Open borders, closed minds
In an arguably unnecessary but nonetheless welcome determination, the English High Court has ruled that the use of offshore structures does not of itself constitute a ground for believing that such structures were intended to be used or were being used for wrongful purposes and that there had to be some additional evidential basis for such a belief.
In National Crime Agency v Baker and others, Mrs Justice Lang was asked to discharge three unexplained wealth orders and related freezing injunctions which had been granted to the National Crime Agency on an ex parte basis. Upon the service of the orders, the respondent offshore vehicles together with their ultimate beneficial owners had disclosed voluminous information relating to the purchase and transfer of underlying properties and their registered owners.
Upon a review of the evidence, Mrs Justice Lang determined that although there had been no material non-disclosure by the National Crime Agency, the case which had been presented at the ex parte hearing had nonetheless been flawed and undermined by assumptions as to the use of offshore structures, the absence of an open minded evaluation of available evidence and/or the inadequate investigation of some obvious further lines of enquiry.
The Court determined that the use of offshore structures was not of itself a ground for determining or assuming that corporate arrangements had been made for an illegitimate purpose or used in an illegitimate way. By way of example, Mrs Justice Lang cited privacy, security and tax mitigation as just some examples of the lawful reasons one might incorporate an offshore vehicle whilst acknowledging that there were as many potential illegitimate reasons for the creation of the same structure. Mrs Justice Lang found that there had to be some additional evidential basis for assuming an unlawful purpose and in this case the available evidence did not give rise to any "irresistible inference" that any property was the product of unlawful conduct. The orders were discharged accordingly.
The England and Wales Court’s recognition of the commercial and practical advantages to the lawful use of offshore structures will resonate with those who work or transact in offshore jurisdictions. Whilst Mrs Justice Lang cited examples of the benefits of an offshore structure, there are infinitely more, and the use of an offshore structure is certainly not a reason to set aside the presumption of innocence.
