Insights

The First Hall Civil Court presided by Madame Justice Audrey Demicoli, on March 11, 2022, in the case ‘Dr Malcolm Mifsud and Dr Cedric Mifsud vs the Sanctions Monitoring Board’, held, among other things, that the Sanctions Monitoring Board was a ‘public authority’ for the purposes of article 469A of Chapter 12 of the laws of Malta, (and subject to judicial scrutiny).

On 29 September  2020, the Sanctions Monitoring Board wrote to the company Aegis Corporate Services Ltd admonishing them for providing services to Mr Arkadiy Rotenberg, a person sanctioned by the EU, by registering his yacht under the Malta flag. The Board stated that Aegis Corporate failed to fulfil its monitoring duties under article 17(6) of the National Interest (Enabling Powers) Act, Chapter 365 of the laws of Malta.

This article imposes upon subject persons a duty of reporting and screening for sanctions.  Article 17(6) of Chapter 365 provides:

‘(6)   Any legal or natural person conducting a relevant activity or relevant financial business as defined in the Prevention of Money Laundering and Funding of Terrorism Regulations shall be required to: (a)  regularly  check  the  list  of  designations  by  the  United Nations, the European Union, and the Board, and to screen their client databases against those lists on a regular basis and immediately after a change to any of these lists occurs; (b)  have in place and effectively implement internal controls and procedures to ensure compliance with the obligations arising from this Act and any relevant United Nations or European Union Resolutions or regulations; and(c)  immediately notify the Board in case targeted property is identified,  and  of  the  actions  taken  in  relation  to  such property in compliance with the requirements under this Act, including in relation to any attempted transactions.’

Aegis Corporate contested the Board’s claims and furnished the Board with full information on their internal sanction screening procedures. Aegis informed the Board that it did not in fact register the yacht, as ship registration and resident agent services  were provided by the law firm Mifsud & Mifsud Advocates.

On 15 March 2021, the Board notified Mifsud &Mifsud Advocates of its decision. It fined them  800 EURfor failing to carry out ongoing monitoring and enhanced due diligence in breach of article 17(6)  of Chapter 365.

Shortly after, the yacht belonging to Mr Rotenberg was deleted from the Malta flag.

Applicants Dr Malcom Mifsud and Dr Cedric Mifsud agreed to pay the fine under protest, and allegedly, only because the Board threatened additional penalties.

In fact, in an email of 29 March 2021, the Board warned applicants that if the fine was not settled by the stipulated deadline, it was empowered to impose a daily cumulative sanction.

The applicants reserved their right to contest the fine before the ordinary courts. The fact that there was no recourse to appeal from the Board’s decision, they claimed, did not mean that the Board was beyond judicial scrutiny.

Faced with this situation, the applicants proceeded to file this lawsuit against the Sanctions Monitoring Board, requesting the court:

1. To declare that the Board’s decision to fine them 800 EUR was ‘ultra vires’ its powers under article 469A (i) (b) (ii), (iii) and (iv) of Chapter 12; that its decision was null and void as well as an infringement of the Malta Constitution, article 39; and
2. To declare the Board to be responsible for damages, suffered as a consequence of its decision; to liquidate the damages and to condemn the Board to pay the damages.

The Board in reply defended its decision to impose a fine upon the applicants. It also raised two preliminary pleas why this court should reject this case:

• The merits of the case were exhausted. Applicants had already paid the penalty and, by paying the fine, they accepted it and there was nothing else to investigate.
• The Sanctions Monitoring Board did not fall under the definition of ‘public authority’ in terms of article 469A Chapter 12 of the laws of Malta; that its decisions could not be reviewed under this article and that it should be freed from these proceedings.

The Court considered these two preliminary pleas of the Board and limited its decision to decide these two pleas.

It said that it was clear that in the circumstances, applicants paid the fine under protest and not because they accepted the administrative sanction of the Board. Although applicants did not express any caveats when effecting payment, they did make it amply clear in their email to the Board that they did not accept the fine and were going to challenge it before the Courts. There was no other way to suspend the imposition of additional penalties, in excess of the 800 EUR fine. Applicants had no other option but to pay the administrative penalty under protest and to later contest it by these judicial proceedings.

Reference was made to case law for guidance, to confirm the legal point that when a person paid a fine under protest for any breach, he was not precluded from contesting it and from disputing the Board’s decision. To reaffirm this point, the court referred to the following cases: William sive Willie Grech and Anna Grech vs Transport Malta dated 18 September 2012; Dr Marco A Ciliberti et vs Hon Prime Minister et dated 16 June 2016; and Public Broadcasting Services Limited vs Broadcasting Authority 11 May 2009.

The Court moved on to decide the Board’s second plea that it could not be considered a ‘public authority’ under article 469A of Chapter 12.

The Board put forward the argument that only a board which issued warrants or licences could be considered a ‘public authority’ under article 469A. This was not the case for the Sanctions Monitoring Board, it said. Its role was limited to taking decisions, making recommendations, and to providing instructions, advice, and notices, the Board maintained.

The applicants, on the other side disagreed,  and were of the view that the term ‘public authority’ under article 469A had to be given a wider interpretation. They insisted that the word ‘includes’ within the definitions provided in  the law signified that in fact the list of ‘authorities’ mentioned by the law itself was not exhaustive.

The Applicants also claimed that the Board carried out administrative acts as a public authority, and that the penalty which it imposed was also in the nature of an administrative penalty; that is, a penalty of a public authority which carried out an administrative act.

The Court agreed with the applicants in this instance.  The fact that the definition of ‘public authority’ in our law made reference to boards which issued licences and warrants, did not mean that other boards were excluded, the court pointed out.

The function of the Board was described in article 7 (5) of Chapter 365, and in particular its role was: ‘(i)  to monitor   the   implementation   and operation  of  sanctions  imposed  by  regulations  made under  this  Act,  Regulations  of  the  Council  of  the European Union and United Nations Security Council Resolutions  and,  where  applicable,  to  harmonise practice thereon with that followed by other states;’

It was also vested with authority to take decisions, and give advice, notices, recommendations, and instructions.

The court felt it was the intention of the legislator for the Sanctions Monitoring Board to be considered as a ‘public authority’ for the purposes of article 469A Chapter 12 of the laws of Malta, and this irrespective of what act, it carried out.

For these reasons on March 11, 2022, the Court dismissed the preliminary pleas of the Board and ordered the continuation of the case on its own merits.

This article was first published in the Malta Independent.