In a landmark judgement handed down by the First Hall, Civil Court, presided by the Hon. Justice Audrey Demicoli, earlier today the court found that the law granting the Financial Intelligence Analysis Unit (“FIAU”) the right to investigate and impose hefty administrative fines on subject persons as a result of certain regulatory breaches violate the the applicant’s right to a fair hearing under Article 39(1) of the Constitution. As a result the Court declared certain provisions of the Prevention of Money Laundering Act (“Act”) (Chapter 373 of the Laws of Malta) and the Prevention of Money Laundering and Funding of Terrorism Regulations (“PMLFTR”) (Subsidiary Legislation 373.01) dealing with the imposition of administrative penalties null and void and also declared the investigative process as well as the imposition of the fine itself null and void.

The case, in the names Phoenix Payments Limited vs The Financial Intelligence Analysis Unit et (Constitutional Case no. 51/2022AD),  was instituted by Phoenix Payments Limited (“Phoenix”) following the imposition of an administrative fine by the FIAU in the amount of €435,576 in terms of Article 13 of the  Act and Regulation 21 of the PMLFTR. Phoenix argued that the law which granted the FIAU the power to investigate alleged breaches and to impose administrative penalties breached its fundamental human right to a fair hearing given that the law granted the FIAU the power to act as an investigator, prosecutor and a Judge. Phoenix further argued that the manner in which the investigation was conducted also breached its fundamental human rights. In terms of Article 39 (1) of the Constitution, and Article 6 and 7 of the European Convention on Human Rights (“ECHR)”).

In its judgement, the court relied on a series of judgments handed down by both the European Court of Human Rights as well as the Constitutional Court and held that although the administrative fines in question were not classified as criminal sanctions at law, nevertheless such administrative fines were intended to be  punitive in nature and were aimed to serve as a deterrent. As a result, the court held that such administrative fines are to be dealt with as fines of a criminal nature and therefore the right to a fair hearing under Article 39(1) of the Constitution applies. The Constitution provides that any person being charged with a criminal offence ought to be given a fair hearing before an independent and impartial court established by law.

The Court found that the FIAU was not an independent and impartial court established by law and as a result, in this regard, the Act and the PMLFTR ran counter to the provisions of Article 39(1) of the Constitution. The Court declared that Article 13(2) of the Act and Regulation 21 of the PMLFTR giving the FIAU the powers to investigate and impose fines breached Phoenix’s right to a fair hearing and declared these provisions null and without effect. As  consequence, the Court also declared the investigative process carried out by the FIAU, and the imposition of the fine itself, as null and void.

Kristina Rapa Manche, Partner in the Dispute Resolution team, at Camilleri Preziosi, acted for  Phoenix Payments Limited.

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