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«Overview and introduction 1. Corruption cases are often international and multi-jurisdictional. Bribes for the award of public contracts or stolen ...»

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BRIEFING NOTE:

RECOVERING ASSETS SECRETED ABROAD

November 2012

Overview and introduction

1. Corruption cases are often international and multi-jurisdictional. Bribes for the award

of public contracts or stolen public funds may be paid into overseas accounts or used

to acquire foreign properties or other assets; the proceeds of corruption may be

laundered through a number of jurisdictions, usually major financial centres or offshore havens.

2. This paper considers the options open to states seeking to locate, freeze and recover the proceeds of corruption secreted abroad, and the advantages and disadvantages of each. It will conclude by discussing some (general) practical tips for recovering assets.

3. An increasing number of jurisdictions permit the confiscation and repatriation of the illicit assets of offenders convicted of corruption offences in their home countries.

4. A smaller but increasing number of jurisdictions will allow enforcement of foreign non-conviction based confiscation orders against corruptly acquired assets (often called civil forfeiture or recovery orders, a little confusingly, as the process is distinct from private civil proceedings brought by a state in foreign courts). These are proceedings brought by the state or its law enforcement agencies in the absence of a criminal conviction to recover an asset on the basis that it represents the proceeds of crime or unlawful conduct. Although it is a matter for each state, civil forfeiture proceedings tend to have similar procedural rules and processes to private civil claims.

5. Most jurisdictions also allow private civil proceedings by states seeking to recover assets deriving from corruption, or damages in respect of corrupt activities.

Discussion below of private civil proceedings is more detailed than that for criminal mechanisms, simply because the audience for this Briefing Note will tend to be less familiar with private civil proceedings as an asset recovery mechanism. Paragraphs 28 to 35 discuss the lower burden of proof in civil proceedings compared to criminal proceedings, and the points made will apply equally to civil forfeiture proceedings.

6. In practice, a combination of criminal and civil proceedings is typically required to maximise recoveries. The UN Convention against Corruption envisages that signatories will ensure that their domestic law makes available both mechanisms to foreign states. As a general comment evidence of corruption is usually more easily obtained by law enforcement agencies using criminal powers, whilst civil proceedings have often proved a more effective mechanism to recover assets based on that evidence.

7. Procedures and remedies will vary between jurisdictions. In this Briefing Note we have sought to describe the options generally available as part of foreign asset recovery strategies, although we have tended to illustrate these options with examples from England, our own jurisdiction.

Recovering assets overseas: the options

8. A State has the following broad options when seeking to identify, freeze and recover

corruptly acquired assets located abroad:

8.1 mutual legal assistance to obtain evidence for domestic criminal proceedings;

8.2 obtaining a domestic confiscation order on domestic criminal conviction, enforced overseas through mutual legal assistance;

8.3 obtaining a domestic civil forfeiture order, enforced overseas through mutual legal assistance;

8.4 foreign criminal or civil forfeiture proceedings followed by repatriation of assets; and

8.5 private civil proceedings brought by the state in foreign jurisdictions.

Mutual legal assistance in criminal proceedings

9. Mutual legal assistance is the formal mechanism by which countries request and provide assistance in obtaining evidence in one country to assist in criminal investigations or proceedings in another. It offers three principal benefits in an asset

recovery programme:

9.1 It makes available evidence that can be used in criminal prosecution and applications for confiscation of assets on conviction. With the permission of the foreign state providing assistance, the evidence could also be used in civil forfeiture proceedings or private civil proceedings. Countries vary in their willingness to grant permission, and defendants often challenge a positive decision.

9.2 Foreign states can be asked to freeze assets believed to represent the proceeds of crime at the outset of, or during, criminal investigations. The typical test for a freeze of assets by law enforcement agencies is a reasonable suspicion that the assets represent the proceeds of crime, or similar wording, provided that a criminal investigation is ongoing. This is a relatively low threshold. Mutual legal assistance can therefore be an effective and cheap method of securing assets at an early stage, pending later attempts to recover those assets.

9.3 It is often the mechanism through which domestic confiscation or civil forfeiture orders are enforced in a foreign country.

Enforcing domestic confiscation and civil forfeiture orders abroad

10. The United Nations Convention Against Corruption requires signatories to permit the enforcement of foreign confiscation orders consequent on criminal conviction, and permits signatories to allow enforcement of civil forfeiture orders.





11. Overseas enforcement of confiscation or civil forfeiture orders offers a cheap and effective route to the recovery of assets, where available in a realistic time-frame. It will usually, and correctly, be the preferred asset recovery mechanism.

12. However, it is first necessary to obtain a binding domestic criminal conviction or civil forfeiture order, and these may not be easy to obtain, particularly against powerful and influential defendants, or against absconding defendants, or against foreign companies, trusts or associates that hold the assets but which may not be susceptible to domestic criminal action.

13. Most jurisdictions require specified criteria to be fulfilled before enforcement of an overseas order, and this gives rise to the risk of having to litigate the case twice, once domestically, and again abroad when seeking to enforce the domestic order.

14. For example, criteria for enforcement of foreign criminal confiscation orders in the

UK include:

14.1 the order must specify the assets against which enforcement is sought (although the asset can be traced if converted, for example, enforcement is available against the proceeds of sale of a property named in the confiscation order);

14.2 the order must be based on a finding that the assets were obtained as a result of or in connection with criminal conduct (being conduct which would be an offence if committed in the United Kingdom);

–  –  –

14.4 the order must be compatible with the European Convention of Human Rights (scope here for defendants to cause delay pending determination of false claims that they were not given a fair trial).

15. Similar criteria apply to civil forfeiture orders, although defendants are given more opportunity to challenge enforcement.

16. Requests for enforcement are first sent to the Secretary of State for the Home Office.

He has discretion as to whether the request should be met. His decision will therefore be subject to challenge: either by the requesting state following an adverse decision or, more likely, by a defendant seeking to prevent enforcement. Delaying challenges by defendants are likely: for example based on allegations of unfair trials or political motivation.

17. If the Secretary of State agrees, the order is passed to the UK authorities for enforcement (for example the Assets Recovery Agency or Serious Fraud Office).

Realised funds are returned to the State seeking to enforce the order.

Foreign criminal proceedings

18. Corruption and money laundering typically involves criminal offences in several jurisdictions. Foreign authorities may be willing to commence criminal investigations and proceedings against offenders within their jurisdiction, for example, corrupt public officials that have travelled to their jurisdiction (although experience tells us that faced with foreign criminal proceedings such officials tend to flee to safer jurisdictions), contractors that have paid bribes, or banks and advisers that have laundered the proceeds of corruption.

19. As part of their criminal investigations and prosecutions foreign authorities may freeze corruptly acquired assets within their jurisdiction. Conviction may lead to confiscation of assets and their repatriation through formal legal mechanisms or by agreement between Governments, or orders for compensation to be paid to the State that is the victim of corruption. Even where criminal convictions cannot be obtained, evidence may be obtained which may be capable of use in private civil proceedings.

20. In some jurisdictions (for example, Switzerland and other civil law systems) the foreign state seeking to recover assets can become a party to the criminal proceedings.

On conviction an application can be made for damages or the recovery of corruptly acquired assets. Where available this is a powerful procedure: the foreign state usually has access to all of the evidence that has been gathered by the Court, is present when the Court questions suspects and witnesses, and will be able to ask its own questions.

21. Some Governments are willing to enter into bilateral asset sharing agreements with foreign countries. The terms are individually negotiated, but typically provide that assets misappropriated from one state and recovered by the agencies of another are shared in an agreed proportion.

Foreign civil proceedings

22. Civil proceedings are a separate and often efficient method of recovering corruptly acquired assets. The mechanism is not dependent on Government to Government cooperation. A State will be bringing a claim in the civil courts of a foreign jurisdiction where corruptly acquired assets are located, just as a wronged private citizen would do, or a liquidator seeking to recover assets misappropriated from an insolvent company by directors or employees. The precise nature of claims will vary across jurisdictions. Most systems of law permit a state to recover corruptly acquired assets, or seek damages for corrupt activities.

23. Potential defendants to civil claims include:

23.1 the corrupt public official;

–  –  –

23.3 off-shore trusts and companies incorporated to receive, launder and conceal the proceeds of corruption;

23.4 companies that have paid bribes to win public contracts;

–  –  –

24. The first question is whether you can bring civil proceedings in the relevant foreign court. Some countries do not permit civil proceedings by foreign States. The United Nations Convention Against Corruption requires signatories to do so.

25. The second question is whether the foreign court has jurisdiction to determine the claim. Different countries may have very different approaches to these questions.

Typically two questions are involved: (a) first does the Court have jurisdiction, and (b) if so, is there a better jurisdiction to determine the claim.

26. For example, the English Courts have jurisdiction to determine a claim, amongst other matters, if the defendant is present in England, or if the claim concerns assets located in England. However, an English Court may still decline to hear the case on the basis that the claim would more appropriately be determined elsewhere, for example, in the courts of the state that has suffered the corruption. Defendants invariably seek to persuade the Court that a claim should be heard elsewhere, particularly where the alternative court may offer more opportunity for delay.



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