A change to the English civil procedure rules on service out of the jurisdiction promises to have a significant impact on fraud cases, and in particular crypto fraud cases, where third parties holding key information are located overseas.
Remind me, what is an information order?
Often sought against a third-party innocent of any wrongdoing, information orders seek to obtain information as to the identity of a wrongdoer or information to enable asset tracing. In English law, examples of information orders against non-parties are Norwich Pharmacal Orders [1] and Bankers Trust orders [2].
And 'Gateway 25' would be?
Gateway 25 is a new jurisdictional gateway under Practice Direction 6B of the English Civil Procedure Rules which was introduced on 1 October 2022. Jurisdictional gateways set out the particular circumstances in which a claimant can apply for permission to serve proceedings out of the jurisdiction. This new gateway provides specifically for claims and applications for disclosure from non-parties where the information being sought relates to the true identity of a defendant (or potential defendant) or to establishing what has become of the property of the claimant or applicant.
What will the change mean?
It means that, for the first time, information orders against third parties can, subject to the court granting permission, be served against overseas entities worldwide. Previously, existing English legal authority meant it was not possible to seek permission to serve Norwich Pharmacal Orders out of the jurisdiction under any of the jurisdictional gateways. The position was also difficult in the case Bankers Trust Orders. The new gateway, aimed specifically at information orders, therefore opens up new possibilities for identifying perpetrators of fraud and tracing assets obtained by fraudulent means.
What has this got to do with crypto-fraud?
Clearly claimants in crypto-fraud cases will not be the only ones who benefit from the new rule. However, with the increasing prevalence of fraud cases in England involving cryptoassets, the lack of an appropriate jurisdictional gateway for the service of information orders has been identified as a barrier to proceedings aimed at tracing the proceeds of such fraud. The information required to bring such a fraud claim will often be held by non-parties domiciled overseas.
Sounds like good news - is there anything else I need to know?
While this development is encouraging, we don’t yet know how the court will approach the new gateway. The wording of the rule allows permission to be sought where information is sought regarding either "the true identity of a defendant or a potential defendant" or "what has become of the property of a claimant or applicant". However, the information orders sought, in particular in relation to what has become of a claimant's property, may often seek information beyond a narrow reading of that rule. The court's interpretation will therefore be important. For example, with respect to requests for information about what has become of a claimant's property, will the court allow wide requests for information about who is holding assets and how assets got to where they are? Or will it limit requests to information about where assets are located at the present time?
Given the purpose of the new rules is to assist defrauded claimants, it is hoped that the court will recognise the value in a broader interpretation.
[1] Taking its name from the case Norwich Pharmacal Co v Commissioners of Customs and Excise [1974] AC 133, this is an order for the disclosure of documents or information by the respondent to the applicant where the respondent, even if innocently, has facilitated the wrongdoing. Often used to establish the identity of the wrongdoer, trace assets of plead proprietary claims.
[2] An order against a bank requiring it to disclose information in respect of an account belonging to a customer who is, on the face of it, guilty of fraud. There must be a clear case that relevant funds held by or passing through the bank belong to the claimant. Named after Bankers Trust Company v Shapira and others [1980] 1 WLR 1274.
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