The Mahendra Chaudhry case and its ramifications

Mahendra Chaudhry has once again won acclaim as the first person to be ever convicted under an antiquated legislation that even the Judge described as “draconian”.

The Exchange Control Act (ECA) under which Justice Paul Madigan found Mr Chaudhry guilty is an old Colonial legislation dating back to 1952.

In his summing up Madigan J said the ECA was a “draconian legislation sitting there since 1952” and had been “resurrected”.

Legislation identical to Fiji’s ECA was also introduced into countries like Singapore, Malaysia and the West Indies’ states of Trinidad and Tobago. But these countries have now repealed that legislation, whereas Fiji has not. 

There has been no prosecution similar to Mahendra Chaudhry’s in any of these jurisdictions. Not even in Fiji.

The Independent Inquiry into Mr Chaudhry’s tax affairs instituted by the Bainimarama-Khaiyum regime in March 2008, also found the Act antiquated. It states:

          The Committee notes that the ECA was enacted in 1952, at a
time when foreign exchange transactions were much less
sophisticated than they are today. Consequently, many of its
provisions appear antiquated and are difficult to apply to
transactions which are occurring in international financial
markets in 2008.”            

The inquiry completely cleared Mr Chaudhry of all tax evasion allegations levelled at him by the Fiji media and found no breaches of the ECA by Mr Chaudhry.

The team was headed by Bruce Cowley, a specialist in corporate law and governance from Brisbane. The other members were Russell Postle, a tax specialist from Sydney and Ms Taufa Vakatale, educationist and former Deputy Prime Minister of Fiji.

They cleared Mr Chaudhry of any breach of any of the laws of Fiji. Also, following the release of the findings of the Inquiry, Prime Minister Voreqe Bainimarama wrote to Mr Chaudhry, thus: 


Given the findings of the Team, this matter is now no
 longer an issue as far as I and the Government are concerned.”  

  (Letter dated 12 March 2008)

 

The Act was amended subsequent to charges being laid against Mr Chaudhry, to increase the penalty for offenders, from a two-year jail term to 10 years.

Reserve Bank of Fiji consent

Michael Scott, formerly a barrister in the Attorney General’s office in Fiji, was legal consultant to the Reserve Bank of Fiji from 1984 to 2009, and legal consultant to FRCA from 2004 to 2009. As such, he was thoroughly familiar with the provisions of the Exchange Control Act. 

Mr Scott is on record as saying that during his (25 year) tenure as legal consultant to the Reserve Bank, it had never required Fiji residents to seek RBF consent to open bank accounts overseas. 

Nor in that time, had the Reserve Bank ever “prosecuted for any failure to obtain such consent, nor took any enforcement steps to require such consent or to penalise Fiji citizens opening foreign bank accounts without prior consent”.

He said he was “not aware of any person other than Mr Chaudhry being prosecuted in regard to such matter”. 

In Mr Chaudhry’s case the money was gifted to him from India for use in Australia should he ever have to migrate for political reasons. The money   had never come to Fiji.

Wide implications of the case 

Mr Chaudhry’s case has colossal repercussions for anyone residing in Fiji who holds accounts in foreign banks. They can face prosecution under the antiquated ECA, unless they have RBF approval. 

  •  Returning former Fiji citizens – can be required under the Act to make full disclosures of all their overseas financial assets, and require RBF approval to hold on to them.

  • Tourists – it also has ramifications for tourists. Because under the regime’s interpretation of the Act, even tourists fall under the purview of the Act.