Keith Schembri loses legal bid to have freezing order overturned

A court has dismissed claims by former OPM chief of staff Keith Schembri, his father Alfio, Malcolm Scerri and Robert Zammit that their rights were breached when their assets were frozen in 2021.

Schembri was remanded in custody in May that year after pleading not guilty to money laundering, criminal conspiracy, fraud and forgery. He was among 11 people taken to court as part of a financial crime investigation.

The co-accused included Nexia BT partners Brian Tonna and Karl Cini, Schembri’s business partner Malcolm Scerri and his father Alfio Schembri, who faced similar charges and were also denied bail.

Vince Buhagiar, former managing director of Allied Newspapers, was the only person given bail.

In May 2022, Schembri, together with his father, Zammit and Scerri, filed an application against the State Advocate in the First Hall of the Civil Court in its constitutional jurisdiction.

During their arraignment, a blanket freezing order was imposed on their assets issued in accordance with the Prevention of Money Laundering Act.

The plaintiffs were allowed access to just under €14,000 per year and argued they could not request the court to revoke the freezing order, as the law does not permit such a request until the case is concluded. 

They claimed a breach of their right to property and that no one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed.

They asked the court to annul and revoke the freezing order and to liquidate moral damages. 

The court analysed the provision under the Prevention of Money Laundering Act and observed that the men could request court authorisation to pay debts from contracts made in good faith before the freezing order was imposed.

They could also request the court to authorise the transfer of immovable or immovable property.

The court observed, however, that while a freezing order was a cautionary measure which causes some disruption pending criminal proceedings, an affected individual is provided with remedies under the law to mitigate its effects.

However, a person cannot be returned to the financial position they were in before the freezing order was issued to ensure that no assets which could be derived from proceeds of crime are transferred or concealed.

It is also aimed at ensuring that no one benefits from ill-gotten gains.

The court then analysed the evidence to see if there was any breach of their rights.

It held that the blanket freezing order, while causing inconvenience to the affected person, does not automatically qualify as a breach of rights.

The court observed that over the years, the plaintiffs were granted several requests to vary the orders and mitigate the effects of the freezing order.

While the plaintiffs described the law as “draconian” and as constituting a clear breach of the right to a fair hearing and to enjoy one’s property, nowhere did the plaintiffs plead that their right to a fair hearing had been breached.

It was observed that Zammit said, “I got what I asked for” while under cross-examination, while Keith Schembri acknowledged he had not made use of ordinary remedies available.

The court held that for the freezing order to be found to be disproportionate, the plaintiffs had to show that they were deprived of living a decent life.

Acknowledging that a freezing order may cause discomfort, the plaintiffs had several opportunities to vary the order, and there was no evidence that their fundamental rights had been breached.

The court therefore upheld the plaintiffs' request and declared that the provision did not offer an ordinary remedy but found no breach of rights in view of the other remedies available to them at law, including remedies which the plaintiffs said they made use of, or not, in the case of Schembri.

Mr Justice Giovanni Grixti presided over the First Hall of the Civil Court. Lawyers Edward Gatt and Mark Vassallo assisted the plaintiffs. Lawyers Julian Farrugia and Yana Bonello appeared on behalf of the State Advocate's Office.