R (on the application of Ezz) v HM Treasury
| Jurisdiction | England & Wales |
| Judge | Mr Justice Cranston |
| Judgment Date | 23 June 2016 |
| Neutral Citation | [2016] EWHC 1470 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/5910/2015 |
| Date | 23 June 2016 |
[2016] EWHC 1470 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Cranston
Case No: CO/5910/2015
Brian Kennelly QC and Emily Neill (instructed by BCL Burton Copeland) for the Claimant
Charles Banner (instructed by Government Legal Department) for the Defendant
Hearing date: 26 May 2016
Approved Judgment
Introduction
Ahmed Ezz, the claimant, is being tried in Egypt for corruption and is facing a very substantial period of imprisonment. The European Union has frozen his funds throughout Europe under Article 1(1) of the Council Decision 2011/172/CFSP of 21 March 2011, implemented by Council Regulation (EU) No 270/2011 of 21 March 2011 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Egypt ("the EU Regulation"). Mr Ezz is one of those named by these measures. He is presently challenging his designation before the General Court of the European Union.
In this judicial review Mr Ezz challenges the rationality of a decision of HM Treasury, which is responsible for the administration of these European Union measures in the United Kingdom. That decision was taken when he applied for the release of moneys from these frozen funds for the payment of his criminal defence lawyers in Egypt. HM Treasury's decision was to assess the reasonableness of these legal fees by reference to the maximum Senior Courts Costs Office ("SCCO") guidance for London legal rates, adjusted by the International Monetary Fund's Purchasing Power Parity conversion rate ("PPP"). A PPP conversion rate is a currency conversion rate designed to reflect differences in the average cost of living in different countries. Mr Ezz contends that PPP is not an appropriate mechanism when he needs to pay for specialist legal services for his defence. The effect of HM Treasury's decision is to reduce the maximum SCCO London daily rate payable for appearing in court from £15,000 to USD $5,790.98.
Permission to proceed with the claim was refused by Mrs Justice Cheema-Grubb on 18 January 2016. The claimant renewed his application for permission on 27 January 2016. By a Consent Order signed on 12 February 2016 the parties agreed to a rolled-up hearing of the claimant's application for permission to proceed, simultaneously with the substantive claim.
Background
Mr Ezz is a former member of the Egyptian Parliament and a businessman. Following the fall of the Mubarak regime, he was convicted of various charges in the Cairo District Court and the Cairo Economic Court, essentially of misappropriating state funds and money laundering. The charges appear mainly to relate to a company called Al Ezz Dekheila Steel Company (previously Alexandria National Iron and Steel Company) and to other companies Mr Ezz owns indirectly, principally Ezz Steel Rebars and its subsidiaries. Substantial prison sentences and fines were imposed. Mr Ezz's convictions were overturned by the Court of Cassation, but a number of retrials are pending. Mr Ezz's position is that the allegations against him are politically motivated and baseless. Pursuant to the EU Regulation in 2011 he was designated as a person "responsible for the misappropriation of Egyptian State funds". He has been re-designated in 2012, 2013, 2014, 2015 and, most recently, on 18 March 2016: Council Decision (CFSP) 2016/411 of 18 March 2016.
In 2013 Mr Ezz instructed Mr Abou Shokka of Abou Shokka Advocates ("ASA") to represent him in the Egyptian proceedings. The EU Regulation recognises that competent Member State authorities such as HM Treasury may authorise the release of funds intended exclusively for the payment of "reasonable professional fees or the reimbursement of incurred expenses associated with the provision of legal services". On 11 December 2013 Mr Ezz applied for a licence to access frozen funds to pay the legal fees of ASA. Mr Ezz provided HM Treasury with a record of his agreement with ASA to show that the fee being charged was a lump sum, which was to cover work being undertaken over approximately three years in relation to the criminal proceedings. He has also produced itemised invoices with a narrative of work done.
There was correspondence between Mr Binns and HM Treasury relating to the question of what constituted reasonable professional fees. In a letter of 24 January 2014, Mr Binns enclosed a letter from Hazim Rizkana, a partner of Helmy, Hamza & Partners, a member firm of Baker McKenzie International, in which Mr Rizkana stated that the criminal lawyers involved in the business crime cases following the end of the Mubarak regime usually charge lump sum fees in advance. The difficult environment surrounding the prosecutions and the risks associated with them meant that the fees escalated "and we have heard of various fee figures ranging from EGP5 million up to EGP70 million. We have no means to verify these figures… but this is what is being gathered from the market."
An email from the HM Treasury in mid-May 2014 stated that, to date, little had been provided on how to assess reasonable fees, and that only through relative comparisons did it judge the task could be undertaken. In a letter of 21 May 2014, Mr Binns reiterated that ASA charged an upfront fee rather than by the hour or in arrears. HM Treasury's response on 30 May 2014 asked for the details of other law firms approached and for the fees they quoted, and stated that Mr Ezz needed to engage with the central issue, that of the reasonableness of the fees. In an email following a meeting with Mr Ezz's London representatives, HM Treasury repeated its request for details of alternative firms approached and for the fees they quoted. In a letter of 13 August 2014, Mr Binns referred to rates that his firm charged and for what it had paid London counsel for work undertaken in Egypt. HM Treasury rejected this as offering any sound basis for deciding the matter. A letter from HM Treasury dated 21 October 2014 repeated the request for information about the basis and level at which Egyptian lawyers were generally remunerated for similar work. In a letter of 10 March HM Treasury wrote that an impasse had been reached. It also raised its concern about Mr Ezz's access to other funds, in particular how he had been able to pay substantial fines in Egypt.
Meanwhile HM Treasury had made inquiries itself to try to assess what were reasonable legal fees within the Egyptian legal market. On its behalf, the Metropolitan Police anti-corruption task force contacted a local judge in Egypt in February 2014 about whether Egyptian lawyers like ASA would earn as much as a London based lawyer, some of whom charged £750 per hour. The judge opined that he would not be surprised if ASA charged even more. HM Treasury also made enquiries through the British Embassy in Cairo, which contacted the senior partner of a law firm in Cairo. He replied in May 2014 that there were no lawyers in Cairo with expertise in assessing legal bills, that lawyers in Egypt, particularly those defending high profile persons associated with the Mubarak regime, were expensive to engage, and that typically in Egypt legal fees were agreed as a total amount at the outset. In January 2015 the British ambassador to Egypt was involved: an inquiry made on his behalf of the Egyptian prosecutors was that defence lawyers would be paid a lump sum and that the amounts mentioned to them did not appear to be unreasonable.
While discussions continued relating to the assessment of reasonable professional fees, HM Treasury granted interim licences for Mr Ezz's legal fees. The funds released were USD $625,000. In February 2015 Mr Ezz sent a further invoice totalling USD $500,000 to HM Treasury and requested a further interim licence.
The Decision
In a letter dated 20 July 2015 HM Treasury wrote to Mr Binns setting out "the basis on which we intend to licence the payment of ASA's fees". It acknowledged the gravity of the criminal proceedings Mr Ezz was facing. It recounted the correspondence and then set out its "[p]roposed approach" for the calculation of reasonable professional fees. The onus was on Mr Ezz, HM Treasury said, and it was not satisfied with the answers provided by him and was left with no other option but to consider London legal rates as a comparison. Egyptian lawyers acted as both barrister and solicitor. Thus from the SCCO hourly rates it would adopt the maximum day hearing rate for QCs of £15,000 for attendance in court and the hourly rate of £409 for a grade A solicitor. Since ASA's services were being provided in Egypt, it would convert those rates into Egyptian Pounds using the International Monetary Fund's PPP conversion rate and then convert them from Egyptian Pounds into US Dollars.
In a letter dated 5 August 2015, Mr Binns accepted the day hearing and hourly rates proposed, but raised concerns about adjusting these through the PPP conversion rate. This was the first time PPP had been raised, he wrote, and it was principally based on living costs. Even if legal costs were included in the PPP calculation, he added, the other cost data would dilute their impact. Further, Egyptian legal costs were unlikely to be subject to the same market conditions as other living costs; the advocates Mr Ezz had selected were entitled to charge higher fees than other lawyers; and the PPP conversion rate that HM Treasury mentioned was dated and otherwise inappropriate.
In a letter of 18 August 2015, HM Treasury wrote to Mr Binns stating that it considered eight, not ten, chargeable hours a day as reasonable. It noted the objections to the use of PPP. It explained that it had been engaging in correspondence since December 2013 to...
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