The High Court has dismissed an application (under the Bankers’ Book Evidence Act 1879) by the CFO of a telecommunications company for access to bank documents for use in Canadian extradition proceedings (initiated by US prosecutors who were seeking to join the CFO as a co-defendant to criminal proceedings in the US because she was alleged to have misled the respondent banks into processing transactions linked to Iran which were in contravention of US sanctions law): Meng v HSBC Bank Plc & Ors [2021] EWHC 342 (QB)

This decision is a reassuring one for financial institutions faced with applications under the Bankers’ Book Evidence Act 1879 (the Act) for disclosure of bank documents for use in foreign or domestic legal proceedings. Such applications may be made by parties to legal proceedings in addition to disclosure applications under the CPR and other avenues for obtaining disclosure, which may increase the administrative burden and cost of business for a financial institution. Despite the longevity of the Act, there is relatively little reported authority interpreting the Act. This decision highlights the narrow scope of the court’s jurisdiction, and helpfully limits the type of documents which may be obtained, under the Act. Additionally, the decision underlines the fact that even if certain conditions in the Act are met for ordering disclosure, the court still ultimately retains the discretion as to whether to order disclosure.

In summary, the court found that it had no jurisdiction under the Act to make the disclosure order sought by the applicant. The Act was limited to UK legal proceedings and did not extend to making orders for the purposes of foreign legal proceedings. The court also said that if even it had found in favour of the applicant on the jurisdiction issue, it would have still refused the application on the basis that the documents/records sought by the applicant did not fall within the scope of the Act (which was limited to transactional records and did not include non-transactional records, such as attendance notes or correspondence between a bank and its customer). The court also noted that even if the applicant had been successful on both the jurisdiction and the records issues, the court would not have not exercised its discretionary power to grant the application. A number of factors which the court took into account in declining to exercise its discretion included the express US prohibition order on the use of the documents in the Canadian extradition proceedings, the likelihood of the applicant having a fair trial before the Canadian courts and the failure of the applicant to link the documents requested sufficiently clearly to specific regulatory duties to maintain records.

We consider the decision in more detail below.

Background

The applicant was the CFO in a telecommunications company (Company), which had a banking relationship with a global banking group. Between 2007 and 2017, the Company, two of its subsidiaries, and the applicant allegedly deceived the global banking group which included the respondents and the US government as to the Company’s business activities in Iran. The employees of the Company are alleged to have made misrepresentations about the relationship of the Company with an unofficial subsidiary in Iran and to the effect that the Company had not violated any US laws or regulations relating to Iran.

In reliance on the misrepresentations by the Company, the global banking group and its US subsidiary in particular cleared more than USD $100 million of transactions relating to the Company’s unofficial subsidiary in Iran between 2010 and 2014; this was in contravention of US sanctions law and exposed the global banking group to potential civil or criminal penalties.

In 2019, US prosecutors brought criminal charges against the Company, the two subsidiaries involved and the applicant for financial fraud. The applicant had in the meantime been detained in Canada. The US government sought the applicant’s extradition to the US so that she could be prosecuted as a co-defendant in the US criminal proceedings.

The applicant subsequently applied to the English High Court under section 7 of the Act seeking disclosure from three UK subsidiaries of the global banking group (the respondent banks) of 13 categories of documents to support her arguments in the Canadian extradition proceedings. The applicant’s case was that the documents were held by the US government, emanated from within the global banking group and were not ‘discoverable’ in the Canadian extradition proceedings or through the US criminal proceedings.

Decision

The court found in favour of the respondent banks and dismissed the application. In summary, the court held that it had no jurisdiction to make the disclosure order sought by the applicant. The court also said that even if it had found in favour of the applicant on the jurisdiction issue, it would have still refused the application on the basis that the documents/records sought by the applicant did not fall within the scope of the Act. The court also noted that even if the applicant had been successful on both the jurisdiction and the records issues, the court would not have not exercised its discretionary power to grant the application.

We consider below some of the key issues considered by the court in relation to the application.

Issue 1: Jurisdiction

The applicant argued that the court had the necessary jurisdiction under section 7 of the Act to make the disclosure order sought on the basis that the Act also applied to foreign legal proceedings anywhere in the world, not just legal proceedings in the UK.

The court held that it had no jurisdiction to make the disclosure order sought by the applicant. The court commented that Parliament had intended that the scope of the Act be restricted to legal proceedings in the UK and that there were statutory schemes in place for foreign courts, public authorities and international authorities – not a private party or criminal defendant – to make a formal request for assistance in obtaining evidence. Such statutory schemes would in effect be bypassed in the case of entries in bankers’ books if the court acceded to the applicant’s submissions; however, the court did not accept that this could have been Parliament’s intention with respect to how the Act was intended to operate.

Issue 2: Documents/Records

The applicant argued that the references in the Act to “entries in” and “other records used in the ordinary business of the bank” included both transactional records and non-transactional records maintained for regulatory compliance.

The court said that even if it had found in favour of the applicant on the jurisdiction issue, it would have still refused the application on the basis that the documents/records sought by the applicant did not fall within the scope of the Act as they were not transactional records. The court underlined that “entries in” and “other records used in the ordinary business of the bank” meant transactional records and did not include non-transactional records maintained for regulatory compliance. The court noted that the Act was never intended to cover everything that a bank has, or does, or writes down, in the course of its ordinary business as a bank; for example, an attendance note of a conversation with a customer or prospective customer or correspondence between the bank and a customer or prospective customer will not fall within the scope of the Act.

Issue 3: Exercise of the court’s discretion

The applicant argued that the court should exercise its discretion to order the respondent banks to provide access to the 13 categories of documents sought in order to promote and ensure fairness in the Canadian extradition proceedings. The applicant said that: (i) the US prosecuting authorities’ case against her was clearly based to a significant extent on information provided to the US authorities by entities and individuals within the global banking group; (ii) the documents sought were plainly material to the Canadian extradition proceedings; and (iii) nothing would be forced on the Canadian courts who would still have to decide admissibility and relevance.

The court noted that even if the applicant had been successful on both the jurisdiction and the records issues, the court would not have not exercised its discretionary power to grant the application. The court said that the documents sought were subject to an express prohibition order, made in the US criminal proceedings, that they could not be used in the Canadian extradition proceedings; the court must therefore proceed on the basis that the express prohibition was lawful under US law. Also, in the court’s view, there was nothing to suggest that without those documents the applicant would be denied a fair hearing before the Canadian court. Finally, the court highlighted that the applicant had failed to provide a clear link between the particular documents sought and specific regulatory duties to maintain records; if it was correct that records for regulatory compliance did fall within the scope of the Act, the applicant was required to specify the records sought and reference them to a specific regulatory duty to maintain those records.

Simon Clarke
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Nihar Lovell
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