May 18 2015

By Jean-Pierre Brun and Sarah Jais




All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

-Arthur Schopenhauer



What is the connection between the 19th century German philosopher Arthur Schopenhauer and asset recovery? That unlikely question arose during a recent StAR event at the World Bank, entitled ‘Civil Lawsuits to Combat Corruption’.

Miami-based lawyer Edward Davis, from Astigarraga Davis, invoked the great thinker during his presentation to a crowded room which included senior private lawyers, along with representatives from civil society, government, academia, and international.

Mr. Davis noted that civil litigation – once mocked as a path to recovering stolen assets, has become an accepted legal avenue. In emphasizing the importance of asset recovery, he stated that the same effort should be expended towards recovering the assets as towards punishing wrong-doers themselves. But, he pointed out that troublingly, ‘crooks have a 99.9% chance of keeping the money’, when the traditional model of mutual legal assistance is used to conduct international investigations.

Mr. Davis rightly highlighted the range of legal options in recovering stolen assets. As described in detail in StAR’s recently published report ‘Public Wrongs, Private Actions’, civil lawsuits offer an alternative in instances when criminal prosecutions become stalled.

For example, in order to confiscate illicit assets in a criminal case, the State must obtain a conviction beyond all reasonable doubt, link the assets to the crime, and use mutual legal assistance for investigations and enforcement orders. Fulfilling all these conditions places a very high burden upon the State with an uncertain outcome.

By contrast, civil lawsuits allow for a lower standard of proof, specifically in addressing the financial consequences of corruption, and also permit an enlarged scope of potential defendants.

As a result civil lawsuits are becoming an increasingly utilized path. A 2012 publication by StAR and the OECD 'Few and Far', showed that for the period  2010-2012, US$ 19.1m was recovered using criminal confiscation as compared to US$ 16m using private lawsuits.

High profile successes using civil litigation have boosted interest in its use. After the fall of former Tunisian President Zine el Abidine Ben Ali, criminal proceedings were opened in number of countries including, France, Switzerland, Spain and Italy to freeze assets belonging to him and his relatives.

In criminal cases conducted in France and Switzerland, Tunisia intervened as a “partie civile”. It allowed Tunisian authorities to get involved in the criminal case and in the future to claim civil damages based on the criminal conviction. In a related case involving assets linked to the Ben Ali family, a combination of a criminal case and civil action was crucial in obtaining the return to Tunisia of US$28 million that had been frozen in Lebanon.

In another example, in 2012, the authorities of Libya won a civil case brought in the High Court in London to obtain ownership of a £10 million house in London belonging to the son of the country’s former ruler, Muammar Gaddafi.

Civil actions allowed states to overcome barriers to asset recovery in criminal cases. Charles Duross from the Washington firm of Morrison & Foerster, and formerly head of the US Department of Justice’s FCPA Unit, underlined the challenges encountered by US Authorities in using restitution of illicit proceeds in criminal cases.

Criminal investigations often focus on proving a case without calculating the value of the proceeds, or the damage caused by corruption.  Restitution following a criminal conviction requires proof of a specific harm and quantification of the loss, Mr. Duross noted. These elements are often difficult to prove in a criminal trial and raise two thorny questions: who is the victim and how do you quantify the loss? While similar challenges may arise in civil lawsuits, they can be overcome by using a lower standard of proof.

In conclusion, the growing popularity of civil cases in recovering assets may be good news to private lawyers. But it is also clearly a plus for governments seeking asset recovery who can use another legal avenue as a complement, and sometimes an alternative, to criminal confiscation.

This all goes to further reinforce Schopenhauer’s dictum of self-evident truths, proving in this instance the utility and benefit of using civil actions to recover stolen assets.

Jean Pierre Brun is a Senior Financial Specialist with the Stolen Asset Recovery Initiative and the lead author of ‘Public Wrongs, Private Actions’

Sarah Jais is a consultant for the Stolen Asset Recovery Initiative and the Financial Market Integrity Unit of the World Bank

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