Garnet Investments Ltd v BNP Paribas (Suisse) SA v Government of Republic of Indonesia
The Garnet litigation, and in particular the Guernsey Court of Appeal’s 2011 decision in favour of the Financial Intelligence Service (FIS), affirmed by the Privy Council’s rejection of Garnet’s application for leave to appeal against that judgment, highlights the potential repercussions for banks and financial institutions in reporting suspicion and a resulting refusal of consent by the FIS. Those risks include an increased risk of litigation by customers and the need for such institutions to protect themselves as much as possible in their contracts with customers and terms and conditions.
Garnet Investments is a BVI company beneficially owned by Hutomo Mandala Putra, also known as Tommy Suharto, the youngest son of the former president of the Republic of Indonesia (Mr Hutomo). In 1998, Garnet opened an account with a Guernsey bank and proceeded to deposit into the account significant sums from the sale of Mr Hutomo’s interests in, inter alia, Lamborghini and Superbike (the funds). In 2002, Garnet instructed the bank to transfer the funds to another bank. The bank refused to do so, stating that it had concerns that Mr Hutomo and his father may have been involved in corrupt activities in Indonesia.
This led in 2006 to civil proceedings by Garnet against the bank, seeking an order that the bank comply with Garnet’s instruction. The bank stated that it was unable to comply because it was concerned the funds may be subject to a constructive trust in favour of the government of Indonesia (GOI) and, alternatively, that the funds may be the proceeds of crime. As a result, the GOI was joined to the proceedings and obtained a freezing order over the funds. Ultimately, that freezing order was discharged in January 2009 by the Guernsey Court of Appeal, which noted, inter alia…
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