in obtaining the evidence is made in connection with – (a) criminal proceedings or a criminal investigation, being carried on outside the United Kingdom, ….. (2) In a case within subsection (1)(a)….the authority may arrange for the evidence to be so obtained only if the authority is satisfied – (a) that an offence under the law of the country in question has been committed or that there are reasonable grounds for suspecting that such an offence has been committed, and (b) that proceedings in respect of the offence have been instituted in that country or that an investigation into the offence is being carried on there. An offence includes an act punishable in administrative proceedings. 15 Nominating a court etc. to receive evidence (1) Where the evidence is in England and Wales….the Secretary of State may be a notice nominate a court to receive any evidence to which the request relates which appears to the court to be appropriate for the purpose of giving effect to the request. (2) But if it appears to the Secretary of State that the request relates to an offence involving serious or complex fraud, he may refer the request ….to the Director of the Serious Fraud Office for the Director to obtain any evidence to which the request….relates which appears to him to be appropriate for the purpose of giving effect to the request….”

[25]Several features of CICA 2003 may be noted: i) Its aim, albeit in terms which are in no way identical, is to give effect to the Convention and to promote cooperation between countries in respect of criminal procedure and investigations. ii) As provided by s.13(1), the SSHD is not entitled to act on a request for assistance unless the s.14 conditions are met. No more need be said of this pre-condition, as, given the Italian criminal proceedings, it is common ground that those conditions are satisfied in this case. iii) As provided by s.13(2)(a), the request may be made only, so far as here relevant, by “a prosecuting authority”. As will be seen, Mr. Knowles QC, on behalf of the 1st, 2nd and 4th Claimants, submitted that a “prosecuting authority” for the purposes of the sub-section meant a prosecuting authority with the requisite authority to transmit a request for assistance. This submission is addressed below. iv) Even where the s.13(1) and (2) conditions are met, the SSHD has a discretion to arrange for the evidence to be obtained under s.15. That the SSHD has a discretion is indicated by the word “may” in s.13(1) and was common ground before us. I return in due course to consider the approach to and ambit of the discretion. v) Given the background to the request and as will already be apparent, the SSHD acted on the LOR by referring it to the Director of the SFO pursuant to s.15(2).

[26](3) The CJA 1987: In issuing the s.2 Notices, the Director of the SFO was acting pursuant to the provisions of s.2 of the CJA 1987, which provides as follows:

“ 2. - Director’s investigation powers (1) The powers of the Director under this section shall be exercisable….on a request made by an authority entitled to make such a request, in any case in which it appears to him that there is good reason to do so for the purpose of investigating the affairs, or any aspect of the affairs, of any person. (1A) The authorities entitled to request the Director to exercise his powers under this section are – …. (b) the Secretary of State acting under section 15(2) of ….[CICA 2003]….., in response to a request received by him from a person mentioned in section 13(2) of that Act (an ‘overseas authority’). (3) The Director may by notice in writing require the person under investigation or any other person to produce ….any specified documents which appear to the Director to relate to any matter relevant to the investigation…… (13) Any person who without reasonable excuse fails to comply with a requirement imposed on him under this section shall be guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale or to both.”

[27]To the extent that the position under English domestic law is relevant, first, it is plain that the SFO’s s.2 Notices proceed on a coercive rather than a voluntary basis; failure to comply exposes the recipient to potential criminal penalties under s.2(13). Secondly, I did not understand it to be in dispute that the SFO would invoke its s.2(3) powers against a defendant post-charge only in exceptional circumstances.

[28]The SFO’s “Guide to obtaining evidence from UK”, contains (at para. 3) observations of possible relevance both to the SSHD’s and its own response to the LOR:

“ What should the Letter of Request contain? Our legislation does not require a Letter of Request to be in official form, but it must contain all the information necessary to demonstrate that assistance is permissible under our legislation. To help you we have prepared a template which you may wish to use as a guideline when you are preparing your Letter of Request. It is important that you understand: first that we will only undertake investigations that meet our criteria and second, that we must exercise our compulsory powers with great care and only where we can show that we have grounds to do so. Therefore, Letters of Request must have sufficient information for us to determine that, in assisting with your investigation, we would be using our statutory powers legitimately.”

It is important that you understand:

first that we will only undertake investigations that meet our criteria

[29]For completeness, there is a curiosity but no more in the fact that CICA ss.13-15 refers to “evidence” whereas s.2 of the CJA 1987 is focused on an “investigation”. All parties before us were agreed that nothing turned on this possible mis-match and that, if necessary, “evidence” was to be given a wide meaning (see, R v Home Secretary, Ex p. Fininvest S.p.A. (DC)

[1997] 1 WLR 743

, at p.752) so as to obviate any difficulty which might otherwise arise on a literal approach to the wording. No more need be said in this regard.

THE SSHD’s and SFO’s 24th FEBRUARY DECISIONS

[30]The SSHD’s 24th February decision recorded that she had carefully considered all the representations made to her and had reconsidered her earlier (26th August, 2011) decision in the light of the material now available to her. In that earlier decision, the SSHD had decided that the reference to the SFO had been a “lawful and appropriate decision in the interests of justice”. That remained her view for the reasons set out in the (24th February) decision letter.

[31]The SSHD set out the chronology of the matter and made reference to the legal framework. To the extent that the Banks argued the contrary and the matter required a decision, the SSHD did not accept that s.13(2), CICA 2003 required her “to be satisfied that the authority which issues the request is the appropriate body to issue it, having power to do so as a matter of local law”. S.13(2) did not require consideration by the SSHD of the validity of the request under the law of the requesting state. Instead, s.13(2)(a) stood in contrast to s.13(2)(b) and contained a “clear and easily applied rule”, viz.:

“ The request may be made by a court exercising criminal jurisdiction or a prosecuting authority in the foreign state. If the requester in fact falls within either of those categories, section 13(2)(a) is satisfied. No further inquiry as to – still less a determination about - the respective powers of criminal courts as opposed to prosecutors under local law is required. ”

In the present case, the request had been made by a prosecuting authority and the SSHD was entitled to act upon it “without further inquiry”.

[32]Under the heading “Legality” (at paras. 17 – 30 of the SSHD 24th February decision letter) the SSHD went on to consider “with care” the various opinions on Italian law which had been presented to her – having first underlined (at para. 16) that she did not accept “that any analysis of the position under Italian law is required at any stage of the application of sections 13-15, CICA”. The SSHD’s conclusions on the challenge made by the Banks “to the legitimacy of the LOR under Italian law” were as follows (set out at para. 31):

“ (a) As set out above, the Secretary of State’s primary conclusion is that there is no need for her to seek to determine or resolve such issues as remain live between the Italian legal experts. (b) The scheme of the domestic legislation does not require her to do so. It would be an extraordinarily difficult, if not impossible, task for her to do so. There is moreover an opportunity afforded to the Banks to raise these issues in the suitable forum for their determination: the Italian Courts. An adjudication as to the actual validity of this LOR and the consequential effect that this may have on the admissibility of any material provided pursuant to it in the ongoing proceedings in Italy is clearly a matter for that court, and not for the Secretary of State. (c) In any event, and without prejudice to that primary conclusion, the Secretary of State considers that the response of the Public Prosecutor to the opinions served on behalf of the Banks, and the reports of Professor Giarda providing expert opinion on the issues that they raise, provide a coherent and full response to the challenges made to legitimacy. To the extent that it is necessary or relevant for the Secretary of State to form a view on those issues, she prefers the reasoning of the Public Prosecutor and Professor Giarda. ”

[33]In paras. 32 and following of the 24th February decision letter, the SSHD addressed the representations as to the inadequacy of the Prosecutor’s undertaking. The SSHD did not consider it necessary to resolve or seek to determine the position under Italian law in this regard for “the following freestanding reasons”:

“ 40. First, the use in fact made of the material once provided is a matter for the courts and authorities of the requesting state. In acting on a request for assistance, in accordance with sections 13-15, CICA, the Secretary of State is entitled to proceed on the basis that the use of the material will be regulated fairly – particularly where the State concerned is a signatory to the ECHR. Any issues as to for example the effect of an undertaking or as to the fairness (including under Article 6 ECHR) or propriety of a party to related civil proceedings having access to LOR provided material is a matter for resolution, if necessary, by the Italian courts. 41. Secondly, in any event, even if reliance is not placed on the Public Prosecutor’s undertaking and even if it is accepted that there is a risk that material provided pursuant to the LOR might be used at a later stage in related civil proceedings, the Secretary of State considers that this does not represent a sufficient reason not to accept the request. The relevant provisions of CICA address requests for assistance in connection with criminal investigation, in this instance proceedings relating to serious or complex fraud. There is a clear and compelling public interest in assisting such investigations or proceedings. That public interest outweighs any potential issues that might arise from the possibility that a party to related civil proceedings might obtain access to material provided under the LOR.”

[34]Finally (at para. 42), the SSHD concluded that the pre-conditions to the exercise of her discretion under ss.13 – 15, CICA 2003 had been met. She had also concluded that she should exercise her discretion “to conclude that assistance should be provided” for the following principal reasons:

“ (a) The Secretary of State is bound to give effect where possible to the treaty provisions that underpin such an LOR. Great weight should be accorded to the legitimate aim of honouring this country’s international obligation, especially where those treaties seek to tackle the commission of crime. (b) A key consideration in exercising the discretion is whether it would be in the interests of justice for the assistance to be provided. The Secretary of State has concluded in this case that it would be. (c) The crimes which are being tried are of considerable seriousness. Major financial institutions, and individuals acting for them, operating in London and elsewhere, are accused of a fraud causing loss to the City (and thus to the public) of Milan, running to many millions of Euros. (d) The challenge to the validity of the LOR and the issues relating to disclosure in the civil proceedings, and the Secretary of State’s conclusions on them, have been dealt with above. (e) To the extent that Article 8 rights are engaged by the request, the Secretary of State has concluded that those rights take the argument no further. If she is otherwise entitled lawfully to reach the conclusion that it would be appropriate for her to invite the SFO to provide the assistance sought, it follows that any interference with Article 8 rights is necessary. Moreover, in the context of the serious charges being tried in Milan, there is nothing disproportionate about the LOR. ”

[35]As already foreshadowed, the SFO’s 24th February decision stands or falls with the SSHD’s 24th February decision. Mutatis mutandis, the SFO’s decision followed the SSHD’s decision and no more need be said of it.

THE RIVAL CASES

[36]Given the nature of the proceedings, the argument before this Court focused on the SSHD’s 24th February decision and therefore largely followed the representations made to the SSHD. I confine this outline of the rival cases to the key points as they emerged by the conclusion of the hearing and acknowledge with thanks the considerable assistance received from Mr. Knowles QC and Mr. Keith QC, representing the Banks, and Mr. Giffin QC and Mr. Qureshi QC, who represented the SSHD and SFO and the Prosecutor respectively.

[37]Mr. Knowles QC’s submissions may be summarised as follows: i) As a matter of jurisdiction, the SSHD was not entitled to act upon the LOR. In consequence of the Prosecutor’s lack of authority under Italian law to issue the LOR, the s.13(2), CICA 2003 pre-condition was not met: the reference to a “prosecuting authority” must mean a prosecution authority acting lawfully, or, at least, a prosecuting authority that there is no good reason to believe is acting unlawfully. ii) Further or alternatively, the SSHD had erred as a matter of discretion in not withdrawing the referral to the SSHD. On Prof. Giarda’s own analysis (see esp., at pp. 449-450 and 473-4 of the Bundle, set out above), the LOR contained within it a request for assistance which the Prosecutor could not get in Italy. The LOR was not confined to a mere request for the voluntary production of documents; it included requests for interviews and court orders. The LOR was thus coercive, not voluntary; it was “stark and obvious” that the LOR was on the wrong side of the line drawn by Prof. Giarda. This submission neither turned on the manner in which the SFO would execute the LOR under English law nor required entry into a debate (between the Italian law experts) as to the meaning of “participation” – it instead accepted the Prosecutor’s expert’s own reasoning and applied it to the terms of the LOR. The Prosecutor had not made a “plain vanilla request” for documents. He had acted outside his authority under Art. 430. Against this background, the SSHD having engaged in a consideration of the detailed materials before her, she could not close her eyes; her conclusion in para. 31(c) of the 24th February decision was “obviously inadequate” and Wednesbury unreasonable. iii) The Court need not be concerned as to a possible “floodgates” argument. In 99% of cases the SSHD could properly proceed on the assumption that the LOR was issued with authority. Exceptionally, here, she could not do so.

[38]For his part and helpfully, to avoid duplication with Mr. Knowles, Mr. Keith QC (while adopting Mr. Knowles’ submissions – if but faintly as to the jurisdiction point) concentrated his submissions on a variety of matters going to the exercise of the SSHD’s discretion. At the outset, Mr. Keith accepted that treaty obligations and comity demanded that, ordinarily, a request for assistance should be acceded to – unless there was good reason not to do so. In the present case, however, having regard to the “discretion” points cumulatively, there was such good reason.

[39]First, it would be wrong in principle to act on the LOR if the request was plainly unlawful under Italian law; it was no answer to suggest that the Banks should be left to a subsequent challenge to the admissibility of the evidence before the trial Judge. Secondly, the Prosecutor’s action in issuing the LOR without reference to the trial Judge had deprived the Banks of the opportunity of being heard and of judicial scrutiny of the LOR. As the Prosecutor’s action remained unexplained, the Court should draw the inference that the Prosecutor had not raised the matter with the Judge because he thought that the Judge would refuse to issue the LOR at this stage. Thirdly, the LOR had been issued very late in the day. Considerations of delay, the disproportionate nature of the LOR and futility loomed large; UBS alone (whom Mr. Keith represented) would be required to produce some 2-3,000 documents; only one witness remained to be called. Fourthly, the SFO’s policy was to obtain undertakings that material obtained pursuant to a Letter of Request would not be used other than in criminal prosecutions arising from the investigation covered by the Letter of Request without the prior consent of the SSHD. Here, the SSHD and/or the SFO had sought such an undertaking. As was common ground, however, the efficacy of the undertaking given by the Prosecutor was limited in that it would not preclude parties to civil proceedings – who were also parties to the criminal proceedings – from seeing and taking copies of the material supplied. The risk was apparent that those parties would use the documents in their parallel civil proceedings. There was no point in a policy of seeking an undertaking and then accepting one which was “wholly ineffective”. Mr. Keith, however, disclaimed in terms, any suggestion that he could succeed on the undertaking point considered alone.

[40]For all these reasons, the SSHD’s 24th February decision was irrational and/or Wednesbury unreasonable and/or plainly wrong. The reasoning in her decision letter was “Delphic”, had no proper regard to the material before her and had taken into account immaterial considerations. The Prosecutor’s actions had been analogous to a case of bad faith and there were compelling reasons for not acting on the LOR.

[41]For the SSHD and SFO, Mr. Giffin QC’s primary submission was that the SSHD was entitled to proceed on the basis that any genuine issue as to whether there was power to make the request under the law of the requesting state was not one which it was appropriate for her to attempt to resolve. Such an approach was legitimate in that it gave appropriate weight to the overarching objective that the United Kingdom should give effect to the purpose of the Convention and fulfil its international obligations. It also avoided the SSHD being drawn into issues whose resolution was likely to be time-consuming, expensive and outside her proper area of expertise. She was not equipped to engage in such disputes as to foreign law. Moreover, the SSHD was entitled to assume that any suggestion of a prosecutor acting unlawfully under his domestic law was capable of being addressed by the courts of the requesting state – who were best placed to do so.

[42]Mr. Giffin did not, however, go so far as to submit that there were no cases in which it would be wrong for the SSHD to accede to a request in the exercise of her discretion. In his skeleton argument, he put the matter this way:

“ …is the most that can be said, as the Secretary of State would contend, that it would be wrong to exercise discretion in favour of answering a request if it was obviously unlawful?”

Later, he said this:

“ The position might conceivably be different in a case in which there was no genuine issue, in the sense that it appeared to be obvious and undisputed or incapable of being properly disputed, that the request was made unlawfully. That could be analogous to the case of a request made in bad faith…..”

In oral argument, I understood Mr. Giffin to accept, in similar terms, that it would or might be wrong for the SSHD to accede to a request where it was “obviously a hopeless case” for suggesting that the prosecutor was acting with authority.

[43]Such cases, Mr. Giffin submitted, would be rare in practice and the present case was not remotely in that territory. Mr. Giffin relied on his summary of Prof. Giarda’s analysis – already and gratefully recorded - to submit that, at the least, there was a genuine dispute here whether the Prosecutor had authority under Art. 430 of the Code. It was not for the SSHD to enter into that dispute, still less to seek to determine it. It would be a strong thing to say that the SSHD’s decision to act on the LOR had been Wednesbury unreasonable and nothing less would suffice for the Banks.

[44]By way of fallback, Mr. Giffin submitted that, if wrong as to the import or application of Prof. Giarda’s evidence, the appropriate response was not to reject the LOR altogether but to limit the method of execution to that for which the Prosecutor had been entitled to ask.

[45]Turning to the discretion points (other than those going to the Prosecutor’s authority under Art. 430 of the Code and the undertaking), Mr. Giffin’s primary submission was that it was not for the requested state to act as examiner of the conduct of the prosecutor in the requesting state. Such an approach would be wholly contrary to comity and the principles underlying the Convention. All these matters were best left to the Italian Courts; by way of example, Mr. Giffin pointed to the question of whether the Italian trial needed the documents sought under the LOR. Mr. Giffin underlined that the Prosecutor could have made the request at an earlier stage without reference to the trial Judge and the SSHD would have acceded to it; upon analysis, what had changed? The Banks faced a high burden in satisfying the Wednesbury test. If the points failed separately, they were no better cumulatively. Policy in this area was important and weight was axiomatically for the decision-maker.

[46]Finally, as to the undertaking, the SSHD usually (but not invariably) sought an undertaking and had done so here. An undertaking had been given and there was no reason to expect that the Prosecutor would not honour it – so far as it concerned him. The position of the parties to the civil proceedings was a factor for the SSHD to weigh; she had done so and regarded it as outweighed by other considerations (as demonstrated in paras. 40 – 41 of her 24th February decision). It was rational to settle for an undertaking as good as the Prosecutor was capable of giving.

[47]For the Prosecutor (as Interested Party), Mr. Qureshi submitted that the Banks’ approach threatened to distort the mutual assistance treaty. Issues of foreign law were not for the SSHD or the Court to investigate unless the only view to be reached was that the authority making the request lacked competence to do so or had made the request in an abusive manner; the former went to jurisdiction, the latter to discretion. That was not this case. Mr. Keith’s submissions as to discretion had been “seductive but inappropriate”; the matters he raised were for the trial Judge (in Italy) not this Court to determine. A clear message needed to be sent to those in the position of the Banks; the alternative was that the mutual assistance system would be inoperable. As to the undertaking point, it could not be expected that the Prosecutor would act in violation of Italian law. Notwithstanding a number of invitations from the Court to do so, Mr. Qureshi, as of course was his right, resolutely declined to explain why the Prosecutor had issued the LOR without reference to the trial Judge; he would go no further than saying that it was not unknown for a public authority to stand firm on its entitlement to take a particular course of action.

[48]Having regard to the rival cases, the principal issues for this Court to determine are as follows: i) Did the SSHD have jurisdiction to refer the LOR to the SFO? (“Issue (I): Jurisdiction”) ii) Putting Art. 430 of the Code to one side, was the SSHD’s decision to refer the LOR to the SFO a proper exercise of her discretion? (“Issue (II): Discretion generally”) iii) Did the Prosecutor have authority under Art. 430 of the Code to issue the LOR and, if not, was the SSHD’s decision to refer the LOR to the SFO a proper exercise of her discretion? (“Issue (III): Art. 430 and discretion”) I shall seek to address these Issues in turn but, before doing so, it is necessary to deal with what may be termed framework matters – namely, the position of the SSHD and the role of this Court.

FRAMEWORK MATTERS

[49](1) The position of the SSHD: As already foreshadowed, provided that the s.13(1) and s.13(2) conditions are met, the SSHD has a discretion under s.13(1), CICA 2003 in deciding whether to accede to the request for assistance. The statute does not in terms restrict this discretion and caution must plainly be exercised before saying anything which might circumscribe it.

[50]The ambit of the discretion is, however, informed by the policy of mutual assistance underlying CICA 2003 – together with the reality, in the present context, of what the SSHD is equipped and resourced to do.

[51]Although a number of authorities were referred to in argument, such statements of principle as there are appear sufficiently from R v Secretary of State for the Home Department, ex parte Abacha

[2001] EWHC Admin 787

. That case concerned allegations by the government of Nigeria (“FGN”) that the former ruler, General Abacha, had stolen more than US$4 billion of the state’s money from which his family and friends (some of whom were the claimants in the proceedings) had benefited. The judgment of the Court was given by Tuckey LJ; nothing turns on the section numbers referred to in the judgment which relate to the predecessor statute to CICA 2003. In the course of rejecting the Claimants’ complaint, Tuckey LJ said this:

“ 17. In the light of the way in which Miss Montgomery put her case, we only have to decide whether there was procedural unfairness in this case. For this purpose we are prepared to assume without deciding that implementation of the FGN request will or may involve some interference with the Claimants’ Article 8 rights bearing in mind that such interference may be justified if it is in accordance with law and necessary for the prevention of crime or the protection of rights and freedoms of others. We bear in mind also two general points. First, as Lord Bingham said, the section 4 process is not a trial. It leads only to the transmission of evidence to the requesting State where, if it is to be used, one can assume that the criminal defendant will have the opportunity of answering it. Secondly, such requests are made by friendly, foreign countries with whom we have treaty or similar obligations of mutual co-operation. The expectation must therefore be that we will comply with the request unless there are compelling reasons for not doing so and that we will do so as quickly as possible. Any requirement of procedural fairness must be fashioned with those considerations firmly in mind. 18. ….. The exercise which the Secretary of State has to perform should be simple. He is not required to conduct a criminal trial on paper or to decide disputed questions of foreign law before making his decision….. ”

Later in his judgment, Tuckey LJ added the following when rejecting a number of general complaints as to the Secretary of State’s exercise of his discretion:

“ 27. ….. Each of the allegations made does or is likely to raise issues of foreign law or procedure which the Secretary of State cannot possibly be expected to resolve. If there is anything in these allegations they should be raised with and considered by the courts or authorities in the countries concerned. They cannot be used as the basis for further delaying the implementation of the Secretary of State’s decision ….to provide the co-operation which the requesting State is entitled to receive and the United Kingdom is obliged to provide. ”

[52]It follows that, in the overwhelming majority of cases, both as a matter of policy in fighting crime and the United Kingdom’s international obligations, it can be expected that requests for mutual assistance under CICA 2003 will be acted upon – and as quickly as possible. The SSHD is not required to conduct a criminal trial on paper or decide disputed points of foreign law. The need to deal with such requests expeditiously will itself, at least in the vast generality of cases, tell against the SSHD becoming involved in, still less needing to determine, disputed questions of foreign law. These requirements of policy dovetail well with practical resource considerations which themselves strongly suggest that it would be unwise to impose some wider duty on the SSHD as to questions of foreign law for which she is simply ill-equipped. The good sense of this approach is underlined by the graphic words of La Forest J in United States of America v McVey

[1992] 3 SCR 475

, at p.528 (an extradition case) remarking on the need otherwise to contemplate “the joys of translation and the entirely different structure of foreign systems of law” (cited in Norris v Government of the United States of America

[2008] UKHL 16

;

[2008] 1 AC 920

, at [89]). No encouragement should be given to parties in such proceedings to embroil the SSHD in disputes as to foreign law – a course which would risk the system of mutual assistance failing to fulfil its important purpose. Accordingly, as Tuckey LJ observed (Abacha, at [17]), the expectation must be that requests for assistance will be acted upon “unless there are compelling reasons for not doing so”.

[53]What then might those “compelling reasons” encompass? Here, as elsewhere, discretionary powers are to be exercised having regard to the facts of the individual case. For this reason and, more generally, because it would be unwise and inappropriate to do so, I do not think that there can be any exhaustive categories or list of cases where the SSHD would be entitled or obliged to exercise her discretion against acting on a request for assistance. As already observed, statutory discretions should not readily be fettered. That said, first, the existence of cases where the SSHD may or should exercise her discretion to refuse to accede to a request underlines that her role is not that of a “rubber stamp”. Mutual assistance should not be equated to a blank cheque. Secondly, cases of refusal to accede to a request must be rare or exceptional, for reasons already canvassed and if international mutual assistance is to function. Thirdly, I do not think that the SSHD’s discretion to refuse to act on a request is confined to those instances enumerated in the Convention; as will be recollected, the Convention does not have direct effect in English domestic law. Fourthly and confining myself to the context of the present case, I see much force in the approach advocated by Mr. Giffin: namely, that it would (at least generally) be wrong for the SSHD to exercise her discretion in favour of answering a request when it was obviously unlawful – thus where it was undisputed or incapable of being properly disputed that the request was made unlawfully. For my part, I do not think it is necessary to demonstrate that the requesting authority was acting in bad faith and, indeed, a debate of such a nature might well be invidious; if, however, it was obvious that a requesting authority was acting in bad faith there would plainly be a most powerful case for the SSHD refusing to exercise her discretion.

[54]Before leaving this topic, I would respectfully echo Tuckey LJ’s observations in Abacha (supra), at [17] and [27], that, ordinarily, disputed points of foreign law or procedure are best left for resolution in the courts of the requesting State. Again ordinarily and a fortiori where the requesting country is party to the ECHR, any Art. 6 or Art. 8 concerns will be accommodated in this fashion.

[55](2) The role of this Court: The question of the role of this Court is of the first importance but can be taken very shortly indeed. In the present case, the (key) decision maker is the SSHD. It is not for this Court to assume or arrogate to itself the role of decision maker. It is only for this Court to intervene if, on well recognised grounds, relief by way of judicial review should be granted. For present purposes, no harm will be done if those grounds are considered together under the heading of Wednesbury unreasonableness. The focus is therefore on the SSHD’s 24th February decision – and relief will not be granted unless the Court is persuaded that her decision was in some material respect Wednesbury unreasonable. This Court is emphatically not sitting as a trial court seeking to resolve disputes as to Italian law or procedure. I turn to the principal Issues.

ISSUE (I): JURISDICTION

(I) : JURISDICTION

[56]With respect to Mr. Knowles, I was wholly unable to accept his submission that if the Prosecutor lacked authority under Italian law to issue the LOR, then the s.13(2), CICA 2003 pre-condition was not met. Indeed, we did not call on Mr. Giffin to respond orally on this part of the case. In my judgment, for the purposes of s.13(2)(a), an entity either is or is not a “prosecuting authority”. If it is, it does not cease to be a “prosecuting authority” because of a challenge (successful or otherwise) to its competence in issuing any particular request for assistance. The jurisdiction point accordingly fails.

ISSUE (II): DISCRETION GENERALLY

[57]With respect and deferring for the moment contentions going to the SSHD’s discretion relating to the lawfulness of the Prosecutor’s actions under Art. 430 of the Code (dealt with under Issue (III) below), the Banks’ arguments as to discretion generally can likewise be speedily disposed of. These points do not, either individually or cumulatively, begin to suggest a basis for quashing the SSHD’s 24th February decision. That said, they are not without relevance. Cumulatively, at least, they highlight a number of features suggesting that this was not necessarily a run of the mill request, so that the LOR merited a closer look from the SSHD than might otherwise have been the case.

[58]Dealing first with the point as to the inefficacy of the Prosecutor’s undertaking (insofar as it related to parties to civil proceedings), I essentially agree with Mr. Giffin, for the reasons he advanced and which are set out above. Moreover, as Gloster J observed during the course of argument, the point was of more limited scope than might first appear, in that if once the material obtained under the LOR was introduced into evidence, it would be in the public domain. Still further, Mr. Keith’s submission as to the undertaking was in danger of proving too much; if right, it would follow that no Italian request could be acted upon because of the position of civil parties in Italian procedure. Doubtless for that reason, amongst others, Mr. Keith was anxious to emphasise that he could not succeed on the undertaking point taken alone. At all events, I am amply satisfied that the SSHD’s reasoning contained in paras. 40 – 41 of her 24th February decision letter cannot be impugned.

[59]Turning next to Mr. Keith’s submissions as to delay, proportionality and futility, I readily accept Mr. Giffin’s answer that it was not for the SSHD to police, approve or disapprove of the conduct of the Italian Prosecutor. Further, so far as the volume of documents goes, there is rather less to the argument than first meets the eye, even assuming that the estimated 2 – 3,000 documents required of UBS should be multiplied by four (to produce the total from all the Banks). Regrettable or not, document intensive litigation (civil and criminal) is commonplace. In any event, questions such as these are almost paradigm examples of matters best left to the Italian Court. Nonetheless, it is a striking feature of the LOR that it comes so late in the trial, involving (if acceded to) the production of a significant volume of documents to be absorbed, if they are to be of use at all, with so little of the trial remaining.

[60]Mr. Keith (and, for that matter, Mr. Knowles) placed much emphasis on the fact that the Prosecutor had proceeded with the LOR without any reference to the trial Judge. The Court was invited to draw the inference that this was because the Prosecutor apprehended that the Judge would refuse to issue the LOR had his permission been sought. I am not inclined to draw such an inference; to do so would require impermissible assumptions as to the relationship between the residual autonomous powers of the Prosecutor and the position of the trial Judge. However, given Mr. Qureshi’s silence as to the reason for the Prosecutor having proceeded in this fashion (other than his entitlement to do so), it is fair to say that there is nothing to put in the balance positively in support of the course of action followed by the Prosecutor. As with the lateness of the LOR this too is properlya matter of remark; the Prosecutor has followed a course, subjecting himself to the restrictions of Art. 430, whereas he could have gone before the trial Judge and obtained – if the Judge agreed – a LOR free of those restrictions.

[61]For completeness, the Banks submitted that the SSHD’s and SFO’s 24th February decisions were to be impugned because they had approached the matter with closed minds. Suffice to say that there was no material realistically lending support to this submission.

ISSUE (III): ART. 430 and DISCRETION

[62]I come finally to Issue (III), which itself sub-divides as follows:(1) Whether the Prosecutor’s action in issuing the LOR was unlawful, having regard to the limits set by Art. 430 of the Code?

(2) If yes, whether it was obviously unlawful?

(3) If yes, whether the SSHD’s 24th February decision can stand?

[63](1) Unlawfulness of the LOR? Had matters rested with a clash of expert opinions as to Italian law, I would have been firmly minded to conclude that the SSHD was not bound to enter in on the dispute, let alone to decide whose view was to be preferred. But, in my judgment, matters do not rest there.

[64]For these purposes, I confine my attention to Giarda 1 and Giarda 2 – the expert opinions adduced on behalf of the Prosecutor. To recap, it is common ground that the Prosecutor’s authority to issue the LOR at this stage of the Italian criminal proceedings can only be justified if his actions in doing so come within Art. 430. As the passages from Giarda 1 and Giarda 2 already set out make clear, there is a stark distinction under Italian law between a request to exhibit documents, based substantially on the hope that the defendant will cooperate and a coercive action – including a request backed “subordinately or as an alternative” by a coercive action. Accordingly and on Prof. Giarda’s own analysis, the question is whether the LOR was a request for voluntary production of the documents in question or a coercive action, given the “menu of measures” (Mr. Knowles’ wording) within it.

[65]To this question, as it seems to me, there can be only one answer. I put to one side completely the coercive nature of the SFO’s s.2 Notices; that goes to the manner of execution of the LOR as a matter of English law and is, on Prof. Giarda’s analysis, irrelevant; for present purposes, I accept that analysis. Instead, looking exclusively at the terms in which the LOR was issued by the Prosecutor, I am, with respect, unable to see how it can sensibly be characterised as no more than a request for voluntary production of the documents sought. It will be recollected that the LOR includes a request for interviews and for “any requisite court order” to “enable the provision of the above requested assistance”. Both of these requests are on the “wrong” side of Prof. Giarda’s line – and in the case of the request for “any requisite court order” plainly so. The commonsense of including such requests, even as a matter of “bootstraps” is understandable; the difficulty, however, is that the Prosecutor, by dint of the course he has chosen, is confined to a request for voluntary production. I do not see how the LOR can be read as such. Nor do I think that these express terms of the LOR can be dismissed as irrelevant (cf. Mr. Giffin’s propositions v) and vi)) on the ground that they seek action in England rather than Italy. Instead and unlike the s.2 Notices, in my view, they define the true nature of the LOR or, at least, cannot be divorced from it. It follows that, having regard to no more than Prof. Giarda’s own analysis, even informed by Mr. Giffin’s summary as far as that goes, the LOR was outside the scope of the Prosecutor’s authority under Art. 430 of the Code and was hence unlawful under Italian law. Certainly, if this view is correct, then the relief sought by the Prosecutor because the documents are located in this country could not have been obtained had the documents been in Italy.

[66](2) Obviously unlawful? The next question is whether the LOR was obviously unlawful. I think it was. First, adopting the test taken from Mr. Giffin’s skeleton argument, while legal ingenuity is such that a great many matters can be and are disputed, I am of the view that the unlawfulness of the LOR is “incapable of being properly disputed”. Secondly, the SSHD having considered “with care” the opinions on Italian law (as the matter was expressed in her 24th February decision), it is not imposing an unrealistic burden on her to test the LOR in the light of the analysis of the expert instructed by the Prosecutor. This is not to require her to form a view as to rival opinions on Italian law; it is asking no more than that the LOR should be on the right side of the line of the Prosecution expert’s own analysis. Had the LOR been scrutinised in this light, the answer, as I have already concluded, is obvious. Thirdly, though I would not rest my decision on it, there was all the more need for such scrutiny in the case of this LOR. As discussed, given the surrounding circumstances dealt with under Issue (II) above, this LOR called for a closer look than might otherwise have been the case.

[67](3) Whether the SSHD’s 24th February decision can stand? It follows, with respect, that the SSHD’s conclusion at para. 31(c) of the 24th February decision letter is untenable. If, as I have concluded, on Prof. Giarda’s analysis, the LOR was on the wrong side of the dividing line between a request for voluntary production and coercive measures and obviously so, then the reasoning of Prof. Giarda is incapable of providing “a coherent and full response” to the challenges made to legitimacy. To the contrary, Prof. Giarda’s analysis demonstrates that the Prosecutor acted without authority in making the request in the terms of the LOR. The foundation for para. 31(c) has thus gone. The matter could no doubt be put in a number of ways; for my part, I am content, with respect, to categorise the para. 31(c) conclusion as Wednesbury unreasonable.

[68]The impact on para. 42 of the SSHD’s 24th February decision must next be considered. As it seems to me, sub-paras. (a) and (c) are unaffected. Indeed, I would strongly endorse the policy considerations underlying sub-para. (a). Sub-para. (c) is plainly accurate. Sub-para. (b) involves a consideration of the interests of justice “in this case”; that consideration must rationally be affected by the obvious unlawfulness of the making of the request for assistance. Sub-para. (d) is central but is necessarily (and save for one argument to which I shall return) undermined by the conclusion as to the unlawfulness of the LOR. Sub-para. (e) is, in terms, contingent on the SSHD’s earlier conclusions. Subject to the argument to which I next turn, I am driven to the conclusion that the SSHD’s exercise of discretion – on the basis of the reasons given in para. 42 – cannot stand; as with para. 31(c), I would characterise it as Wednesbury unreasonable.

[69]The argument which remains rests on sub-paras. 31(a) and (b) of the SSHD’s 24th February decision letter. As it seems to me, there are a number of answers to the matters raised in these sub-paragraphs: i) The course advocated in these sub-paragraphs was not in fact followed by the SSHD. In fact, the SSHD did consider “with care” the opinions on Italian law. Having done so, it is difficult to see that the SSHD could then have shut her eyes to obvious unlawfulness. It is unnecessary to decide how the matter might have looked had the SSHD simply declined to engage with the opinions on Italian law or had the exchange of opinions come to an end before the production of Giarda 1 and Giarda 2; that is not this case. I would, though, add this. At para. 16 of her 24th February decision letter, the SSHD indicated that she did not accept that “any analysis of the position under Italian law” was required at any stage of the application under ss.13-15, CICA 2003. I cannot think that so extreme a view is tenable; taken literally, the SSHD’s role would be reduced to that of a rubber stamp. At all events, I did not understand Mr. Giffin to press his argument that far – given his wholly realistic approach to rare cases of obvious unlawfulness and bad faith. ii) For the reasons given, the SSHD was not called upon to resolve or determine issues which “remain live” between the Italian legal experts. To the contrary, the conclusion to which I have come is based on an acceptance of the analysis of the Prosecutor’s chosen expert, applied to the terms of the LOR itself. iii) Had the Prosecutor’s request surmounted the hurdle imposed by the restrictions on his powers under Art. 430 (which I have concluded it does not), I would have had no quibble with the proposition that all remaining matters would have been best resolved by the Italian Court rather than by the SSHD or this Court. Hence the decision to which I have come on Issue (II) above.

[70]Accordingly, in my view, the SSHD’s 24th February decision cannot stand and the SFO’s decision of the same date must fall with it. In this case, exceptionally, there are compelling reasons for declining to act on the LOR, relating to the Prosecutor’s obvious lack of authority to make the request for assistance in the terms contained therein.

[71]As to remedy, the natural consequence of this conclusion would be the quashing of the SSHD’s and the SFO’s 24th February decisions. However, Mr. Giffin, through his fallback position, effectively invited us to pause before coming to that decision. It will be recollected that Mr. Giffin canvassed the possibility of applying a “blue pencil” test: namely, salvaging the LOR in part, by restricting it to a “plain vanilla request” for which (on the relevant hypothesis) the Prosecutor had been entitled to ask. Although, as it seems to me, this fallback position is not without a certain practical attraction, it suffers from an insuperable difficulty. In short, it would require us to adjudicate on an amended LOR which was never before the SSHD, whereas our focus has been and must be on the SSHD’s 24th February decision, based on the LOR which was before her. Accordingly, my conclusion is that the SSHD’s and SFO’s 24th February decisions must be quashed.

[72]I part from this case with the following observations: i) Given the underlying policy considerations, it is with considerable reluctance that I have come to the conclusion that assistance should not be given in this case in response to the LOR. Moreover, I would not want anything said in this judgment to lend encouragement to efforts to inundate the SSHD with opinions on foreign law, with a view to or with the effect of delaying the process. It is to be emphasised that, in the overwhelming majority of cases, there would be no point in doing so; the SSHD’s task does not extend to entering into or resolving a genuine and live dispute as to foreign law. ii) The history of this case has on any view been unfortunate. It is concerning that nearly a year elapsed between the transmission of the LOR and the decisions of the SSHD and SFO under challenge. If need be, consideration should be given to imposing very tight timetables on representations, if these show signs of straying into questions of foreign law. Further, the justification for repeated exchanges of representations and opinions, calls for close and critical scrutiny. If the mutual assistance system is to function, it must function expeditiously. iii) I confess to a considerable degree of sympathy for the position of the SSHD and the SFO. Though the Court has no means of knowing what the SSHD’s decision would have been, had the very real limits on the Prosecutor’s authority under Art. 430 of the Code been brought to the SSHD’s attention, as, with respect, I think was incumbent on the Prosecutor (in accordance with the SFO Guide), much difficulty could doubtless have been avoided. MRS

JUSTICE GLOSTER:

[73]I agree.