The long running dispute in the Tantular litigation has finally reached the Privy Council and some crucial questions about the interaction between Jersey trusts and the mechanics of Jersey’s confiscation regime have now finally been settled.
Essentially, the Tantular litigation has been about the international reach of saisies judiciaries (a species of restraint order imposed by Jersey’s Royal Court over property pending confiscation proceedings). Specifically, the case concerns whether the assignment of a mortgage over a trust-owned property in Singapore, in this case by Credit Suisse, amounts to dealing with confiscated property in a way prohibited by the saisie. This article aims to provide an outline description of the key issues decided in the appeal and the underlying principles that may inform later cases.
Mr Robert Tantular was convicted of various offences, including fraud and money laundering, in Indonesia in 2014 and 2015. The Indonesian authorities sought the assistance of the Attorney General of Jersey to held Indonesia enforce confiscation orders against Mr Tantular. This included an apartment in Singapore that was occupied by members of Mr Tantular’s family. That property was owned by a Jersey company, whose shares were owned and controlled by the trustee of a discretionary Jersey trust that Mr Tantular had settled in 2004. The class of discretionary beneficiaries included Mr Tantular and members of his family. At the request of the Indonesian authorities, Jersey’s Attorney General sought and obtained two saisies judiciaires to restrain “the realisable property situate in Jersey of Robert Tantular”.
Credit Suisse obtained a variation of the saisies from the Royal Court, to permit it to exercise its power of sale under a mortgage over the Singapore apartment. The Tantular family beneficiaries applied to the Royal Court for a declaration that the saisies did not prevent Credit Suisse assigning its interest in the mortgage to them, or, alternatively, for such orders and directions as would permit the assignment to take place. The Royal Court refused the application, but the Court of Appeal allowed the family members’ appeal and granted the declaration.
Mr Tantular sought the discharge or variation of the saisies on the basis that the Court could not prohibit persons from dealing with realisable property held by them outside Jersey. The Royal Court dismissed the application and the Court of Appeal agreed. Mr Tantular now appealed to the JCPC.
The JCPC addresses the interpretation and application of article 16(4)(b) of the Proceeds of Crime (Jersey) Law 1999, within the provisions of which the whole of the litigation was taking place. Article 16(4)(b) deals with prohibitions on dealing with property in relation to criminal asset recovery.
The JCPC, unsurprisingly and resolutely, held that the wording of the Law does not impose a geographical limitation. It supported this interpretation by examining the immediate context of the law, the definitions of property and realisable property, and the internal logic of the provisions. The Royal Court has power to make a saisie in respect of realisable property that is located outside of Jersey provided the person with power to exercise de facto rights of ownership or control over it (in this case the trustee) is within its territorial jurisdiction.
The purpose of the statute was held to be the facilitating of international cooperation in asset recovery from criminals, and the ability to impose prohibitions on dealing with property outside Jersey enhances this purpose. The JCPC pointed out that restricting the Law to dealings in property within Jersey would limit the international assistance that Jersey can provide and risk damaging its financial reputation.
The property (an apartment in Singapore) that was the subject of the mortgage had been funded 80% from a third-party loan from Credit Suisse with the balance of 20% funded from Robert Tantular, via the trust. The net equity in the apartment was realisable property within the meaning of the Jersey legislation.
At first instance, the Royal Court held that any assignment of the mortgage by Credit Suisse would constitute dealing with the property, which was prohibited by the saisies. However, the Court of Appeal held that the bank’s interest in the mortgage did not fall with the scope of the saisies.
The Jersey legislation empowers the Royal Court to make a saisie against any specified person from dealing with realisable property. As Credit Suisse was not directly the subject of the original saisie, the only issue for the Privy Council was whether Credit Suisse was entitled to a declaration that it could assign its rights to a third party.
The JCPC held that the only realisable property within the mortgage relationship between Credit Suisse and the trust-owned company that held the apartment was the net equity after the discharge of the mortgage. Credit Suisse’s rights under the mortgage were not realisable property and therefore not caught by the saisie.
Credit Suisse had, by the time of the Privy Council appeal, already foreclosed on its mortgage and remitted the surplus equity to the Viscount in Jersey, following the Court of Appeal’s affirmative decision that it was free to do so. However the JCPC raised the issue – which will be relevant to future cases – as to whether a party in the position of Credit Suisse, assigning its rights to a third party, might make itself liable for contempt of court by aiding or abetting a breach of, or frustrating the purpose and effect of, the saisie if the third party could then put realisable property beyond the reach of confiscation. This was a novel issue raised for the first time in the JCPC. The JCPC asserted that had this issue been raised earlier, the Court of Appeal’s declaration would not have been granted, as the assignment would have been unlawful. In its deliberations, the JCPC emphasized the obligation of third parties, such as Credit Suisse, to respect court orders and refrain from knowingly aiding or abetting a breach or intentionally frustrating the order’s purpose. The JCPC highlighted the fact that Credit Suisse had the discretionary power to assess whether the proposed assignment would interfere with the administration of justice. In cases of uncertainty, it was deemed prudent for the bank to seek a variation of the saisies from the court. Credit Suisse, in particular, faced uncertainty regarding potential accusations of contempt of court if they assigned the mortgage. Thus, the family applied for a variation of the saisies.
Ultimately the JCPC determined that the Court of Appeal erred in declaring that the saisies did not prevent Credit Suisse from assigning the mortgage to any third party. Instead, the JCPC underscored the need for the application to vary the saisie to be approached on the understanding that there existed uncertainty regarding potential breaches of the seizures or frustration of the court’s purpose.
The Jersey Court of Appeal had ordered the Attorney General to pay the trustee’s and family’s costs of that appeal. The Court of Appeal also made an order that the government of Indonesia, on whose behalf the saisie was obtained, was jointly and severally liable with the Attorney General for those costs.
The JCPC was asked to determine whether the Court of Appeal was empowered to make this order or whether it infringed the principles of sovereign immunity applicable to civil proceedings.
The circumstances in which the Courts of Jersey can make an order against a foreign state in civil proceedings are where the foreign state has submitted to the jurisdiction of the Jersey Courts. Had Indonesia submitted to the courts of Jersey because it had ultimately instituted the proceedings which resulted in the saisies or because it had taken steps in the Jersey proceedings?
The JCPC concluded both points in the negative: there had been no submission by seeking the saisie, and the filing of evidence by the Indonesian government in support of the Attorney General’s application for a saisie on its behalf did not amount to submission. The JCPC held that the Court of Appeal erred in proceeding on the basis that by seeking a saisie the Attorney General is merely representing the foreign government in the conduct of the proceedings. The fact that the Attorney General can only bring proceedings if requested by an overseas government or that his discretion not to accede to such a request is limited does not mean that the overseas government is effectively the party to the proceedings. The proceedings which led to the grant of the saisies judiciaires and the later registration of the Indonesian confiscation orders were instituted and pursued by the Attorney General and only by him.
The factual, financial, and legal complexities of cases of this sort are self-evident; they require the most cautious and meticulous approach by service providers, third party lenders to complex structures, and those who advising them.