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R (Ezz) v HM Treasury [2016] EWHC 1470 (Admin)

DATE: 23 Jun 2016

In this case a former Egyptian government minister subject to the asset freezing regime under Regulation 270/2011 sought the release of frozen assets pursuant to the provision in Article 4 of the Regulation that funds may be released where it is determined that they are “intended exclusively for reasonable professional fees associated with the provision of legal services”: The legal fees in question related to the Claimant’s lawyers instructed for his forthcoming criminal trial in Cairo.

After extensive correspondence with the Claimant’s solicitors over a period covering about 1½ years, HM Treasury decided to assess what was ‘reasonable’ by reference to the Senior Court Costs Office maximum daily rate, adjusted by reference to the IMF Purchasing Power Parity conversion rate (“PPP”) to reflect the differences in the UK and Egyptian markets. This was on the basis that the Claimant had not provided specific evidence of what was ‘reasonable’ in the Egyptian market, such as quotes from other lawyers in Cairo.

The Claimant applied for judicial review of the use of HMT’s decision, on the basis that it was irrational to use PPP because it primarily reflected differences in living standards and did not take into account the costs of lawyers in the particular market that the Claimant required – complex criminal fraud cases.

Following a rolled-up hearing, Cranston J. granted permission to apply for judicial review but dismissed the claim. At pars. 30-34 he held:

“30.    …At the outset one starts with the words of Article 4.1(b).  Under it, HM Treasury’s task is to release frozen funds to the extent that it determines that they relate to reasonable legal fees.  There are some obvious points about that formulation.  First, reasonable legal fees are not necessarily the highest legal fees payable.  Secondly, there can be differing views on what constitutes reasonable legal fees without those views being unreasonable.  Thirdly, and crucially in this case, the issue is not what ASA quoted as its fees, or their bona fides, but what were reasonable fees for the purposes of Article 4.1(b).

31.     Next is the fact that, on its face, Article 4.1(b) of the EU Regulation is a derogation to Article 2, by which funds are otherwise frozen.  Accordingly, in line with the general principles for interpreting EU law, Article 4.1(b) must be interpreted restrictively and in the light of the aims being pursued: Case C-481/99 Heininger [2001] E.C.R. I-9945; Case C-412/82 Group Josi Reinsurance Co. [2000] E.C.R. I-5925, paragraphs [49], [70]; Case C-387/96 Sjoberg [1998] E.C.R. I-1225, paragraph [14]; C-241/99 CIG [2001] ECR I-5139, paragraph [29].  Here the aim of the EU Regulation, as suggested in the Recitals, is to recover misappropriated state funds for the benefit of the Egyptian people, albeit recognising the fair trial rights of those accused of being responsible for the misappropriation.  A successful application will have a direct consequence of depleting those funds.  To my mind both the words and aims of the EU Regulation demand that, when faced with an application to release frozen funds, HM Treasury must not simply take assertions at face value but needs to scrutinize with care claims that particular figures are reasonable.

32.     Moreover, I cannot accept Mr Kennelly’s narrow focus on the rationality of HM Treasury’s use of the PPP ratio to the exclusion of its decision on Mr Ezz’s application as a whole.  Use of the PPP ratio must in my view be seen in context.  One aspect of the context is that despite requests over a period of 18 months, Mr Ezz was unable to provide evidence about where ASA’s fees stood in relation to the usual rates in Egypt for lawyers defending corporate crime.  The onus after all is on the person applying to access frozen funds to make the case.  The highest Mr Ezz’s evidence on the issue went was what Mr Rizkana’s said, but Mr Rizkana’s earlier letter and later statement contained generalised assertions and no hard figures to support the reasonableness of the rates ASA claimed.  Evidence was no doubt hard to come by, and HM Treasury’s own enquiries bore little fruit. But the fact is that despite a number of requests Mr Ezz produced no evidence about his approaches to other lawyers.

33.     Another aspect of context is that HM Treasury’s use of the PPP ratio followed the starting point of the decision, which was its adoption of the maximum SCCO London legal rates as a benchmark.  That was a generous recognition of the importance from Mr Ezz’s standpoint of the criminal proceedings in which he was involved.  Unsurprisingly, Mr Kennelly raised no objection to this. But the corollary was that since one was starting with legal rates in this jurisdiction, one would normally expect an adjustment since what was at issue was the cost of legal services in Egypt.  It was not unreasonable to make a conversion when, as already mentioned, evidence about the rates charged by the type of lawyers which it would be reasonable for Mr Ezz to employ in his criminal defence was distinctly lacking. It was with this background that HM Treasury used the internationally accepted PPP conversion ratio.

34.     In these circumstances it was not beyond the range of reasonable responses for HM Treasury to adjust the SCCO maximum London legal rates by reference to the PPP conversion ratio as a means of arriving at a figure for reasonable legal costs within the Egyptian market.  Asserting that the application of a PPP rate is perverse because the service being purchased in Egypt is not subject to the same market conditions governing general living costs there is to no avail when the best evidence of this would be to produce the fees quoted by lawyers other than ASA for the services desired. Given that shortage of direct evidence on reasonable legal costs in the Egyptian legal market for this type of service, using the PPP conversion ratio cannot be said to be irrational.”

Charles Banner appeared as sole counsel for HM Treasury, instructed by the Government Legal Department.