Jersey firm obliged to help fraud investigation after landmark case

Tuesday 18 June 2019

A Jersey trust firm will have to hand over documents relating to its dealings with a Norwegian oil baron as part of a probe into suspected fraud, after the Attorney General won a landmark battle.

The decision – handed down this week by the Privy Council, Jersey’s highest court of appeal – comes following a years-long fight to avoid doing so by Volaw Trust and Corporate Services, which administered a group of companies and trusts linked with oil and gas industry businessman Berge Gerdt Larsen.

Mr Larsen was convicted of defrauding his own company, Larsen Oil and Gas, and evading tax to protect his riches of around $108million, but later acquitted on appeal in 2016.

During this time, Jersey’s Attorney General, Robert Macrae, wished to initiate his own investigation into suspected instances of fraud and complex fraud, serving a compulsory notice on Volaw in 2015 to produce documents to assist him with this. No individuals had been charged.

Pictured: The courtroom used by the Judicial Committee of the Privy Council.

If they did not comply, the notice read, they could face a financial penalty.

But Volaw disputed the lawfulness of the move, arguing that it violated the privilege against self-incrimination – a fundamental human right.

The principle prevents evidence or confessions of wrongdoing by an individual being obtained under pressure or coercion – whether physical, psychological or otherwise.

Having unsuccessfully fought through the Jersey courts, the case last year reached the island’s highest court of appeal, coming before seven judges in the UK’s Privy Council.

During the course of the two-day hearing, which took place in November and saw the Attorney General represented by Advocate Howard Sharp QC of Ardent Chambers, the court weighed up Volaw’s appeal against various precedent-setting cases involving the oppressive and coercive conduct of foreign authorities.

Pictured: Advocate Howard Sharp QC appeared as Counsel for the Attorney General at the two-day hearing.

In the end, their judgment did not fall in Volaw’s favour.

They concluded that the Attorney General’s notice, which contained a standard warning of a fine for non-compliance, did not constitute coercion of the kind normally associated with breaches of Article 6 of the European Court on Human Rights.

Delivered yesterday by Lord Reed, the judgment noted that no particular individuals working at Volaw had been singled out by the notice.

If they had committed a crime, the Privy Council reasoned, they would only risk self-incrimination if they were involved in finding and handing over the documents to the Attorney General.

“In the Board’s view, however, none of them was compelled by the notices to produce the documents themselves, since (a) the notices were not addressed to them, and (b) the documents were not their documents, and were not in their possession. Nor were they compelled to participate in Volaw’s production of the documents: that task could be delegated to other members of staff. Their only relevant obligation was not to consent to, or connive at, the commission of an offence by Volaw,” the judgment explained.

The Council also concluded that it was important for the Attorney General to be able to properly conduct an investigation in light of the “increased possibilities of tax evasion and fraud consequent on the development of the international movement of persons, capital, goods and services”, which have led to the creation of international law developments and information-sharing agreements.

“The present case, involving an individual taxpayer in Norway and numerous related companies and trusts based in a multitude of jurisdictions around the world, with their administration services provided by a financial services firm in Jersey, is an illustration of the circumstances which have led to the need for bilateral tax information exchange agreements such as the Jersey/Norway TIEA.

“It is only through the recovery of documentation from the financial services firm at the hub of the global network of companies and trusts that an effective investigation can be carried out,” the judgment noted.

It continued that there was also a “substantial public interest” in maintaining the “integrity” of local financial services firms, adding: “It is not unreasonable that [Volaw] should be expected to cooperate with responsible investigations into possible tax offences or fraud involving their clients by producing information in their possession relating to their clients’ affairs.”

They subsequently advised her Majesty that the appeal be dismissed.

Speaking following the judgment, the Attorney General commented: "I welcome the successful outcome in these long-running proceedings which upholds the legality of our statutory framework in Jersey. This framework gives effect to our international obligations as a global finance centre to assist other countries in combatting fraud and financial crime, such as money laundering and tax evasion. 

The Privy Council has confirmed the powers of the Attorney General and the Comptroller of Taxes to compulsorily require the production of pre-existing documents where it is suspected that serious or complex fraud may have been committed or where information relevant to the administration or enforcement of the tax laws of a partner jurisdiction is held in Jersey.”