It is widely recognised that money laundering undermines competitive markets and can hinder the development of national economies.
The 4th Money Laundering Directive
Last year, the European Commission published a provisional version of its proposal to amend the Third Money Laundering Directive (transposed into UK legislation in the UK in the Money Laundering Regulations 2007). This Fourth Money Laundering Directive (MLD4) is now reaching its final stages in the legislative process. Among the changes in MLD4 are that:
the clarity and accessibility of beneficial owner information will be enhanced. Mirroring proposals announced by David Cameron in late October, it is envisaged that companies will be required to supply up to date information on their beneficial ownership to a central registry in the member state in which they are based.
there will be a tightening of the rules on simplified due diligence and strengthening of certain enhanced due diligence requirements.
This will be relevant not only for businesses themselves, but also when carrying out KYC procedures in relation to customers. These will be covered further in a future article.
Collapse of the Victor Dahdaleh trial
During December 2013, the high-profile bribery trial of Victor Dahdaleh collapsed, again raising questions by some over the ability of the Serious Fraud Office (SFO) to prosecute substantial and complex cases. The SFO alleged that Mr Dahdaleh acted as a middleman in the payment of bribes of over $60 million to a number of individuals in return for the award of contracts to various companies. Although this case collapsed, it was recently reported that Alco, one of the companies allegedly using Mr Dahdaleh as a middleman, had agreed with American authorities to plead guilty to Foreign Corrupt Practices Act (FCPA) violations and to pay $384 million in fines and penalties. Inevitably, this spurs additional unfavourable comparisons between the SFO’s enforcement record and that of its US counterparts.
Interestingly, this month, it was reported in the Telegraph that the head of the SFO, David Green was proposing an amendment to the Bribery Act, which if adopted, could enable the SFO to take direct action and “levy US-style fines”. Apart from reputational issues, the move, if adopted, could result in “companies and banks that fail to prevent financial crime by their staff...[facing] vast fines and be blacklisted from...bidding for certain contracts under European Union rules...”.
When debtors or hirers are sent notices of sums in arrears under section 86B or 86C of the Consumer Credit Act, included with the notice must be a copy of the current "arrears information sheet". Also, a default notice (under sections 87 and 88 of the CCA) must include a copy of the current default information sheet.
The FCA has published updated versions of the arrears and default information sheets which will take effect from 1 April 2014.
In addition, it will be producing two new variants of the information sheets. These are as follows:
"High-cost short-term credit providers will need to provide an Information Sheet, including information on free debt advice, before a loan is rolled over". The publication date of this sheet is expected to be on 1 April 2014, with it being effective from 1 July 2014; and
"Peer-to-peer lending platforms will be required to provide bespoke Information Sheets to borrowers in arrears or default". The publication date of this sheet is expected to be on 1 July 2014, with it being effective from 1 October 2014.
The recent case of Fadallah v Pollak is a useful reminder of the difficulties with retention of title.
What were the facts of the case?
Eagle Power sold some second-hand generators to John Pollak. Mr Pollak did not have storage facilities: Eagle agreed to store them for him until he found a buyer. In the meantime, Mr Fadallah asked Eagle to buy some generators from it. Eagle offered him the generators being stored for Mr Pollak. Mr F agreed to buy these for shipping to his hotel in Nigeria. He was unaware that Eagle did not own them.
Eagle asked Mr Pollak if it could re-purchase the generators (being stored for him). He agreed to re-sell them on his own terms and conditions. Under these, there was a clause that title would not pass until payment in full was made. In due course, Eagle went into liquidation without having paid Mr Pollak and without having delivered the generators to Mr F. The issue considered by the Court of Appeal was whether the goods belonged to Mr F or to Mr Pollak: both of them were innocent parties.
Relevant law and decision
Subject to provisions in the Factors Act 1889 and in the Sale of Goods Act (SoGA), the basic position under s21 of SoGA is that a buyer does not gain better title to the goods than the seller had.
The recent Court of Appeal case, Olympic Airlines SA v ACG Acquisition XX LLC,has generated much publicity.
This case was fairly complex, but the broad facts are as follows. Olympic entered into a lease of a 17 year old Boeing with ACG for 5 years. Before being leased to Olympic, the aircraft was leased through a subsidiary of ACG to AirAsia. In August 2008, Olympic accepted delivery of the aircraft from ACG. Its pre-acceptance inspection did not involve the aircraft being disassembled and so (as one would perhaps expect) was restricted in scope. Both parties signed an acceptance certificate. The certificate included confirmation by Olympic that the leased property complied in all respects with the condition required at delivery under relevant parts of the lease agreement. However, unbeknown to the parties, the aircraft did not, in fact, on delivery comply.
The course of events gave rise to claims on both sides – ACG for payment of rent and damages for loss of rent, and by way of counterclaim, Olympic for damages for breach of contract by ACG in failing to deliver the aircraft in the required contractual condition.
The key question was whether a claim for damages for defective delivery survived the parties having executed the Certificate of Acceptance. The lease agreement itself included a clause that delivery by the lessee to the lessor of the acceptance certificate would be conclusive proof between the parties that the lessee had examined and investigated the aircraft, that the aircraft was satisfactory to the lessee and the lessee had irrevocably and unconditionally accepted it.
What was the outcome?
The Court of Appeal accepted ACG’s primary contention that on its true construction, the Certificate of Acceptance was conclusive proof that the aircraft complied with the delivery conditions and that a claim for damages for defective delivery could not survive execution of the certificate.
It is important:
to note that the lease was in a B2B context;
to note that the lease agreement contained extensive provision for inspection by Olympic of the aircraft before deciding whether to accept, and also allowed for the lessee to note discrepancies and require defects to be rectified;
to note that the case was based on the contractual interpretation of the particular lease and certificate of acceptance. However, it does highlight the need for careful drafting and clear wording of certificates and leases.