High Court in London Dismisses Challenge to Unexplained Wealth Orders

On October 3, the High Court of England and Wales (High Court) issued a pair of related decisions pertaining to Unexplained Wealth Orders (UWOs) entered against Zamira Hajiyeva, the wife of Jahangir Hajiyev, the former chairman of the state-owned International Bank of Azerbaijan (IBA).  Because these UWOs are the first to be issued and publicly disclosed, this analysis will address, respectively, the timeline and background of the case and the two decisions, which discharged the High Court’s anonymity order covering Hajiyeva and Hajiyeva’s substantive challenge to the UWOs.

• Background:
  • 2015: Hajiyev, who had served as IBA Chairman from 2001 until 2015, was arrested by the Azeri Ministry of the Interior and accused of embezzling €125 million from the IBA.
  • 2016: Hajiyev was sentenced to 15 years’ imprisonment and required to pay the IBA $39 million, after being charged with large-scale embezzlement, abuse of trust, and other violations of the Azeri Criminal Code. At the time, Hajiyeva reportedly was placed under arrest in absentia and was on the Azeri government’s wanted list, but apparently did not return to Azerbaijan to face charges.
  • 2017: The United Kingdom Criminal Finances Act 2017 became law. Under Section 1 of that Act, the High Court is authorized to issue a UWO, which, according to the United Kingdom National Crime Agency (NCA), “requires a person who is reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the nature and extent of their interest in particular property, and to explain how the property was obtained, where there are reasonable grounds to suspect that the respondent’s known lawfully obtained income would be insufficient to allow the respondent to obtain the property.”  The Section 1 authority came into force on January 31, 2018.
  • 2018: In February 2018, the NCA applied for and obtained its first-ever UWOs, to investigate assets totaling £22 million – Hajiyev’s and Hajiyeva’s Knightsbridge home in London and a golf course in the South East of England — that were believed to ultimately be owned by Hajiyev as a politically exposed person (PEP).  At that time, the High Court also issued interim freezing orders (IFOs), which prohibited the sale, transfer, or dissipation of the assets while subject to the IFO.  Subsequently, it issued an anonymity order to protect the identity of Hajiyeva (“Mrs A” in the first High Court decision), Hajiyev (“Mr A”), and the two lawyers who acted on Hajiyev’s behalf at his trial and on his appeal.
• Anonymity Order: With regard to the need to keep the anonymity order in place, Hajiyeva argued that disclosure would interfere with her and her husband’s right to respect for their private and family life under Article 8 of the European Convention on Human Rights (ECHR).  Justice Supperstone, however, expressed concern for the principle of open justice, particularly the importance of doing justice in open court and having the names of the people whose cases are being decided, and others involved in the hearing, be public knowledge.  In his view, “An order for anonymity is a derogation from the principle of open justice and an interference with the Art[icle] 10 ECHR rights of the public at large.”  He disagreed that identification of “Mrs A” or her husband would interfere with her or their rights under Article 8, noting that “any interference with their Art[icle] 8 rights is unlikely to be severe.”  He also concluded that he was “not satisfied that there should be any derogation from open justice. The public interest in publishing a full report of the proceedings, in my view, outweighs any concerns that the respondent may have about herself or her husband. I do not consider that any anonymity order is necessary in the interests of the respondent, or her husband, or his lawyers.”  He accordingly discharged the anonymity order.
• Substantive Challenge: Hajiyeva contested the UWOs on eight grounds, including that Hajiyev was not a PEP, that the Criminal Finances Act’s income requirement had not been met, and that the UWO offends the privilege against self-incrimination and spousal privilege.
  • On the first point, Mr. Justice Supperstone concluded that Hajiyev is a PEP, and that accordingly Hajiyeva, “as his wife, is herself a PEP.”
  • On the second point, he concluded that the income requirement was satisfied.
  • On the third point, he concluded that the UWO did not offend the self-incrimination and spousal privileges on several grounds. First, although Hajiyeva expressed concern about her possible prosecution in Azerbaijan, “Hajiyeva and her husband have no right to invoke either privilege with regards to the alleged risk of prosecution for criminal offences outside the [United Kingdom].”  Second, because he did not believe that the evidence disclosed “a real and appreciable risk” that Hajiyeva or Hajiyev will be prosecuted for offences in the United Kingdom, “the threshold test for the privileges to apply has not been satisfied.” Third, he concluded that “Parliament in creating the UWO procedure has necessarily intended that the privileges be abrogated.”  Fourth, he determined that subsection 13(1) of the Fraud Act 2006 excludes the privileges “in proceedings relating to property,” and that “these UWO proceedings are proceedings for ‘an account of any property or dealings with property’” within the meaning of subsection 13(3)(c) of that Act.
  • He also disagreed that “disclosure of information under the UWO about the property will give rise to a real or appreciable risk of prosecution of Mrs Hajiyeva or her husband for offences in the UK or in the non-EEA Country (even assuming for present purposes that she would return to the non-EEA Country). There is no evidence that they would be at risk of further criminal proceedings in any event.”
• In the course of this decision, Mr. Justice Supperstone briefly noted that between September 2006 and June 2016, Hajiyeva spent a total of £16,309,077.87 at Harrods in London “on numerous different credit cards,” and that “a significant number of these cards, namely 35 American Express, Mastercard and Visa cards were issued by the [IBA].”

Hajiyeva’s attorneys indicated that she will appeal Mr. Justice Supperstone’s rulings. In the meantime, Hajiyev reportedly is facing new criminal charges of tax evasion and money laundering in Azerbaijan.

Note: When using a new statutory authority for the first time, law enforcement authorities are always well-advised to select a test case where the facts are highly favorable for the government.  By that standard, the NCA did well to choose this as the test case for UWOs.  As reflected in Mr. Justice Supperstone’s decisions, Aliyev’s embezzlement conviction and Aliyeva’s profligacy in spending – which has now attracted media attention around the world, including Australia, Brazil, Canada, France, Indonesia, Italy, and the United States — weighed significantly in the balance.  While the outcome of appeal cannot be predicted with high confidence, Mr. Justice Supperstone’s rulings on each of Hajiyeva’s challenges appear soundly grounded.

That fact also bolsters the NCA’s credibility in making use of UWOs in future investigations.  Donald Toon, the NCA’s Director for Economic Crime, has already stated about the rulings that “[w]e are determined to use the powers available to us to their fullest extent where we have concerns that we cannot determine legitimate sources of wealth.”