Madoff Investment Securities LLC, Re

Personal data may be transferred outside the European Economic Area where an applicable exemption to the eighth data protection principle is satisfied. A transfer connected with investigating a substantial and complex alleged fraud may be necessary for reasons of substantial public interest. It may also be necessary in connection with legal proceedings or for establishing, exercising or defending legal rights.

An order should identify the information whose disclosure is authorised. The court should not grant a blanket authority over unspecified information. An office-holder’s statutory examination power is limited to information concerning the company in respect of which that office-holder holds office. It cannot be used as a substitute for an application under the Cross-Border Insolvency Regulations.

Joint provisional liquidators of an English company applied under section 112 of the Insolvency Act 1986 for directions concerning the transfer of data to the trustee appointed in the New York liquidation of Bernard L Madoff Investment Securities LLC.

The proposed transfer engaged the eighth data protection principle because the United States was outside the European Economic Area and was not accepted to provide an adequate level of protection. The court was also asked to authorise disclosure of unspecified further information and participation by the American trustee in interviews under section 235 of the Insolvency Act 1986. The central issues were whether the statutory exemptions applied and what limits governed the proposed orders.

1. The court was satisfied that the scheduled transfers were necessary for reasons of substantial public interest under paragraph 4(1) of Schedule 4 to the Data Protection Act 1998. Investigating an alleged fraud of exceptional scale and complexity, and tracing the relevant assets, constituted a substantial public interest.

2. The court was also satisfied that paragraph 5(a) and paragraph 5(c) of Schedule 4 applied. The liquidation proceedings in New York and England made the transfers necessary in connection with legal proceedings and for establishing, exercising or defending legal rights. The court considered that paragraph 5(b) was likely to apply, but made no finding on that issue.

3. The court refused the proposed blanket order authorising disclosure of further unspecified information. The order would leave the provisional liquidators to decide what information was necessary without the court knowing what it was being asked to authorise. The provisional liquidators could determine what further disclosure was required and return to court if difficulties arose.

4. Section 235 of the Insolvency Act 1986 requires former officers and others to provide information concerning the company in respect of which the office-holder is appointed. It does not entitle the American trustee to attend an interview in order to ask questions about the American company. The provisional liquidators could ask questions about the English company which might illuminate the American company’s affairs, but section 235 was not a shortcut to an application by the American trustee under article 21 of the Cross-Border Insolvency Regulations.

5. An order was made in the terms of paragraph 1 of the draft order, together with the costs order in paragraph 4. The remaining orders sought were refused.

First-instance decision. The judgment does not state any prior appellate decision.