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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Finninvest SPA, R (on the application of) v Secretary of State for the Home Department [1996] EWHC 382 (QB) (23 October 1996) URL: http://www.bailii.org/ew/cases/EWHC/QB/1996/382.html Cite as: [1996] EWHC 382 (QB), [1997] 1 All ER 942, [1997] 1 Cr App Rep 257, [1997] COD 94, [1997] WLR 743, [1997] 1 WLR 743, [1997] 1 Cr App R 257, [1997] Crim LR 213, [1995] 2 BCLC 585

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(DIVISIONAL COURT)

		Royal Courts of Justice Strand London WC2
		Wednesday 23 October 1996

Wednesday 23 October 1996

LORD JUSTICE SIMON BROWN: This motion involves a wide ranging series of challenges directed at the implementation by the United Kingdom authorities of an Italian letter of request. The applicants are respectively Fininvest S.P.A., a large Italian corporation with interests in advertising, publishing and broadcasting; Mr. Confalonieri, Fininvest's president since 1991; and Mr. Berlusconi, Fininvest's previous president and their principal shareholder, a Member of the Italian Chamber of Deputies, Leader of the Forza Italia political party and, from March to December 1994, Prime Minister of Italy.

The applicants and others are alleged by the Italian prosecuting authorities to be involved in a huge fraud, a fraud whereby at least Lire 100 billion (about £51 million sterling) has been surreptitiously removed from Fininvest and used for criminal purposes. Prosecutions are already afoot against Mr. Berlusconi respectively for bribing Revenue inspectors (Proceeding No. 12731/94) and for making illicit donations of Lire 10 billion to Mr. Craxi, the former Prime Minister and Leader of the Italian Socialist Party (Proceeding No. 9811/93). Such donations were illicit because they were made without proper authority of Fininvest's Board of Directors and without proper records; Italian law requires transparency of political payments both from donors and recipients.

The applicants and others are now being investigated too in relation to other offences involved in this overall fraud, notably offences of false accounting within the Fininvest Group whereby the source of these large sums was concealed.

It was in connection with these investigations that the Secretary of State for the Home Department received from the Public Prosecutor in Milan a letter of request dated 21st March 1996, supplemented by a further letter dated 9th April 1996, sent under the provisions of the European Convention on Mutual Assistance in Criminal Matters 1959 (the 1959 Convention), implemented in the United Kingdom by the Criminal Justice (International Cooperation) Act 1990 (the 1990 Act).

By that letter the Italians requested assistance in obtaining documents relevant to the allegations of false accounting, in particular documents held by C.M.M. Corporate Services Limited (CMM) at an address in Regent Street. CMM is a company founded by Mr David Mills, a solicitor and now a partner in Messrs. Withers.

The request was referred by the Home Secretary to the Director of the Serious Fraud Office (the SFO) under section 4 (2A) of the 1990 Act (introduced by amendment by the Criminal Justice and Public Order Act 1994).

The SFO implemented the request under their powers contained in the Criminal Justice Act 1987 (the 1987 Act), similarly amended in 1994 to provide for a section 4(2A) reference by the Home Secretary. They did so in part under section 2(4) of the 1987 Act by seeking and obtaining a search warrant authorising entry to CMM's premises to search there for specified documents, and in part under section 2(3) of the 1987 Act by serving upon Mr. Mills a notice requiring him to produce specified documents. Seven days was initially allowed under the section 2(3) notice, a period since from time to time extended whereby the notice still remains outstanding.

The search warrant was issued by the Bow Street Metropolitan Stipendiary Magistrate on 15th April 1996 and executed that day with the full cooperation of CMM. The documents removed were (with the consent of the applicants' then solicitors) examined by representatives of the Italian authorities to ascertain which were relevant and which were required for transmission to Italy. Some of the documents taken have since been returned to CMM; the rest were sent by the SFO to the Home Secretary. None, pending this challenge, have been transmitted to Italy. The Italian representatives, however, have communicated certain information as to their contents to the Italian prosecuting authorities whereby certain further arrests have since been made.

The present challenges are directed:

1. to the Home Secretary's decision to refer the request to the SFO;
2. to the SFO's decision to seek a search warrant;
3. to the Bow Street Stipendiary Magistrate's decision to issue the warrant;
4. to the terms of the section 2(3) notice;
5. to the transmission of information by the Italian representatives to their prosecuting authority.

The grounds of these challenges are many and various. Some go to more than one of the steps under attack. Principally, however, they are three-fold, concerned respectively with:

(a) the width of the request (and, in turn, of the warrant and notice),

(b) the justifiability of seeking (and issuing) a search warrant, and

(c) the question whether this case involves political offences.

It is time to set out the material parts of the main statutory provisions in play, providing as these do the essential framework within which all these challenges fall to be considered.

First, section 4 of the 1990 Act as amended:

"4. (1) This section has effect where the Secretary of State receives

(a) from a court or tribunal exercising criminal jurisdiction in a country or territory outside the United Kingdom or a prosecuting authority in such a country or territory; or

(b) from any other authority in such a country or territory which appears to him to have the function of making requests of the kind to which this section applies,

a request for assistance in obtaining evidence in the United Kingdom in connection with criminal proceedings that have been instituted, or a criminal investigation that is being carried on, in that country or territory.

(2A) Except where the evidence is to be obtained as is mentioned in subsection (2) below, if the Secretary of State is satisfied -

(a) that an offence under the law of the country or territory in question has been committed or that there are reasonable grounds for suspecting that such an offence has been committed; and

(b) that proceedings in respect of that offence have been instituted in that country or territory or that an investigation into that offence is being carried on there,

and it appears to him that the request relates to an offence involving serious or complex fraud, he may, if he thinks fit, refer the request or any part of the request to the Director of the Serious Fraud Office for him to obtain such of the evidence to which the request or part referred relates as may appear to the Director to be appropriate for giving effect to the request or part referred.

(5) In this section 'evidence' includes documents and other articles."

Next, section 2 of the 1987 Act, as amended:

"(1B) The Director shall not exercise his powers on a request from the Secretary of State acting in response to a request received from an overseas authority within subsection (1A)(b) above unless it appears to the Director on reasonable grounds that the offence in respect of which he has been requested to obtain evidence involves serious or complex fraud.

(3) The Director may by notice in writing require the person under investigation or any other person to produce at such place as may be specified in the notice and either forthwith or at such time as may be so specified any specified documents which appear to the Director to relate to any matter relevant to the investigation or any documents of a specified description which appear to him so to relate; and

(a) if any such documents are produced, the Director may

(i) take copies or extracts from them;

(ii) require the person producing them to provide an explanation of any of them;

(b) if any such documents are not produced, the Director may require the person who was required to produce them to state, to the best of his knowledge and belief, where they are.

(4) Where, on information on oath laid by a member of the Serious Fraud Office, a justice of the peace is satisfied, in relation to any documents, that there are reasonable grounds for believing

(a) that -

(i) a person has failed to comply with an obligation under this section to produce them;

(ii) it is not practicable to serve a notice under subsection (3) above in relation to them; or

(iii)the service of such a notice in relation to them might seriously prejudice the investigation; and

(b) that they are on premises specified in the information.

he may issue such a warrant as is mentioned in subsection (5) below.

(8A) Any evidence obtained by the Director for use by an overseas authority shall be furnished by him to the Secretary of State for transmission to the overseas authority which requested it."

The Secretary of State's decision to refer the request to the SFO is attacked on two main grounds. First it is said that the request was not properly to be regarded as one "for assistance in obtaining evidence" (my emphasis); rather, it is said, the request invites merely an extensive fishing expedition, something which the Secretary of State has no jurisdiction to entertain or to refer on to the SFO. Second, it is said that the Home Secretary was bound to consider whether or not the request concerned "a political offence [or] an offence connected with a political offence" (within the meaning of Article 2(a)of the 1959 Convention), and that had he done so in the light of the information which the Italians were duty bound, but failed, to put before him, he must, or at least could, properly have concluded that it did, a conclusion which would have provided him with a specific discretion to refuse assistance to the Italian authorities. To this political issue I shall come at the end, once the facts are more fully described.

I start with the width of the request, a question which arises more obviously in relation to the search warrant and the section 2(3) notice; more obviously because, provided only and always that the request is essentially one for evidence, the possibility that it extends too far is not, the Home Secretary submits and I accept, something that need concern him; rather it is a matter for consideration by the SFO if the request is referred to them (as it would be a matter for the court in those cases, unlike the present, where the Home Secretary nominates a court under section 4(2)).

Examination of this part of the case necessarily involves further reference to the facts, in particular those set out in the letters of request and in the information sworn by Mr. Dickson of the SFO to obtain the search warrant.

The criminal offence under investigation is described in the letter of request thus:

"False accounting.....in that acting together and with a single purpose they fraudulently falsified the annual balance sheets of Fininvest in order to conceal the creation, administration and use of very large sums of money, by:

(a) fraudulent money transfers; and

(b) false commercial operations; and

(c) payments for consulting services which did not exist.

Very large sums of money were booked to overseas companies which were outside the consolidated balance sheet of Fininvest.

Under Italian law, the offences aggravated both because of the damage which has been done to Fininvest and because of its continuing nature.

By surreptitious and unrecorded means, monies from the overseas companies have been used for criminal purposes such as illicit payments to politicians.

The monies booked to the overseas companies were financed both by Silvio Berlusconi Finanziariasa SA (now SFII SA), a Luxembourg company which was the Fininvest foreign treasury company, and by Istifi spa, the Fininvest Italian treasury company. The administrative arrangements were made under the direction of executives of Fininvest."

The letter then explains in rather more detail how the fraud was committed and why assistance is sought from the UK authorities in connection with documents held by CMM and Mr. Mills:

"Fininvest is a large Italian holding company which has interests in broadcasting, television and advertising. Through a network of further holding companies of which he held, in each case, a majority of the shares, Silvio Berlusconi, until recently Prime Minister of Italy, controlled Fininvest.

The investigation into Fininvest has discovered a very large fraud whereby, for different reasons and by different methods, the persons under investigation all acting under the direction of Silvio Berlusconi, worked together to remove large sums of money secretly from Fininvest. This operation included the laundering of money.

The manner in which the Fininvest Group operated was that none of the companies within the Group received or paid out their own funds. Within Italy, there was a single treasury company, Istifi spa, which made all payments and received all funds. Outside Italy, there was, again, a single treasury company, Silvio Berlusconi Finanziaria SA (now SFII SA), which fulfilled the same function.

As part of the fraud, a substantial number of overseas companies were created, many in such jurisdictions as Panama, the British Virgin Islands and the Channel Islands. These overseas companies are listed in Schedule I attached hereto.

Initially, these overseas companies were administered by fiduciaries in Switzerland. A number of different financial operations were employed. These are some examples.

1. A company within the Fininvest group would, either directly or through a third party, conclude an agreement with an overseas company whereby, in return for a fee from the Fininvest company, services of various kinds would apparently be provided. In fact such services were never provided and the effect was simply to move money out of Fininvest to the overseas company.

2. A similar method of removing money was for the company in the Fininvest Group either directly or through a third party to purchase share rights from the overseas company. Again, this was illusory, and no rights were actually acquired.

3. A different type of operation arose where, using funding from Fininvest through a third party, overseas companies purchased quoted shares in companies in the Fininvest Group, the apparent intention being to inflate the price of the shares. That this operation was a sham was clear from the fact that the shares, which were bearer shares, remained at all times in the possession of the same fiduciary.

The ultimate destination of the money going to the overseas companies is still the subject of investigations. It is possible to say, however, that some of it has been removed in cash from banks in Switzerland. In respect of one particular payment, however, there is documentary evidence that in 1991, Lire 10 billion (approximately £4 million Sterling) was paid into an account in the name of an overseas company at SBS, a bank in Lugano. This sum was then transferred to the account of Northern Holding at the Trade Development Bank of Geneva, Switzerland. This account is operated by a fiduciary who represents Bettino Craxi, an Italian Deputy (ie a Member of Parliament) who has been Prime Minister of Italy and also President of the Socialist Party of Italy. The money was then transferred from that account to BIL, a Luxembourg bank, where it was credited to the account of Bellhart Holding. One of the people permitted to operate the Bellhart Holding account is a man called Al Kateeb, a representative of the PLO.

As a result of a Commission Rogatoire which was sent to Switzerland, and the actions of the examining magistrate in Lugano, we have discovered that the persons under investigation considered it too dangerous to continue to have the overseas companies administered from Switzerland, and therefore moved their administration to London. We have discovered that this is being undertaken by a company called CMM Corporate Services Limited (now owned by a company called Edsaco Limited) which is located at Sceptre House, 169/173 Regent Street, London W1R 7FB.

The name "CMM" originated with a law firm called Carnelutti Mackenzie Mills. This firm no longer exists, and nor does the firm of Mackenzie Mills & Co which succeeded it. Mr. David Mackenzie Mills of that former firm is presently a partner in the firm of Withers, which is located at 12 Gough Square, London EC4A 3DE. Mr. Mills has been very much involved in administering these overseas companies, and this does not appear to have ceased since he became a partner in Withers.

In that the overseas companies are now administered by CMM Corporate Services Limited/Edsaco Limited with the assistance of Mr. Mills, I believe that documents material to our investigation are likely to be found both at Septre House and in the possession of Mr Mills at the firm of Withers. I have set out a description of these documents in Schedule II attached hereto. Apart from Mr Mills, it appears that the other current directors of CMM Corporate Services Limited/Edsaco Limited are J R Beardsley, D F Lavin, Ms Tanya Maynard, A Sarikhani and M J Wickers. Others who have been, and may still be, involved are Anthony R Indaimo and Jeremy W Le M Scott who are both presently partners in the firm of Withers."

The letter then indicated the particular form of assistance requested and why. This, however, goes (as does also the supplementary letter of request) rather to the separate issue of whether or not a search warrant was justified here, and to that I shall return later. Suffice it for present purposes to note only that the Italian authorities were seeking in particular to obtain the documents specified in Schedule 2 to the request, a Schedule which commences thus:

"all documents of the description set out below, or files of documents containing documents of the description set out below, which are connected to, or relate in any way to, Fininvest or any companies in its Group, or any of the persons named in this letter of request including persons under investigation, or any companies or entities set out in Schedule I hereto [a list of overseas companies] for the period 1st January 1989 to the present day",

and which then recites a long list of categories of business documentation.

Mr Dickson's information repeated much of the contents of the letter of request, explained why he was applying for a search warrant (a matter to which I shall return) and scheduled the documents being sought (described almost identically as in the letter of request save that the schedules were somewhat re-ordered). A warrant was issued duly authorising entry to CMM's Regent Street premises to search for the scheduled documents. Six named Italians were permitted to accompany any police constable executing the warrant. This had been specifically requested for obvious good reason: the documents related to highly complex matters and many were in Italian. The Italians were there to advise where necessary as to which documents fell within the terms of the warrant.

The section 2(3) notice served on Mr Mills described the documents to be produced by him precisely as they were described in the search warrant. There have, we are told, been extensive subsequent discussions between Mr Mills and the SFO as to just what documents he has which should be produced.

The applicants' arguments for contending that the warrant and the section 2(3) notice, as well as the letter of request itself, were inpermissibly wide, run essentially as follows:

1. "Evidence" - the word used in sections 4 (1)(b) and 4(2A) of the 1990 Act - has an established meaning in this context i.e. in the field of mutual assistance.

Amongst the various formulations encapsulating this meaning are that the evidence required is "....... direct evidence for use at a trial as contrasted with information which may lead to the discovery of evidence ...... " - per Viscount Dilhorne in Rio Tinto Zinc Corporation v Westinghouse Electric Corporation[1978] AC 547 at 619. Or that it is the antithesis of fishing:

"[Fishing] arises in cases where what is sought is not evidence as such, but information which may lead to a line of enquiry which would disclose evidence. It is the search for material in the hope of being able to raise allegations of fact, as opposed to the elicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularisation."

- per Kerr LJ in In re State of Norway's Application [1987] 1 QB 433 at 482.

2. The documents sought in the present case fall foul of that test. This is so in three particular respects:

(a) The formula adopted in Schedule 2 "all documents [of descriptions so wide as to encompass virtually all business documentation] ..... which are connected to, or relate in any way to [anyone named in the request]" was held in Westinghouse (where the request was for "any memoranda, correspondence or other documents relevant thereto") to be too wide. It does not attempt to identify any particular transaction or activity. It has all the hallmarks of a fishing expedition.

(b) The period of time encompassed by the request - "lst January 1989 to the present day" - is too wide, in particular in that it extends some fifteen months after the closing of the account on 31st December 1994 in connection with the second, later, false accounting charge.

(c) The documents are sought provided only that they relate to "any of the persons named in this letter". That includes, for instance, Mr Mills himself and the other named individuals concerned with CMM. In the result, the description read literally is apt to include, for example, Mr Mills' own personal correspondence and bank statements. That plainly goes too far.

Plausible though at first blush these arguments appear, in my judgment (with but a single qualified exception in respect of the named persons) they prove unsustainable on closer examination. In the first place, I would accept the respondents' contention that what is meant by the word 'evidence' in the present context is not identical to its established meaning in the legislation under consideration in Westinghouse and in In re Norway. True, as the applicants point out, the evidence obtainable under the Evidence (Proceedings in Other Jurisdictions) Act 1975 included that required for civil proceedings whether already instituted or contemplated, and that required for criminal proceedings provided they are already instituted. But it was not until the 1990 Act that a provision was made for obtaining evidence in connection with "a criminal investigation" - providing only, as section 4 makes plain, that the Home Secretary is satisfied both that an investigation into a particular offence is being carried on and that there are reasonable grounds for suspecting that it has been committed.

Inevitably there is some flexibility in the whole concept of evidence - not even the applicants submit, for example, that what may be sought under the 1990 Act must be "likely to be material evidence" within the meaning of section 97 (1) of the Magistrates Courts Act 1980 as explained in R v Reading Justices ex parte: Berkshire County Council [1996] 1 CAR 239. When, therefore, one is speaking of 'evidence' in the context of a criminal investigation, the permissible area of search must inevitably be wider than once that investigation is complete and the prosecution's concern is rather to prove an already investigated and "instituted" offence.

The 1990 Act in short created a wholly new scheme for mutual assistance with regard to criminal investigations, a scheme under which it would plainly be necessary to examine altogether more material than would ultimately constitute evidence at any trial. True, the word "evidence" continues to be used, but Parliament cannot thereby have intended to confine assistance within the relatively narrow limits prescribed by Westinghouse and In re Norway. That in effect would be to defeat the very change being brought about by the 1990 Act. The terms of Article 1 of the 1959 Convention should in this regard be noted:

"(1) The Contracting Parties undertake to afford each other, in accordance with the provisions of this Convention, the widest measure of mutual assistance in proceedings in respect of offences the punishment of which, at the time of the request for assistance, falls within the jurisdiction of the judicial authorities of the requesting Party."

In my judgment, that consideration of itself is sufficient to defeat the applicant's central contentions here with regard to the width of disclosure sought in this case. What is under investigation here is, after all, as the respondents point out, a wide-ranging, multi-faceted, international fraud involving far-reaching allegations against a large number of individuals in connection with an even larger number of companies. Considering, moreover, that it is at the investigative stage, one could hardly look to greater particularisation of the offences than is contained in the letter of request. So far from this being a fishing expedition, specific allegations of fact are made concerning the setting up of an elaborate network of overseas companies and the various ways in which the false accounting has been committed. The documentation which it is believed will establish or support these allegations is (or rather was) with CMM and Mr Mills. In short, the request for assistance here is not, as the applicants contend, vague and speculative; rather it is as precise and focused as such a request could sensibly be in these circumstances. It is impossible to know just what documents are both in London and relevant. To discover that, it is necessary to find, examine and appraise them. Given, however, that these are the type of documents invariably germane to any major company fraud investigation, and that these overseas companies are now administered by CMM, it is highly likely that many will be relevant. And insofar as any of the documents seized prove not to be, they will not be transmitted to Italy. It is perhaps helpful in this regard to note also this passage from the judgment of the Swiss Federal Court dealing with the applicants' challenge to the Commission Rogatoire there:

"The question of knowing whether the information requested in the context of an application for assistance is necessary or of use in the proceedings underway in the applicant State, in general, must be left up to the assessment of the latter's authorities. The State applied to does not, in fact, have the means to be able to pronounce on the advisability of adopting certain evidence and cannot, therefore, put its own power of assessment in place of that of the foreign authority carrying out the enquiries."

As for the period encompassed by the request, extending as it does beyond the periods of false accounting under investigation, that seems to me plainly justifiable in the present circumstances: self-evidently documents post-dating the closing of accounts are likely to refer back to the accounting period and in any event they may reveal the subsequent movement of assets or shares allegedly employed in the fraud. The position here could hardly be more different from that under consideration by Lord Widgery CJ in Williams v Summerfield [1972] 2QB 512 at 518, when, with reference to section 7 of the Bankers' Books Evidence Act 1879, he suggested that the period of disclosure of bank accounts be limited to the period strictly relevant to the charge before the justices.

The one criticism I do accept is, as stated, with regard to the named persons and the consequences of a literal application of the terms of the search warrant and the section 2(3) notice in that regard. In my judgment, however, it would be quite wrong to strike down these instruments on that acount. The search warrant has now long since been executed and there is no suggestion that such obviously inappropriate documents as theoretically would fall within its scope were in fact taken. On no view did the infelicitous formulation of the schedule constitute the sort of serious breach of statutory safeguard that Auld J was referring to in R v Southampton Crown Court ex parte J and P (unreported 21st December 1992) when this court declined to allow the warrant there to stand - albeit, one should note, even then on the basis that the police investigation would not be prejudiced because a fresh warrant could be sought and meantime the documents would be held safe.

As for the outstanding section 2(3) notice, the intended scope of which is already under discussion between the SFO and Mr Mills, I see no reason why agreement should not readily be reached to confine it to what may sensibly be called the Fininvest documents. Plainly the SFO have no possible interest in seeing Mr Mills' own personal papers. Had it been necessary, I would have regarded this as a clear case for "excising inappropriate material [to] produce a request which is acceptable and proper" - see Glidewell LJ in In re Norway at page 491. In my judgment, however, this is not necessary here.

Before concluding this part of the case, there is one further group of arguments I should notice. We were treated to elaborate submissions from both sides as to the significance of the word "information" in section 2(2) of the 1987 Act - a provision which I need not read and which was not, of course, invoked in the present case.

The applicants, as I understand it, point to the contrast between "information" and "evidence", submit that "information" is wider and more accurately represents what was the subject of the request here, and argue that compliance with such a request goes beyond what is permissible under section 4(2A) of the 1990 Act (which confines assistance to obtaining evidence). The SFO's powers under section 2(2) could, they submit, only properly be used in a domestic context.

Not so, submit the respondents. They argue, first that the word "information" is used in section 2(2) (and in section 2(10)) merely in contradistinction to documents and that it would be inappropriate to use the word "evidence" there because what is disclosed is only ever admissible in evidence where the section 2(8) conditions are satisfied. Second, and in any event, they submit that section 4(2A) of the 1990 Act - introduced in 1994 by the same amending legislation as introduced also the implementing provisions in the 1987 Act - contemplates, as indeed does section 2(1A)(b) of the 1987 Act itself, the full use of the SFO's powers. In other words, the "director's investigation powers" conferred by section 2, draconian as they may be, are no narrower with regard to requests for mutual assistance in overseas investigation cases than they are in the domestic context. The SFO can, in short, use their section 2(2) power in a mutual assistance case although, as I repeat, they did not do so here.

It is sufficient to say that I accept the respondents' arguments on these matters also; the applicants can accordingly derive no possible assistance from the use of the word "information" in section 2(2).

I would accordingly reject all the applicants' claims for relief with regard to the suggested excessive width of the letters of request, the search warrant and the section 2(3) notice.

I must turn next to a further discrete ground of challenge advanced against the Home Secretary's referral of this request to the SFO, the contention that before making such referral he was required, but failed, to consider whether there was dual criminality in respect of these offences. Whatever strictly is the position in law, I have to say that this seems to me, on any view, a wholly barren point: the clear fact is that Mr. Dickson of the SFO deposed in his Information that:

"the facts set out in the Request would, if they had taken place in England, constitute offences of, inter alia, conspiracy to defraud and false accounting".

It is, indeed, impossible to suppose that the Home Secretary himself, had he addressed the point, could have concluded otherwise.

The applicants contend, however, that relevant questions of extra-territoriality could have arisen here under English law and that the Home Secretary was bound to consider them. I therefore briefly address the substantive point: should he have done so? The applicants' argument here fixes upon the language of the precondition to referral in section 4(2A) of the 1990 Act; that "it appears to [the Home Secretary] that the request relates to an offence involving serious or complex fraud".

The SFO's powers under the 1987 Act, of course, only arise in cases involving "serious or complex fraud" - see section 1(3) of that Act. It follows, submit the applicants, that the offence in question must necessarily always constitute such an offence prosecutable under English law.

In my judgment this is a hopeless argument. The 1990 Act is at pains to indicate when dual criminality is required and when it is not. The relevant starting point is Article 5 of the 1959 Convention, which, so far as relevant, allows any contracting party to "reserve the right to make the execution of letters rogatory for search or seizure of property dependent on one or more of the following conditions:

(a) that the offence motivating the letters rogatory is punishable under both the law of the requesting Party and the law of the requested Party ......."

The UK duly reserved that right and when thereafter, in section 7 of the 1990 Act, Parliament came to deal with the "search or seizure of property", it provided in terms that the offence in question must "constitute a serious arrestable offence if it had occurred in any part of the United Kingdom" - see subsections 1 and 2(b) of section 7.

The one other requirement of dual criminality to be found in the 1990 Act is with regard to fiscal offences under section 4(3):

"where it appears to the Secretary of State ...... that the request relates to a fiscal offence in respect of which proceedings have not yet been instituted he shall not exercise his powers under [the earlier provisions] unless ........

(b) he is satisfied that the conduct constituting the offence would constitute an offence of the same or a similar nature if it had occurred in the United Kingdom."

That was permissible not because of article 5 of the 1959 Convention but rather because of article 2(a) which permits assistance to be refused not only if the request concerns a political offence but also if it concerns a fiscal offence, and which therefore allows conditions to be imposed, as here, in section 4(3)(b).

These instances are in striking contrast to the language of section 4(2A)(a) which requires only that the offence be one "under the law of the country or territory in question".

In short, even were these false accounting offences, contrary to the fact, not offences under English law too, it would matter nothing. Assistance would still be required.

Subject then to what I have called the political issue, that disposes of the challenge to the Home Secretary's referral of this request to the SFO and I can move next to the SFO's decision to seek a search warrant against CMM, and, in turn, the magistrate's decision to grant it. These decisions, it is said, were unjustified on the facts. More particularly it is argued that section 2(4)(a)(iii) of the 1987 Act was not satisfied here, ie. that there were no reasonable grounds for believing that the service of a section 2(3) notice on CMM "might seriously prejudice the investigation." I should record here the applicants' acknowledgment that the challenges to these two decisions - the SFO's to seek, and the magistrate's to grant, a search warrant - are identical; on the facts of this case either both must succeed or neither.

Once again it is necessary to return to the facts to see the basis upon which this search warrant was sought. This is to be found in paragraph 15 of Mr Dickson's Information:

"I have considered carefully whether it would be appropriate to obtain the specified documents by service on CMM Corporate Services Limited/Edsaco Limited and Mr Mills of Notices under Section 2(3) of the Act. Other things being equal, this is the normal way in which the Director would obtain such documents. I have noted (but no more) the request of the Assistant Public Prosecutor in Milan that the specified documents be obtained by means of a search warrant. In the case of Mr Mills, who is a professional man and a member of a highly respected professional firm, I believe that he would comply with a Notice to produce such documents as he has in his possession at his professional premises. I therefore intend to serve a Notice on him at the same time as any warrant which this court may grant is executed. In respect of CMM Corporate Services Limited/Edsaco Limited, however, I have come to the conclusion that service of such a Notice in relation to the specified documents might seriously prejudice the investigation, by allowing the opportunity for some or all of the specified documents to be concealed, destroyed or removed from the United Kingdom. I have come to this conclusion for three reasons:

(a) Those persons running CMM Corporate Services Limited/Edsaco Limited must be aware that what they have done in managing the companies set out in Schedule III is fraudulent and might render them liable to prosecution in Italy. That in itself would give them a strong incentive not to comply with a Notice, and to destroy or remove the documents.

(b) It is extremely worrying that the persons under investigation considered it too dangerous to continue to have the overseas companies administered from Switzerland, and therefore moved their administration to London. Quite apart from believing that enforcement action would not be taken in London, this suggests that CMM Corporate Services Limited/Edsaco Limited were considered a "safe" repository of the specified documents.

(c) The fact that the documents have already been moved once (from Switzerland) suggests that those involved would not hesitate to do the same again."

Most of what is set out there closely reflects the fears expressed by the Italians in their letters of request. The second letter, I should note, referred to evidence that had then come to light that Tanya Maynard, one of CMM's directors, had required those responsible for holding the documents in Switzerland to transfer them to CMM in London. This she did on 10th April 1995, very shortly after Italian letters of request were sent to Switzerland on 8th and 24th March. If there was an innocent explanation for this, none has ever been provided. Prosecuting authorities are, submit the respondents, entitled to a measure of scepticism in this sort of situation.

Not so, say the applicants. They argue that there was no sufficient evidential basis for a search warrant here and that it is fanciful to suggest that people running a company administration service such as CMM provides have a sufficient knowledge of the significance of their actions to allow an inference to be drawn that they themselves are involved. Unless, moreover, it could be said that those representing the directing mind of the company would destroy or remove the documents, there could be no sufficient reason for not seeking a section 2(3) order against CMM. This, after all, could have been served upon Mr Mills himself; it could have required production of the documents "forthwith"; and it would have been attended by grave sanctions - up to six months imprisonment for non-compliance (section 2(13)), and up to seven years imprisonment were anyone to destroy or dispose of relevant documents (section 2(16) and (17)).

The applicants seek to attack these decisions in two ways. First, it is said that the SFO ought to have carried out further investigation than they did to determine for themselves whether so extreme a step as a search warrant was justified against an apparently respectable company like CMM - a company owned since 1994 by Edsaco Limited, itself a wholly owned subsidiary of the Union Bank of Switzerland - most of whose clients are wholly unconnected to Fininvest. That an obligation lies upon the SFO to satisfy themselves of the justifiability of whatever course they take cannot be doubted - see R v Central Criminal Court ex parte Propend Finance Property Limited [1996] 2 CAR 26 at 36. In my judgment, however, the SFO did all that could reasonably be required of them in this regard. In the first place they were themselves already in direct discussions with the Italian prosecutors before ever this request was referred to them. Secondly, as Mr Dickson has deposed in these proceedings, he instigated certain enquiries of CMM through the Metropolitan Police. Third, it is plain that the SFO exercised their own independent judgment in the matter; that, indeed, is apparent from paragraph 15 of Mr. Dickson's Information.

The second ground of attack is that there was here simply no reasonable basis for seeking this search warrant. That, however, as the applicants recognise, can only be advanced as a Wednesbury challenge and in my judgment it is quite impossible to say here that, on the material before them, it was irrational either for the SFO to seek or for the magistrate to grant this search warrant.

I turn next to the challenge to the transmission to Italy of information gleaned by the Italian representatives following upon the execution of the search warrant. This, it is contended, breached the requirement in section 2(8A) of the 1987 Act that any evidence obtained by the SFO should be furnished to the Home Secretary for transmission abroad, a requirement reflected in Mr. Dickson's assurance to the applicants' then solicitors by letter dated 17th April 1996 that "the documents will be transmitted by us to the Home Office in the usual way for onward transmission to Italy."

By that same letter, however, Mr Dickson confirmed the arrangement already agreed with those solicitors that the Italian representatives would continue to examine the documents, as they had during the search itself, so as to limit what was to be sent to the Home Office to the documents or copies needed for the investigation. The Italian representatives made no notes of the documents, a fact confirmed by the terms of a report which they wrote on return to Italy on 19th April:

".......the information given in this report could contain some inaccuracies as it is simply the fruit of an effort to memorise the information made by the writer."

In those circumstances I accept the respondents' submission that it cannot be said that there has yet been any transmission to Italy of "evidence" - defined by section 4 (5) of the 1990 Act to include documents - contrary to section 2(8A), or of the documents contrary to the assurance. Nor do I think it right to criticise the Italian representatives for reporting back to their superiors in Italy to the best of their ability, or the SFO for not seeking assurances from the Italians that they would not do so. This frankly seems to me to have been neither realistic nor necessary.

This challenge too, therefore, I would reject.

I come finally to the political issue, the applicants' argument being that had the Home Secretary correctly directed himself on the law and been properly informed on the facts, he would have regarded each of these offences as "a political offence [or] an offence connected with a political offence" within the meaning of article 2(a) of the 1959 Convention, and thus been entitled to refuse assistance to the Italian authorities. Without such a discretion, I should note, the Secretary of State had no alternative under the Convention but to comply with the request. I have already set out the terms of article 1 (1); for good measure article 19 provides that "reasons shall be given for any refusal of mutual assistance." No other basis for refusal (save the width of the request with which I have already dealt) has been suggested.

It is time to set out the relevant part of article 2:

"Assistance may be refused:

(a) if the request concerns an offence which the requested Party considers a political offence, an offence connected with a political offence, or a fiscal offence ......"

The first question arising on this part of the case is whether the Home Secretary had to have regard to article 2(a) at all. In fact he did have regard to it, but if, as he argues, he was not in law required to do so, then even assuming he misdirected himself on the point, it would not matter.

In contending that he was not bound to consider article 2(a) at all, the Home Secretary relies in particular upon the lack of any such requirement in the domestic legislation, a silence contrasting with the express provision made by section 4(3) for fiscal offences. In my judgment, however, the argument is plainly unsound. Section 4(3) deals merely with some and by no means all fiscal offence requests and it does so, moreover, by removing the discretion which otherwise would exist with regard to them. This leaves other fiscal offence requests to be considered, just like any political offence requests, under the remaining provisions of section 4, which expressly confer upon the Home Secretary a general discretion in the matter. It seems to me quite impossible to contend that in exercising this general discretionary power the Home Secretary is entitled to ignore the express discretion arising under article 2. The Secretary of State would in my judgment plainly be overlooking a material consideration if, for example, he simply forgot the existence of article 2(a).

That is not to say, however, that the Secretary of State was bound to reach a decision as to whether or not these offences were themselves, or were connected with, political offences. He could instead, had he wished, have decided that whether or not they were - whether or not in other words a discretion arose under article 2(a) - he would not in any event exercise it to refuse cooperation with the Italian authorities in the particular circumstances of this case. Had he followed that course - or, indeed, had he deposed in the present proceedings that, even had he reached a contrary view on the political offence question, he would still have decided to comply with the request - his decision would in my judgment be proof against this particular ground of challenge, irrespective of whether or not he directed himself correctly on the substantive issue.

As it is, however, the Secretary of State has deposed, by Mr. Sonnenberg who dealt with this request, that:

"The request of 21st March 1996 referred to "illicit payments to politicians". I considered that the payments referred to were offences of bribery and corruption. I did not consider that the offences described in the request, namely of false accounting and use of monies for criminal purposes such as illicit payments to politicians, were political offences or offences connected with political offences. Accordingly, although I had article 2(a) of the Convention well in mind, I did not need to consider possible refusal of assistance thereunder."

In the result, we do not know what decision the Home Secretary would have taken in the case had he concluded that these were or were connected with political offences. Likely though it might appear that he would in any event have cooperated with this request, it accordingly becomes necessary to address the substantive question.

The next issue to arise is: according to whose law is the question whether or not an offence is political to be determined, that of the requesting State or that of the requested State? Although the applicants contend that this is to be determined by reference to the law of the requesting State, or perhaps both States, that seems to me wholly inconsistent with the express words of article 2(a): ....... "an offence which the requested Party considers a political offence ....." That formulation to my mind distinguishes the position here from that ordinarily arising under international conventions when the courts seek if possible to maintain consistency between the decisions of different jurisdictions - see, for example, Fothergill v Monarch Airlines [1981] AC 251 and T v Home Secretary [1996] 2 WLR 766 at 793A. In my judgment the issue here is to be determined according to English law.

I must touch now on a short point arising on the facts. As indicated in the passage already cited from his affidavit, Mr. Sonnenberg thought all the illicit payments to politicians involved offences of bribery and corruption. That is now conceded to be mistaken: some of these payments were unlawful simply because they were political contributions made without the requisite transparency and authority. The Italian authorities should, the applicants contend, have made this clear to the Home Secretary so that he could exercise his article 2(a) discretion with a proper understanding of the facts. I agree, and I further agree that in these circumstances the appropriate question to ask is whether, had the true facts been known to him, the Home Secretary would, or even could, have regarded these offences as political.

It is necessary at this stage to clarify precisely what offences here are said to be political. As I understand the applicants' argument, it is that one of the two sets of existing proceedings in Italy - Proceeding No. 12731/94 for making illicit donations of Lire 10 billion to Mr. Craxi - is political, and that the false-accounting charges in respect of which the request is made are offences connected with it. From time to time in the argument Mr. Fitzgerald QC appeared to submit that the false- accounting offences themselves must be regarded as political, on the grounds that the Italian authorities are not in truth interested in prosecuting them for their own sake but rather are concerned to bring the applicants to book for making illegal political contributions. On analysis, however, that seems to me essentially the same argument as saying that the respective offences are connected. In other words, it cannot avail the applicants to establish that the motive underlying investigation of the false-accounting offences is a desire to punish the applicants for making illicit political donations unless only the making of such donations is itself a political offence. To make good their argument, therefore, the applicants must in my judgment establish that the making of illicit political donations is indeed a political offence. That I believe to be the critical question on this part of the case.

In this regard I should first note that the respondents, rightly in my view, accept:

(a) that the fact that other funds produced by this fraud were used for bribing Revenue inspectors - on no view a political offence - cannot avail them: the false- accounting allegations make no distinction between the various uses to which the concealed funds were put; and

(b) that the false-accounting offences are indeed connected to those offences presently being prosecuted in Italy, in the sense that the very purpose of the false accounting was to disguise the source of the illicit payments so that in reality the respective offences are closely inter-related (and perhaps connected too by virtue of the prosecutor's motivation in pursuing both, although, as I have indicated, that to my mind adds nothing to the argument).

Is then the making of illegal political donations (hereafter called, for convenience, 'the present offence') a political offence? In submitting that it is, the applicants advance two main arguments: first, that the present offence is intrinsically a political offence, in the same category as, say, treason and sedition, all of them offences against the State. Alternatively they say that it must be regarded as a political offence because of the motivation of the offender in committing it, or of the requesting State in prosecuting it.

The whole concept of political crime is well recognised to be one of considerable difficulty. There are many reported cases in the field, most of high authority, and within them innumerable dicta illuminating various aspects of the problem. Many of these authorities were cited to us. Rather, however, than attempting any wide-ranging review of the law, I shall concentrate instead upon what seem to me to be the few key passages of present relevance.

The applicants rely here upon three dicta in particular. First, in support of their argument that the present offence is per se a political offence, this from Lord Reid's speech in Schtraks v Government of Israel [1964] AC 556 at 581:

"We must, I think, approach the interpretation of this sub section [section 3(1) of the Extradition Act 1870 which bars extradition of a fugitive criminal for an offence of a "political character"] with two things in mind. In the first place, offences obviously of a political character are not within the scope of extradition at all; for example, there is no mention in [the Act] of treason, sedition or any other offence of that kind........."

I am ready to assume that there are indeed certain offences of an intrinsically political character (although, as the respondents point out, the murder of the Sovereign, if carried out for purely personal reasons, albeit by definition treason, might not be thought a political offence). Even making this assumption, however, I find it impossible to regard the present offence as political per se, i.e. political irrespective of motive or circumstance. The applicants argue that it is so simply because it relates to the funding of the political process. I disagree. Rather it seems to me merely an offence against the ordinary law enacted for the proper ordering of the democratic process in Italy - no different from, say, voting twice at an election. It is, of course, an offence committed in a political context. In my judgment, however, that does not make it a political offence.

The second dictum upon which the applicants principally rely is this from Lord Lloyd's recent speech in T v Home Secretary at page 800:

"A crime is a political crime for the purposes of article 1F(b) of the Geneva Convention [a provision excluding the protection of asylum for those guilty of "serious non-political crimes"] if, and only if (1) it is committed for a political purpose, that is to say, with the object of overthrowing or subverting or changing the government of a State or inducing it to change its policy; and (2) there is a sufficiently close and direct link between the crime and the alleged political purpose. In determining whether such a link exists, the court will bear in mind the means used to achieve the political end, and will have particular regard to whether the crime was aimed at a military or governmental target, on the one hand, or a civilian target on the other, and in either event whether it was likely to involve the indiscriminate killing or injuring of members of the public.

Although I have referred to the above statement as a definition, I bear in mind Lord Radcliffe's warning in [Schtraks] that a question which was first posed judicially more than 100 years ago in In re Castioni [1891] 1 QB 149, is unlikely now to receive a definitive answer. The most that can be attempted is a description of an idea."

Lord Radcliffe in Schtraks, one may note, had suggested that "the court's reluctance to offer a definition has been due ..... to the realisation that it is virtually impossible to find one that does not cover too wide a range."

The words in Lord Lloyd's formulation upon which the applicants here focus are "inducing [the government] to change its policy." It is, they submit, an obvious inference to be drawn from the basic facts of this case that the present offence was committed to influence government policy in some way: one does not clandestinely pay vast sums of money to a political party without such a purpose. I for my part am disposed to accept this submission and draw the suggested inference - an inference, I would note, yet more readily drawn had the position been as Mr. Sonnenberg misunderstood it to be, i.e. had all the payments involved bribery and corruption; it is for this reason that in my judgment the factual misunderstanding is immaterial, the actual position being a fortiori to what it was understood to be.

What, however, I cannot accept is that any offence committed with a view to inducing a change in government policy is ipso facto to be regarded as a political offence. The difficulty comes in defining just when it will be and when it will not. Lord Lloyd's formulation was, of course, in the context of violent crime. But that, I recognise, is not itself a necessary precondition of political offending - see, for example, this from Lord Reid's speech in Schtraks at page 583:

"...... I do not see why the section should be limited to attempts to overthrow a government. The use of force, or it may be other means, to compel a Sovereign to change his advisers, or to compel a government to change its policy may be just as political in character as the use of force to achieve a revolution. And I do not see why it should be necessary that the refugees' party should have been trying to achieve power in the State. It would be enough if they were trying to make the government concede some measure of freedom but not attempting to supplant it."

A little later, moreover, Lord Reid contemplates asylum for: "a refugee who had committed an offence, perhaps of a non-violent kind, as part of a campaign to induce or compel an autocratic government to grant a measure of civil or religious liberty [even had there been] no disturbance of public order ......."

Just when, then, can such an offence properly be characterised as political by virtue of the offender's purpose or motivation? In addressing this question in the present context I find considerable help in the following passage from Lord Radcliffe's speech in Schtraks at page 591:

"In my opinion the idea that lies behind the phrase "offence of a political character" is that the fugitive is at odds with the State that applies for his extradition on some issue connected with the political control or government of the country. The analogy of "political" in this context is with "political" in such phrases as "political refugee", "political asylum" or "political prisoner." It does indicate, I think, that the requesting State is after him for reasons other than the enforcement of the criminal law in its ordinary, what I may call its common or international, aspect. It is this idea that the judges were seeking to express in the two early cases of In re Castioni and In re Meunier when they connected the political offence with an uprising, a disturbance, an insurrection, a civil war or struggle for power: and in my opinion it is still necessary to maintain the idea of that connection. It is not departed from by taking a liberal view as to what is meant by disturbance or these other words, provided that the idea of political opposition as between fugitive and requesting State is not lost sight of: but it would be lost sight of, I think, if one were to say that all offences were political offences, so long as they could be shown to have been committed for a political object or with a political motive or for the furtherance of some political cause or campaign. There may, for instance, be all sorts of contending political organisations or forces in a country and members of them may commit all sorts of infractions of the criminal law in the belief that by so doing they will further their political ends: but if the central government stands apart and is concerned only to enforce the criminal law that has been violated by these contestants, I see no reason why fugitives should be protected by this country from its jurisdiction on the ground that they are political offenders."

Before finally dealing with the offender's motivation, it is convenient to cite the third dictum relied upon by the applicants, that which brings the prosecutor's motivation too into play in determining whether or not an offence is political. This is from Lord Diplock's speech in R v Governor of Pentonville Prison ex parte Cheng [1973] AC 931 at 946:

"The purpose of the restriction [again, section 3(1) of the Extradition Act 1870], as it seems to me, was twofold. First, to avoid involving the United Kingdom in the internal political conflicts of foreign States. Today's Garibaldi may well form tomorrow's government. And, secondly, the humanitarian purpose of preventing the offender being surrendered to a jurisdiction in which there was a risk that his trial or punishment might be unfairly influenced by political considerations. As indicated by the inclusion of the second part of the restriction [barring extradition where it is sought "with a view to try or punish him for an offence of a political character"] it was suspicion of the motives of requisitioning States in seeking the surrender of fugitive criminals who were political opponents of the governments of those States which underly both requirements of section 3(1) of the Act."

In asserting here that the applicants risk "trial or punishment .... unfairly influenced by political considerations", Mr. Fitzgerald places before us extensive writings describing the Italian magistracy's "Mani Pulite" ("clean hands") crusade, and submits that these writings clearly reveal a power struggle between the two arms of State, the judiciary and the executive. The prosecutor here, he contends, is concerned "to make a political example of certain prominent politicians for 'political' ends."

It is time to state my conclusions on the political issue and this I can do really quite briefly.

I do not accept for one moment that the Italian magistracy's desire to expose and punish corruption in public and political life, and the conflict that that has created between the judges and the politicians there, operates to transform the present offences into political ones. It is a misuse of language to describe the magistrates' campaign as being for "political ends", or their approach to Mr. Berlusconi as one of political persecution. On the contrary, all that I have read in this case suggests rather that the magistracy are demonstrating both their proper independence from the executive and an even-handedness in dealing equally with the politicians of all political parties. If one applies Lord Radcliffe's dictum that there should be no protection for offenders "if the central government stands apart and is concerned only to enforce the criminal law", one finds in the present context the magistracy standing apart as the relevant arm of central government and the politicians (or some of them) as the offenders against whom "the criminal law in its ordinary ..... aspect" is being enforced. It is, indeed, somewhat ironical that the applicants here are seeking to be regarded as political offenders in respect of offences committed in part whilst Mr. Berlusconi himself was actually in office.

More fundamentally, however, I reject the applicants' basic proposition that making payments to politicians or political parties - whether by way of bribes or illicit donations to my mind matters not - constitutes political offending in any relevant sense. It is not intrinsically political, nor is it made so because the offender hopes to change policy by buying political influence, nor because the judiciary by prosecuting him hope to clean up politics. In short, none of the applicants' arguments, whether taken individually or cumulatively, begin to persuade me that the present offences are political. I just cannot see corrupt political contributors as "today's Garibaldis" (per Lord Diplock), or seekers after "freedom" (per Lord Reid), or "political prisoners" (per Lord Radcliffe).

It follows that I would reject this final ground of challenge also and, in the result, dismiss the motion.

I add just this footnote. I am conscious of having referred throughout this judgment to offending of one sort or another. It is imperative to recognise, however, that none of the applicants has yet been convicted of anything and that nothing I have said should be thought to raise the least presumption of guilt against them.

Application refused with costs