The Chancery Division (Mrs Justice Joanna Smith DBE) has delivered a judgment on the proper construction of “use” in section 9 of the Crime (International Co-operation) Act 2003 in the context of ongoing FCA proceedings for alleged market abuse against two former executives of Globo Plc. The decision, which can be found here: FCA v (1) Papadimitrakopoulos (2) Gryparis  EWHC 2792 (Ch) could have important implications for future FCA investigations into market abuse.
Richard Power (led by Graham Brodie KC of 33 Chancery Lane) appeared for the First Defendant and Leonora Sagan (led by Andrew Hunter QC of Blackstone Chambers) appeared for the Second Defendant. The FCA was represented by Andrew George KC and Rayan Fakhoury of Blackstone Chambers.
The First Defendant applied to strike out the FCA’s claim as an abuse of process after it was revealed that it had employed material obtained through mutual legal assistance channels under the 2003 Act (the “MLA Material”) in launching the civil proceedings, without first obtaining the express consent of the relevant overseas authorities. The First Defendant, supported by the Second Defendant as an interested party, asserted that the FCA’s conduct amounted to a breach of s.9 of the 2003 Act which provides that evidence obtained pursuant to the Act “may not without the consent of the appropriate overseas authority be used for any purposes other than that specified in the request”.
In its defence, the FCA relied on a narrow construction of “use” to mean “adduced in evidence”. On its case, s.9 of the 2003 Act did not prohibit the use of MLA Material for spring-board inquiries so long as the MLA Material was not adduced in evidence in the civil proceedings. The FCA’s case was that its “dual track” investigation in this case was therefore permitted; such investigations, it said, were standard practice in market abuse cases and allowed its investigators to consider potential criminal misconduct and civil law breaches in parallel, without the need for information barriers to be erected between segregated teams.
In rejecting the FCA’s narrow construction, Joanna Smith J held that the statutory language, the underlying purpose of the 2003 Act, and relevant authorities each supported a broad construction of the word “use” in s.9. She also held that the unchallenged evidence of the FCA clearly established prohibited use of MLA Material, and that the FCA’s standard form language in its letters of request to overseas authorities was not sufficient to establish that consent for collateral use of that material outside a criminal investigation had in fact been obtained from them.
Although ultimately the Court considered that this was not an appropriate case for strike-out, she made two significant rulings: first, that the consent of the Greek authorities should now be sought for continued use of the MLA Material obtained from them; and second, that in order to mark the Court’s disapproval of the FCA’s conduct, none of the MLA Material that had been used without consent would be admissible in the ongoing claim. The judge also indicated that she considered it prima facie appropriate for the FCA to pay the costs of the strike-out application.
The judgment therefore represents a clear statement on the scope of prosecuting authorities’ powers under the 2003 Act and is likely to have serious implications for any “dual track” investigations and the ways in which authorities collect, manage, and deploy, evidence obtained from overseas authorities. The FCA have published a statement, including a link to the judgment, which can be found here.