Background
The Director of Public Prosecutions secured the recovery of assets worth several billion pounds that represented proceeds of fraudulent investment schemes orchestrated in China by Zhimin Qian. The schemes attracted payments from Chinese residents, largely through Chinese financial channels. Some proceeds were converted into Bitcoin in China before Qian fled the country and later settled in England. The property seized by the Metropolitan Police included more than 61,000 Bitcoin.
Numerous alleged victims applied under section 281 of the Proceeds of Crime Act 2002 for declarations that portions of the recovered property belonged to them. Because section 281 requires an applicant to establish a proprietary interest rather than merely a personal claim as a creditor, the court had to determine which country’s law would govern the asserted ownership rights. The preliminary hearing proceeded on agreed assumed facts, without evidence about the content of Chinese law or the evidential basis of each individual claim.
The Court’s Holding
The High Court held that Chinese law governs the existence and content of the proprietary rights asserted by the applicants. Whether their rescission and constructive-trust theories were analysed under Rome I, Rome II, or common-law conflict-of-laws rules, the transactions and alleged rights were overwhelmingly connected with China. The court did not decide whether the applicants actually possessed proprietary rights under Chinese law; that question, including proof of Chinese law, was reserved for a later stage.
The court rejected the applicants’ alternative arguments. Sections 304 to 310 of the Proceeds of Crime Act provide statutory tracing rules for identifying recoverable property but do not create or enlarge victims’ proprietary rights under section 281. Nor could English equitable concepts be superimposed on rights governed by Chinese law to produce a hybrid English-Chinese solution where Rome I or Rome II required application of the designated substantive law.
The court also rejected the contention that English law should apply by default because Chinese law had not yet been pleaded or proved. Selecting the governing law was a conflict-of-laws question logically preceding the evidential inquiry into that law’s content. The absence of Chinese-law evidence therefore did not make English law applicable.
Key Takeaways
- Claims under section 281 require proprietary ownership; status as a fraud victim or creditor alone is insufficient.
- Chinese law governs the alleged proprietary interests because the fraud, payments, receipt of funds, and conversion of proceeds into Bitcoin occurred principally in China.
- The Proceeds of Crime Act’s statutory tracing rules identify recoverable property but do not determine whether that property belongs to an applicant.
- The court decided only the applicable-law issue, leaving the content of Chinese law and the merits of each ownership claim for later determination.
Why It Matters
The decision clarifies that the location of seized cryptocurrency in England does not by itself make English law govern competing ownership claims. Courts must identify the legal nature of each asserted right and apply the relevant choice-of-law rules, even where the asset is Bitcoin and is controlled within England and Wales.
For victims seeking property recovered under the Proceeds of Crime Act, the ruling underscores the distinction between tracing criminal proceeds for public recovery and proving a private proprietary entitlement. The applicants must now establish under Chinese law that the recovered assets, or relevant portions of them, belong to them.