But the waters become a bit muddy with regard to the use of compulsory powers requiring the production of pre-existing documents.
Should individuals be compelled to hand over evidence that potentially incriminates them?
In the recent case of Volaw Trust and Corporate Services Ltd and others v The Office of the Comptroller of Taxes & anor (2019), the Privy Council considered that very point.
And the decision provides welcome clarity to conflicting caselaw, according to Eamon McCarthy-Keen, associate at Peters & Peters Solicitors, and Genevieve Woods, barrister at 3 Raymond Buildings.
Tax authorities like HM Revenue & Customs have the power to require taxpayers and third parties to provide information or documents regarding an individual’s tax position.
The non-compliance of which, without a reasonable excuse, can attract a penalty.
These authorities may exercise this power for domestic purposes or at the request of overseas agencies under a tax information exchange agreement (TIEA) or mutual legal assistance.
In the determination of any criminal charge against them, everyone is entitled to a fair and public hearing within a reasonable time before an independent and impartial tribunal established by law.
Article 6 ECHR provides that anyone charged with a criminal offence has the right to defend themselves in person or through their lawyer.
The European Court of Human Rights (ECtHR), whose decisions are not binding on English courts but can be taken into account, has interpreted that to include an individual’s right not to self-incriminate.
Clear as mud
In Funke v France, the applicant was compelled by French tax authorities to produce bank statements, which he refused to disclose.
He was subject to a court order, fine and a daily penalty for any delay caused by non-compliance.
Civil recovery of the penalties continued, even after his death, for a further eight years. No civil or criminal proceedings for the recovery of the alleged unpaid taxes were ever brought.
The ECtHR held that, in those circumstances, there was a violation of the privilege against self-incrimination (PSI) contrary to Article 6.
But it later held in Saunders v UK that PSI was primarily concerned with respecting the will of an accused person to remain silent and did not extend to the use in criminal proceedings of compulsorily obtained material “which has an existence independent of the will of the suspect” – ie pre-existing or “real” evidence – such as documents acquired under a warrant, breath, blood, or bodily tissue samples.
Saunders distinguished between compelled statements and real evidence, with PSI only applying to the former, seemingly inconsistent with the decision in Funke.
Subsequent ECtHR and English authorities took a less categorical approach than Saunders, notably in Jalloh v Germany, in which a suspected drug dealer was held down and administered an emetic by the police to cause him to regurgitate the drugs that he had swallowed.
Although the drugs were considered real evidence, the manner in which they were obtained was held by the ECtHR to have violated Article 3 ECHR (the prohibition against torture), and their use in evidence also rendered the trial unfair in breach of Article 6.
The Jersey tax authority issued notices, triggered by a request from the Norwegian tax authorities under a TIEA, for documents to Volaw Trust and Corporate Services and a number of BVI and Jersey-based companies administered by Volaw (the appellants).
The requests were in connection with an investigation into alleged tax evasion by a Norwegian national whose business interests were administered by Volaw (he was later convicted of tax evasion in Norway but successfully appealed that conviction).
The Norwegian investigation was then expanded to include a possible criminal investigation into the appellants.
The Jersey authority also opened its own fraud investigation.
Although the TIEA notices were later withdrawn, the issues raised were considered of general public importance by the Privy Council, the highest appellate court for the crown dependencies.
The court held that PSI can, in some circumstances, apply to real evidence such as pre-existing documents, following the Funke line of authorities.
In so far as some decisions have held that Article 6 is not engaged by compulsion to produce pre-existing documents, the court held that a more nuanced approach was needed, and that it must look at four factors:
- (i) the nature and degree of compulsion used to obtain the documents;
- (ii) the public interest in the investigation and punishment of the offences;
- (iii) the existence of procedural safeguards; and,
- (iv) the use to which the material may be put.
On the facts, the court dismissed the argument that the TIEA notices violated Article 6 as the compulsion used did not involve physical or psychological pressure, often in the form of treatment which breaches Article 3 (eg Jalloh).
The court held that there was substantial public interest in the investigation of criminal offences of this kind, and that it was not unreasonable to expect financial services firms to cooperate with financial crime investigations by producing information about their clients’ affairs.
However, the court observed that the public interest would not ordinarily be sufficient to outweigh the right of the accused not to incriminate themselves at trial (Article 6 is an unqualified right).
The court also considered that because both Jersey and Norway adhere to the ECHR, there were sufficient procedural safeguards, such that the fairness of a trial could not be said to have been seriously prejudiced by the production of documents at a pre-trial stage.
Volaw has unified divergent caselaw, raising the possibility of challenging a notice for pre-existing documents on the basis that it violates Article 6, even at a pre-trial stage, where the nature and degree of compulsion renders the use of such evidence in a trial unfair or the applicant risks suffering a flagrant denial of justice in the requesting country.
However, in giving with one hand, the court has taken with another by restricting such challenges to instances in which real evidence was obtained through “physical or psychological pressure”.
Although the context of each case will be determinative, it is unlikely that a document production order will constitute such pressure and be considered improper.
Nonetheless, tax advisers or agents, served with a notice to produce documents or provide information regarding their client’s financial/tax affairs, for use in proceedings in the UK or abroad, would be wise to consult legal advice regarding the scope of the notice and its interpretation and the consequences of non-compliance, particularly if such notices are addressed to them personally.
Legal advice may also be required in assessing the lawfulness of such orders and whether there are grounds for challenging them on the basis of vires, PSI or otherwise.
This article was written for International Adviser by Eamon McCarthy-Keen, associate at Peters & Peters Solicitors, and Genevieve Woods, barrister at 3 Raymond Buildings.