Asset Tracing, Recovery and Fraud in Europe: The Main Differences Between Common Law and Civil Law
Staying up to speed about the differences between Common Law (i.e. the Anglo-Saxon legal tradition) and Civil Law (i.e. European Continental legal tradition) is no easy feat.
In this article, whilst recognizing that important differences exist even between jurisdictions of the same legal family, we break down some of the key differentiators between these two legal systems in relation to asset tracing, asset recovery, and fraud.
To begin with, let’s dive into asset tracing and recovery.
Asset Tracing and Recovery
Civil Actions Vs. Criminal Proceedings
Common Law generally does not allow criminal actions to be exercised – either by private prosecution or the victim of criminal fraud – to the same extent that is permitted by Civil law.
Instead, a series of civil actions have been developed in Common Law jurisdictions that allows those affected by criminal or civil fraud to achieve a comparable result to that which would be achieved in criminal o civil proceedings of Civil Law jurisdictions.
How Do They Differ?
In Continental Europe, a victim of criminal fraud can choose to:
- Seek financial compensation for themselves in the proceedings (as opposed to the prosecuting authority making this decision).
- Pursue either criminal or civil action at any one time. The victim must choose which one to pursue first, as both actions cannot happen simultaneously.
Whereas, in the Common Law system, the opposite is true:
- The decision to pursue financial compensation is taken by the prosecuting authority, not by the victim.
- Both criminal and civil actions can take place at the same time.
It’s safe to say that these are two very distinct differences between Civil Law and Common Law when it comes to fraud.
When to Trace Assets
Common Law prioritizes the tracing of assets – and the assurance that they exist – even before the resolution of a legal conflict. This is achieved through the use of methods like, for example:
- Mareva Injunctions: for freezing assets ahead of a judgement, including orders directed to the defendant to disclose his assets.
- Anton Piller Orders: for the right to search premises and freeze evidence without warning the suspected fraudster.
- Bankers Trust Orders: used against banks that are in possession (or have been previously) of misappropriated or stolen funds.
All of these are accompanied by civil and criminal contempt of court measures.
In Civil Law jurisdictions, the tracing of assets happens through the use of criminal and civil asset tracing and recovery methods at the disposal of both creditors and victims of crime. Asset tracing measures during the course of investigations in criminal matters are particularly noteworthy in terms of their potential impact.
One could argue that the Common Law measures are sometimes stronger than those available in Civil Law courts for criminal and civil actions, although equivalent methods do exist in both legal systems.
We also need to clarify how “fraud” is defined.
Fraud in Common Law
In Common Law, “fraud” is a broad concept that refers to the deliberate concealment of assets, or the use of deceit to obtain a financial gain.
Fraud is often linked to the use of opaque structures – for example, in offshore jurisdictions – that are not in essence bad, due to their legitimate origins and purpose. For example, for use by trusts or foundations.
Fraud in Civil Law
In the Continental tradition, fraud (of creditors) means protecting one’s assets as a precaution, to avoid their use by creditors. Also, “fraud” is categorized as different sorts of crimes described in each jurisdiction’s Criminal Codes, as well as different causes for civil action.
Historically, the fight against fraud rested upon the Paulian Revocation action or subrogatory action.
However, these have gradually been expanded to also include bankruptcy and criminal protection.
Asset Tracing and Recovery in Spain
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