Lord Goldsmith attacks Austria’s ‘unfair’ treatment of UK businessman

5 Sep 2012

€100m bail demand issued to Julius Meinl was excessive, says former attorney general

A British businessman is receiving “harsh and unfair treatment” from the Austrian legal authorities, his lawyer, Lord Goldsmith QC, has told the foreign secretary.

The former attorney general wrote to William Hague last month about Julius Meinl, 53, a banker of Austrian descent. The businessman’s lawyers have also made an application to the European court of human rights.

Meinl was arrested at the state prosecutor’s office in Vienna in April 2009, after attending voluntarily for interview. As a condition of bail, he was required to pay an extraordinary €100m into court – more than £78m at current rates and believed to be a world record in any jurisdiction.

Although the Austrian authorities have spent the past five years investigating alleged market manipulation by a property fund in which Meinl was not directly involved, he is the only person to have been arrested as a result of the investigation. Nobody has been charged and Meinl’s bail money has not been returned.

Complaining about the delay in dealing with the case, Goldsmith said his client’s treatment was a breach of natural justice and caused “the greatest concern”.

The QC, head of European and Asian litigation at the international law firm Debevoise and Plimpton, urged Hague to raise Meinl’s case with the Austrian authorities. He told the foreign secretary: “There is a strong suspicion that the authorities have been reacting to public pressure from some quarters, which in turn is coloured by Mr Meinl’s Jewish family background.”

Meinl is the fifth member of his family to bear the name of his great-great-grandfather, who founded an upmarket food retailing empire in 1862 on the idea of selling ready-roasted coffee beans. The family were forced to flee Austria in 1938 because Meinl’s grandfather had married a woman of Jewish origin.

After the war, the family were granted British nationality. Meinl’s father served as a pilot in the RAF and his grandfather helped Britain to identify Nazi sympathisers who were still occupying positions of authority in Austria.

Later, the family returned to Austria and re-established the family business as the equivalent of a cross between Fortnums and Waitrose. They also developed their customer savings division into Meinl Bank, one of Austria’s most successful banking operations.

In the late 1990s, the family sold their retailing business and moved into investment banking. A Jersey-registered property fund called Meinl European Land (MEL) was established, based on the company’s property portfolio. The fund also bought shopping centres in the former Soviet bloc. Meinl Bank acted as MEL’s sponsor and investment bank.

In 2007, the property fund’s value dropped heavily. Small investors, perhaps unfamiliar with the ways of the markets, were outraged to discover that a fund named after such a well-respected brand could go down in value as well as up. Meinl, who headed the bank’s executive board, was held personally responsible by the Austrian public even though he was not directly involved in MEL. An Austrian business magazine called Format implicitly compared him to Hitler with a cover-story headlined “Meinls Kampf”.

Attention centred on allegations that MEL had unlawfully bought back its own shares in order to prop up their price, shortly before the global financial crisis. Not so, Meinl told me when I interviewed him in 2009. There was no market manipulation, he said: MEL had decided to repurchase its shares in order to sell a significant stake to a potential strategic partner.

At that time, I had no way of testing Meinl’s response. The Jersey financial services commission had appointed inspectors to investigate the allegation that MEL had provided financial assistance to itself to purchase its own shares – which would have been contrary to Jersey law – but their investigations were still continuing.

It was not until December 2010 that the commission concluded, on the strength of the inspectors’ findings, that the MEL buy-back had not been in breach of the island’s laws. At the same time, though, the Jersey regulator announced an inquiry into whether MEL’s directors had acted in a fit and proper manner.

In February 2012, the Jersey commission declared its investigation closed. It announced that three former directors of MEL had given voluntary undertakings not to run other Jersey companies in future without the commission’s prior consent, while stressing that this was not to be taken as any acceptance of wrongdoing by any of the three. Meinl was not one of them: he had never been a director of MEL or the separate Jersey company that acted as its manager.

Meinl’s lawyers say that the Jersey commission would not have accepted voluntary undertakings and closed its investigations if it had found any breach of the criminal law. The property fund, known as Atrium since a change of ownership in 2009, reported “excellent operational performance” earlier this month.

In his letter to the foreign secretary, Goldsmith accepts that there are limits to any British intervention in another country’s criminal investigations. So Meinl’s Austrian lawyers have also lodged an application at the human rights court in Strasbourg, arguing that the seizure of Meinl’s correspondence with his lawyers and the excessive delay in investigating the allegations have denied him his right to a fair trial under article 6 of the convention.

Perhaps more promisingly, Meinl’s lawyers argue that setting his bail at €100m breached article 5 of the convention, the right to liberty. They accept that bail of €3 million was upheld in the case of a ship’s captain accused of responsibility for spilling oil into the Atlantic ocean. But that figure, they say, was on the very edge of admissibility. And this is 33 times as much.

The lawyers also complain that the Austrian courts found that Meinl was a greater flight risk because of his British nationality. They argue that article 14 of the convention taken together with article 6 means that the right to a fair trial must be upheld without discrimination on grounds of national origin.

If this application gets as far as the Strasbourg court, the Austrian government can be expected to argue that Meinl has not been deprived of his right to a fair trial, has not been treated any worse because he is British and was able to produce €100m within the day.

What the Austrians may find harder to answer is why their investigation has taken so long and why were not willing to follow the findings of the Jersey authorities. Of course investigating and prosecuting fraud is difficult; and nobody knows that better than the former attorney general who, for six years, was ultimately responsible for all prosecutions in England, Wales and Northern Ireland. But still, he notes, “the investigation drags on”.

The Austrian legal authorities may yet be able to establish that they have not been influenced by anti-British or anti-Jewish sentiments. On this, though, the jury is still out.

http://www.guardian.co.uk/law/2012/aug/28/julius-meinl-austria?newsfeed=true