by
Dr. Peter D. Maynard
A lesson from the World Trade Center attack is that you do not define a religious, ethnic or racial group based on the bad people in that group. The vicious and unconscionable acts of the terrorists do not mean that all Muslims and followers of Islam and all Arabs are terrorists. Similarly, we should define our broader community in terms of our noble accomplishments, such as human rights, instead of the negative and reprehensible possibilities that may take place.
More than two hundred years ago, Sir William Blackstone in his classic Commentary on the Laws of England, said it is better that 10 guilty people escape than one innocent suffer. For two centuries, jurists have considered Blackstone’s pronouncement a profound statement of principle. On an individual level, that maxim has been turned on its head in recent years. Now, the innocent suffer, and the guilty still go free. The fight against crime has opened the door to introduce the excesses of a police state. The pendulum has swung to the extreme.
In the attack on the international financial centres, human rights have suffered. At the same time, in the new millennium, the economic development of many countries depends on services, such as tourism and finance, and not traditional sectors, such as agricultural and raw material exports. Accordingly, the economic viability of many countries is now under threat, even when they had bona fide material, human and infrastructural assets and a healthy competitive advantage to make them legitimate financial centres. Therefore, on a macro level, in many countries, the right to a legitimate livelihood is in danger in the present conditions.
A complaint of law enforcement authorities in the metropolitan countries has been that the administration of justice is too slow in the developing world. This complaint is not completely justified. But, as a consequence, there has been a dangerous evolution of a policy of circumventing the administration of justice and short circuiting the right to due process. Since the mutual assistance treaties, information has been obtained and assets have been frozen, on the basis of unilateral, ex-parte court applications, in which only one party, namely law enforcement, is heard. Now, through the establishment of financial intelligence units, law enforcement agencies of the developed countries have gone a step further. They seek to avoid the necessity of going before the courts at all. Freezing of assets takes place purely by executive extra judicial action of a financial intelligence unit. One executive requests another foreign executive agency to freeze assets. It does so. The beneficial owner has no legal recourse to stop the freezing of its assets. It is as simple as that. What could be faster? At the same time, this procedure takes place at a considerable cost and damage to the basic rights and safeguards compatible with modern, democratic societies.
This continuing and undesirable evolution has been rejected in a new case, which reaffirms the right to the protection of law, due process, and access to the courts. The decision, now under appeal, is a bold step which has had reverberations far and wide, well beyond the international financial centre where it was pronounced. It can help to restore the balance, which will make a realistic future in financial services possible for many countries of the world.
The case is Financial Clearing Corporation v. Attorney General, unreported, Supreme Court of the Bahamas Common Law No. 232 of 2001, decided on 27 November, 2001. This article deals with the facts, human rights, the legislation, property and judicial pre-authorization, judicial function and the separation of powers, privacy, and the conclusion.
Facts
The facts of the case are that the Financial Clearing Corporation was an international business company incorporated in the British Virgin Islands and had its registered business office located at Ansbacher (BVI) Limited in the British Virgin Islands. The Financial Intelligence Unit of the Bahamas issued an order dated 26 January, 2001, made pursuant to section 4(2)(b) of the Financial Intelligence Unit Act 2000 (hereinafter “the Act”), by which the applicant was ordered to “refrain from any existing transactions” on its account at Barclays Bank plc in the Bahamas (“Barclays”) for a period of three days. This was followed by a freezing order on 29 January, 2001, made pursuant to section 4(2)(c) of the Act which had the effect of freezing the assets in that account for five days. That freezing order was successfully challenged in this case.
The freezing order was not served on the applicant, which learned of its existence from Barclays. That order was discharged on 5 February, 2001, replaced by a restraint order under section 26 of the Proceeds of Crime Act, 2000. The restraint order remained in effect.
Human Rights
Chapter III of the Constitution of the Bahamas is in the equivalent of a Bill of Rights. That Chapter, entitled “Protection of Fundamental Rights and Freedoms of the Individual” and consisting of Articles 15 to 31, covers human rights ranging from the protection of right to life to the protection from deprivation of property. In particular, Article 27 of the Constitution of the Bahamas, dealing with the protection from deprivation of property, states in relevant part:
“(1) No property of any description shall be compulsorily taken possession of, and no interest in or right over property of any description shall be compulsorily acquired, except where the following conditions unsatisfied, that is to say:
(a) the taking of possession or acquisition is necessary in the interests of defence, public safety, public order, public morality, public health, town and country planning order development or utilization of any property in such manner as to promote the public benefit or the economic well-being of the community; and
(b) the necessity therefore is such as to afford reasonable justification for the causing of any hardship that may result to any person having an interest in or right over the property; and
(c) provision is made by a law applicable to that taking of possession or acquisition
(i) for the making of prompt and adequate compensation in the circumstances; and
(ii) securing to any person having an interest in or right over the property a right of access to the Supreme Court, whether direct or on appeal from any other authority for the determination of his interest or right, the legality of the taking of possession or acquisition of the property, interest or right, and the amount of any compensation to which he is entitled, and for the purpose of obtaining prompt payment of that compensation; and
(d) any party to proceedings in the Supreme Court relating to such a claim is given by the law the same rights of appeal as are accorded generally to parties to civil proceedings in that Court sitting as a Court of original jurisdiction.
(2) Nothing in this Article shall be construed as affecting the making or operation of any law so far as it provides for the taking of possession or acquisition of property
(j) for so long as may be necessary for the purposes of any examination, investigation, trial or inquiry.”
The Legislation
The legislation is one of the series of 11 anti-money laundering acts passed by the Bahamas government in response to the political and economic threats of the OECD. Section 4 (2) of the Act states in relevant part:
“(2) Without limiting the foregoing and notwithstanding any other law to the contrary, the Financial Intelligence Unit:
(a) shall receive all disclosures of information such as are required to be made pursuant to the Proceeds of Crime Act, 2000 which are relevant to its functions, including information from any foreign Financial Intelligence Unit;
(b) may upon receipt of such disclosures as are referred to in paragraph (a), order in writing any person to refrain from competing any transaction for a period not exceeding seventy-two hours;
(c) may upon receipt of a request from a foreign Financial Intelligence Unit or law enforcement authority including the Commissioner of Police of the Bahamas order any persons to freeze a person’s bank account for a period not exceeding five days if satisfied that the request relates to the proceeds of any of the offences specified in the second schedule: Provided that an aggrieved person may apply to a judge in chambers to discharge the order of the Financial Intelligence Unit and shall serve notice on the Financial Intelligence Unit to join the proceedings but such order shall remain in full force and effect until the judge determines otherwise;
(d) may require the production of such information excluding information subject to legal professional privilege that the Financial Intelligence Unit considers relevant to fulfill its functions;…”
Accordingly, the legislation contemplates a role for a judge in paragraph (c), but only to discharge the order, and not in the making of the order in the first place.
Property and Judicial Pre-Authorization
The judge considered whether the customer’s right to have its money repaid on demand was property within the meaning of Article 27. The applicant had a current account at Barclays, and therefore Barclays was under a contractual obligation to pay the customer on demand. Barclays was in the position of a debtor. Joachimison v Swiss Bank Corp. [1921] 3 KB 110
The Court said that the customer has a right to receive from the bank on demand, money deposited in its bank account, and if the money is not paid, the customer can sue for it. The Court referred to the words of Lord Diplock in Attorney General of the Gambia v Momodou Jobe [1985] LRC 556 at page 565, which dealt with section 18 of the Constitution of the Gambia, which included the exact words of Article 27, as follows: “‘property’ in section 18 (1) is to be read in a wide sense. It includes choses in action such as a debt owed by a banker to a customer. The customer’s contractual right against his banker to draw on his account (i.e. to claim payment of the debt or any part of it on demand) is embraced in the expression “right over or interest in” the debt…” Therefore, in the view of the Bahamas Court, money in a bank account was included in an “interest in or right over property of any description” in Article 27.
The Court took the view that the orders of the Financial Investigation Unit were a compulsory acquisition. It referred to Lord Diplock, who also at page 565 of the same case, expressed the view: “To confer upon a member of the public service, in the exercise of the executive powers of the State, a power at his own executive discretion to prevent the bank’s customer from exercising his contractual right against the bank to draw on his account on demand would, in their Lordship’ view, amount to a compulsory acquisition of a right over a interest in the customer’s property in the debt payable to him by the banker, and a law which provided for the exercise of such an executive discretion would contravene section 18 of the Constitution. It would be ultra vires and void.”
While on its facts, Momodou Jobe was not a case where the Privy Council declared a section of the Special Criminal Court Act of the Gambia ultra vires, it was held that the exercise of the power to make a freezing order was subject to judicial pre-authorization.
Judicial Function and the Separation of Powers
In the case of Hinds v. The Attorney General [1977] A.C. 195, on appeal from Jamaica, the Privy Council observed that all constitutions on the Westminster model deal under separate Chapter headings with the legislative, the executive and the judicature and that there was implicit in such constitutions, the basic principle of the separation of powers which applies to the exercise of the respective functions by the three organs of government. The Bahamas Court quoted Lord Diplock at page 226: “What Parliament cannot do, consistently with the separation of powers, it to transfer from the judiciary to any executive body whose members are not appointed under Chapter VII of the Constitution, a discretion to determine the severity of the punishment to be inflicted upon an individual member of a class of offenders.”
Justice Allen compared Hinds with the facts before her. She said: “There is no doubt that Parliament is competent to enact a provision to freeze bank accounts for a limited period for the purposes of investigation, however, because such a power is an intrusion on the right of a person not to be deprived of his property without compensation, the question is whether it can lawfully put such a power in the hands of the executive. Is such a power, like the power to select punishment in Hinds, essentially a judicial function?”
In response, the Court looked at a number of examples of cases where the separation powers was violated. For example, in J. Astaphan & Co. (1970) Ltd. v Dominica (Comptroller of Customs) [1996] E.C.S.C.J., No. 28 Civil Appeal No. 8 of 1994, the Eastern Caribbean Supreme Court (Court of Appeal) found that the imposition by a customs officer of a sum in excess of the estimated duties on goods was “inconsistent with the basic principle of separation of powers and contravenes the appellant’s fundamental right… against compulsory acquisition of property…”
Similarly, the Court considered a case from Mauritius which found that a statutory prohibition of bail was unconstitutional. In Noordally v. Attorney General [1987] L.R.C. (Const.) 599 at 603, Moolan C.J. said, “The whole of our Constitution clearly rests on two fundamental tenets, the rule of law and the juxtaposition (or separation as it is more often called) of powers… We conclude therefore that it is not in accord with the letter or spirit of the Constitution, as it presently stands, to legislate so as to enable the Executive to overstep or bypass the Judiciary in its essential roles, namely those of affording to the citizen the protection of the law and, as guardian of the Constitution, to ensure that no person’s human rights or fundamental freedoms are placed in jeopardy.”
Justice Allen continued, “These dicta underscore the different roles of the three branches of government, the essential role of the court being the protection of fundamental rights and freedoms and the administration of justice. They support my view that the power to stop transactions on a bank account and the power to freeze a bank account, ought properly to be vested in the judiciary.”
She concluded, “In my judgment then, and to the extent that paragraphs (b) and (c) of section 4(2) of the FIU Act vest the powers to restrain transactions and to freeze accounts in the director of the Financial Intelligence Unit and not in the court, they contravene the doctrine of the separation of powers and are unconstitutional.”
Privacy
The Court did not go so far as to find a violation of the constitutional right to privacy. The Court had been asked to give a declaration that the applicant, pursuant to Articles 15 and 21 of the Constitution, and the confidential relationship between the applicant and Barclays, inter alia, had a reasonable expectation of privacy in its personal financial records obtained from Barclays, as they constituted part of the biographical core of personal information which individuals in a free and democratic society would wish to maintain and control from dissemination to the state.
The Judge observed that, in Neill Wells v the Attorney General (1791/1991), Hall, J., as he then was, held that Article 15 (of the Bahamas Constitution) was both a preamble as well as an enacting section, in as much as it was accorded, by Article 54(3), the same degree of entrenchment as the other fundamental rights provisions. She concurred with this and continued that “since the applicant can only litigate in the Supreme Court those rights enumerated in Articles 16 through 27, it must show that the right to privacy of personal banking information is protected by Article 21.”
The Court referred to the right to privacy, which was characterized by Ackerman J. in Bernstein and others v Bester NNO 1996 (4) B.C.L.R. 449 (CC) as lying along a continuum where, the more a person interacts with the world, the more the right of privacy becomes attenuated. She said, “The learned judge’s characterization also, I think, recognized the difficulty in defining the extent of the right of privacy protected by Article 21. While I agree that the protection afforded by Article 21 is not limited to the right not to have one’s person or home searched and the entry by others on one’s premises, and may extend to other property, yet I do not believe it extends to the protection of the privacy of personal banking information. I do not believe that the disclosure of personal banking information “intrudes on the inner sanctum” or “violates the most intimate core of privacy”, of persons. The relationship of banker and customer is, in my view, outside the closest intimate sphere of which Ackerman spoke.”
Therefore, the Judge concluded, “In my judgment, Article 21 does not include a right not to have one’s personal banking information disclosed. Accordingly, the applicant has not shown that section 4(2)(d) of the Act violates any constitutionally guaranteed right under Article 21.”
Conclusion
As section 4(2)(d) is presently worded, the Financial Intelligence Unit cannot request the production of banking information from a licensee unless by a court order. The action was aimed at paragraphs (b) and (c).
The applicant complained that its banker was in breach of the law by disclosing information to the Financial Intelligence Unit without a court order. But, there was no evidence before the Court that there was such disclosure and in any event Barclays was not a party to this action. That question was therefore reserved for further argument, if necessary.
Therefore, the Court held that the applicant should have a declaration that paragraphs (b) and (c) of section 4(2) of the Act were unconstitutional. The applicant also won a declaration that the Financial Intelligence Unit cannot require the disclosure of banking information from a banker, without a court order.
Therefore, the decision is a notable victory for due process and the administration of justice. An investor continues to have the assurance that he will have meaningful access to the courts. The decision has reverberations around the world. In the attack on the international financial centres, those centres are not reduced to vassals of the developed countries. Human rights, including the right to property, are not treated as play things to be arbitrarily manipulated by the metropolitan executive agency through a domestic executive financial intelligence unit. This case is an important step in the march back to restoring the competitive advantage of the international financial centres in the developing world.
