The law is the last result of human wisdom acting upon human experience for the benefit of the public.Samuel Johnson, LL.D – Anecdotes of the Late Samuel Johnson – by Hester L Piozzi (1887)
Introduction to Fraud & Asset Recovery in Gibraltar
In today’s world, fraud encompasses a great many things – from general data theft to sophisticated international ‘white-collar’ crime in the form of tax-evasion, bribery and corruption. Yet, the reality is that fraud not only continues to pervade us in modern society, but it is becoming all the more challenging to combat with the advances and complexities brought about by innovations in science and technology. It is precisely due to such challenges that the international legal community needs to keep apace with the advent of cyber-crime, and this is especially true of the offshore legal community, of which Gibraltar forms part of.
In this modern cyber-world, misappropriated funds can be transferred from one country to another – say, an offshore jurisdiction – on the mere touch of a button, and thus automatically nestle themselves under an opaque or complex structure (often involving different jurisdictions), which a civil claimant or prosecuting authority then needs to arduously ‘get behind’.
An offshore finance centre like Gibraltar – as well regulated as it may be, is not impregnable to the advent of cyber crime. It goes without saying that Gibraltar must therefore remain ever more vigil to the abuse of its territory by overseas criminals who may attempt to safe-harbour the proceeds of crime, and thus place them out of reach of the long arm of the law.
In general terms, Gibraltar has in place a range of legislative tools and resources to deal with fraud and asset recovery in the context of both the criminal and civil law. These legal aids originate from English statutes and rules of court as well as, of course, international law mutual assistance treaties extended by the United Kingdom to Gibraltar. However, ‘cyber-crime’ is a rapidly-evolving phenomenon per se, and in the next decade or so, the laws of Gibraltar will need to continuously evolve in order to keep up with this particular dimension of asset recovery practice.
Civil & Criminal Asset Recovery
The subject of fraud and asset recovery is particularly wide. It is without doubt a very specialised area of law and a trap for the unwary. It is also a topic which tears through the veil separating the criminal and civil law – both substantively as well as procedurally. At times, both criminal and civil proceedings for asset recovery exist in parallel, and in many instances, material obtained in the civil context can be used in the criminal proceedings, and vice-versa. Which path to take in a give case – whether civil or criminal (or both) is largely fact-specific.
It is often believed that the civil asset recovery route is more expeditious as opposed to its criminal law counterpart. This is usually due to the supposition that asset recovery via criminal proceedings is conviction based and thus it may take a while before a conviction and ancillary orders can take place. This will of course always depend on the circumstances, so at times civil asset recovery can be quicker.
Such is the band-width of the topic, that what follows is a very broad outline of the relevant law in Gibraltar and processes at stake. The present focus however is on asset recovery with a transnational element.
Criminal Asset Recovery – Gibraltar Legislation & Procedure
Overseas Intelligence Requests
International legal co-operation is not a novelty. It has been around for some time, and there is a distinction to be drawn between police co-operation and judicial co-operation. When it happens nowadays, it usually takes place within a defined infrastructure laid down in the law, in the form of a Mutual Legal Assistance (MLA) Treaty.
MLA Treaties apart, intelligence requests for police co-operation are nevertheless the first step in any international line of enquiry. International assistance of this type is informal assistance between law enforcement counter-agencies – e.g. Interpol, Europol and the domestic special police branch.
While informal support is useful it does suffer from limitations. For example, evidence obtained in this manner may be inadmissible in legal proceedings. Therefore, the need to have recourse to MLA legislation for co-operation is the usual eventuality.
Gibraltar, like the United Kingdom, can assist any other country in the world with an informal request for intelligence co-operation.
It ought to be remembered that informal intelligence requests are often a sensible way to start the process in order to improve the overall substance and “quality” of the actual Letter of Request that is made under the particular MLA legislation at stake. The informal approach may also serve to save time where it is of the essence and thus better serve the needs of justice.
Gibraltar Mutual Legal Assistance Legislation
The United Kingdom is party to various international MLA agreements which she has extended to Gibraltar. By way of examples – there is the 1959 Strasbourg Convention on Mutual Assistance in Criminal Matters (which is a first generation MLA Treaty on crime), and the 2003 United Nations Convention on Transnational Crime.
Mutual Legal Assistance in the field of tax law
There are many other types of international mutual assistance provisions written into the laws of Gibraltar – in particular in the field of tax law. Whatever be the area of local law that MLA touches upon, one thing is for sure – Gibraltar, in keeping with his international standards as a Finance Centre of the highest repute, has been committed to providing international assistance to prevent her territory from being used as a sanctuary for the proceeds of crime.
2001 Budapest Convention on Cyber-Crime
The Budapest Convention on International Co-operation (The Convention on Cybercrime of the Council of Europe) [also known as the “European Convention on Cybercrime”] that was opened for signature in November 2001 is worth a brief mention here. The European Convention has been ratified by the United Kingdom and was implemented into UK Law in 2011. Although it should be noted that the Treaty has not yet been extended to the jurisdiction of Gibraltar, it represented the first international legal consolidated initiative to tackle the challenges of internet crime.
Mutual Legal Assistance (Council of Europe) Act 2018
Gibraltar’s Mutual Legal Assistance (Council of Europe) Act 2018 is of recent introduction into Gibraltar law. It incorporates into domestic law the 1959 Strasbourg Convention which, by anyone’s standards, is a purpose-built piece of legislation for criminal mutual legal assistance.
The 2018 legislation facilitates the execution of international Letters of Request in relation to requests for assistance for, inter alia, the service of legal process and the procurement of evidence.
It should be noted that despite the obligatory nature of the Convention, the 2018 Act permits the Gibraltar authority to decline assistance where the the principle of double jeopardy is potentially being infringed.
It has to be said that MLA in the context of criminal proceedings is a powerful asset recovery tool in Gibraltar, and sometimes it can help the prosecution to obtain evidence which it would not otherwise have the power to ordinarily obtain.
International Requests for Mutual Assistance
As a matter of local criminal law enforcement, Gibraltar is not considered to be part of the United Kingdom, and it follows that the relevant authorities in Gibraltar are wholly responsible for executing foreign requests within the territory.
The UK Home Office has published useful guidance for overseas authorities when making MLA requests of the UK not only for herself but also for her overseas territories, Crown Dependencies and Protectorate. It can be found here: https://www.gov.uk/guidance/mutual-legal-assistance-mla-requests.
Requests for Mutual Legal Assistance from the Gibraltar Authorities when the requesting state is a non-Schengen Agreement territory are directed to Her Majesty’s Attorney General for Gibraltar. However, in respect of international assistance requests emanating from Schengen territories, they must be addressed to the UK Government/Gibraltar Liaison Unit at the Foreign & Commonwealth Office in London.
European Investigation Orders (Post-Brexit)
The Gibraltar European Investigation Order Regulations 2017 which provided for the gathering and the transfer of evidence in the EU, were repealed in Gibraltar on the 1st January 2021 due to Brexit. Needless to say, whilst various legacy requests under the Regulations will continue to apply in Gibraltar under transitional arrangements, MLA requests from EU Member States will essentially need to be invoked via the Mutual Legal Assistance (Council of Europe) Act 2018 regime.
Civil Fraud & Asset Recovery
The Range of Civil Fraud Cases & Remedies
English law does not actually have a specific category of litigation claims called ‘civil fraud actions’, but we make use of the phraseology as a shorthand expression or label of convenience. In actuality however, what constitutes a ‘civil fraud’ claim is fairly wide and therefore there exist a multiplicity of claims that can lead to a civil fraud asset recovery process. The ones often seen in practice involve proprietary claims, and include: actions for breach of trust (or for breach of fiduciary duty); those based on the tort of conspiracy; and those relating to the misappropriation of corporate assets. The usual remedies in these types of cases (which are available at both common law and in equity) depends on the underlying claim but, generally speaking, they range from damages, restitution, rescission, to orders for the return of property to the victim.
Civil Fraud Cases Require a Quick Response Team
Obtaining a judgment overseas in many instances may represent half the battle won – you have the benefit of a monetary judgment in your favour but how and where can you execute it and what are the chances of monetary recovery? Doing your homework from the outset should be part of your overall litigation strategy. Many questions should be posed – for example: does the defendant have money? Does the defendant possess assets? Where are the assets located? Are the assets held under entities or complex structures? What are the enforcement powers in the overseas territory? What can be done to secure the assets pending a final hearing?
A civil case usually begins with a quick response team who will need to undertake a lot of the ground work akin to a private investigation. There may need to be company searches undertaken at Companies House, and at the Gibraltar Land Registry, the inspection of the Register of Ultimate Beneficial Ownership in Gibraltar, as well as engaging the services of local private detectives to assist in the investigation of any other relevant matters.
In many civil frauds, especially with a cross-border element, the assets have most likely transmuted themselves via a sophisticated scheme into a structure with independent legal entities holding legal title to them. These companies can at times be therefore be ‘a mere cloak or facade’ to perpetuate a fraud. In instances such as these, the Gibraltar Court can accede to an application to pierce the corporate veil.
Equally, in many of those cases with a transnational element, it will not uncommon for disputes to arise on questions of the jurisdiction of the Gibraltar Law Courts to deal with the matter. Thus, issues of jurisdiction often lead to many of the complexities that arise in the context of civil asset recovery claims.
Emergency Interim Orders
The Supreme Court of Gibraltar possesses wide powers to impose a variety of interim remedies in civil fraud cases, and several orders can be imposed pre-issue of proceedings. The principal orders that come to the rescue at the pre-action stage in these types of proceedings are Freezing Orders, Search Orders (formerly known as “Anton Piller Orders”) and Orders for Disclosure of Documents as well as the identity of wrongdoers (formerly known as “Norwich Pharmacal Orders”).
Emergency Interim Orders are made in Gibraltar under the the Civil Procedure Rules 1998 and can therefore be a particularly powerful piece of litigation armoury in a civil case in that assets are preserving pending suit or further judicial order.
The Statute of Elizabeth I – Fraudulent Conveyances Act 1571
In the context of Gibraltar claims for civil asset recovery, it is worth briefly mentioning the English Fraudulent Conveyancing Act 1571 which forms part of the law of Gibraltar under the English Law (Application) Act 1962. The 1571 legislation is widely referred to as the “Statute of Elizabeth” and is found in the statute books of most, if not all, the common law offshore jurisdictions of the world. As antiquarian as it is, it still is good law.
The Statute of Elizabeth was brought into existence to address a particular mischief – to prevent dishonest debtors transferring property into trusts so as to frustrate claims made against them since the transfer out into the trustee divested the debtor of any legal interest over the property.
In modern times, the Statute of Elizabeth is still very much alive and in Gibraltar, operates to allow a creditor to apply to the Gibraltar Court to set aside any conveyance of property made with the intention of defeating creditors. A useful auxiliary to a claim based on the Statue of Elizabeth is the Freezing Order which, as has been noted, may be obtainable pre-issue of proceedings.
The Future of Fraud & Asset Recovery Laws in Gibraltar
In sum, Gibraltar law has efficient asset recovery tools and remedies which can be utilised as part of the overall civil or commercial litigation strategy, as the case may be. The jurisdiction also enjoys a range of cross-border strategies for asset recovery in the form of Letters of Request under the terms of international legal instruments in the field of mutual assistance, especially in the criminal law.
It is clear that cyber-crime is a rapid evolving phenomenon, which not only Gibraltar itself will need to tackle, but more pertinently, the international legal community. Cyber fraud will most likely perpetuate the next few decades and it will be fraught with legal challenges for reasons already outlined.
In the next few decades, it is likely that the laws of Gibraltar dealing with asset recovery in the context of cyber law will be largely influenced by the response of the international legal community to the advances of technology.
For further information about fraud and asset recovery proceedings in Gibraltar, please contact Ian Watts.
©Ian Watts, Barrister-at-Law, 2017-2021. All Rights Reserved.