Using Civil Remedies in Corruption and Asset Recovery Cases

Article excerpt

Civil law remedies are a credible and effective tool for countries interested in recovering stolen assets--both when criminal procedures are unlikely to yield a result or in addition to such measures. They do not replace criminal prosecutions and confiscation but they complement them by attacking the economic base of corrupt activities and by focusing on victims' interests. While common law offers a wider array of options to exercise proprietary claims on stolen assets, for personal claims both common and civil law systems offer reasonably similar avenues. Jurisdictions should consider increasing their use of legislation and legal concepts dealing with civil measures to recover profits obtained and damages suffered as a result of corrupt activities. Recent success stories involving private civil proceedings illustrate how such a strategic use and combination of available tools can boost asset recovery efforts.

CONTENTS

I.   INTRODUCTION: WHAT IS CORRUPTION AND
     HOW DO WE RESPOND?
II.  TYPES OF ACTIONS
     A. Proprietary Actions
        1. The constructive trust
        2. Revindication
     B. Personal Claims
        1. Contract
        2. Tort
        3. Restitution and unjust enrichment
        4. Civil action based on a criminal case
III. REMEDIES: HOW MUCH TO SUE FOR AND HOW ARE THE
     DAMAGES CALCULATED?
     A. Most Common Remedies Used to Quantify Illicit Profits,
        Compensation or Restitution
        1. Disgorgement
        2. Compensation for damages
        3. Contractual restitution
     B. Quantification in Practice and Challenges
     C. Beyond the Present--Emerging Theories--Punitive Damages and
        Social Damages
IV.  CONCLUSION

Following the entry into force of the UN Convention Against Corruption (UNCAC) in 2005 and more recently the Arab Spring and a string of scandals in the financial sector, the topic of corruption and its proceeds has steadily risen up the international policy agenda. The G8, the G20, and many regional and civil society organizations, are all putting forward ideas on how best to tackle it. This article aims to provide a modest contribution to that debate by focusing on an often overlooked avenue for going after corruption. Before doing so however, it is important to be clear about the terms, and specifically about the meaning of the concept of corruption.

I. INTRODUCTION: WHAT IS CORRUPTION AND HOW DO WE RESPOND?

In essence, corruption is an agency problem: one person (the agent), be he an elected politician or a director of a bank, is supposed to be acting in the best interests of someone else (the principal), be it the people of a nation as embodied in the state or the bank's shareholders as embodied in the bank itself. Instead the agent allows his personal interests to take precedence. The agent is furthering his own interests at the expense of the principal. To be clear, principal-agent in its broad sense is not to be confined to its strict legal meaning, but rather as a sociological description of relationships. Though traditionally defined as "the abuse of public office for private gain," the distinction between public and private sector corruption is really secondary, concerning only how the power is vested. We therefore agree with recent definitions of corruption as encompassing all forms of abuse of entrusted power. In its internal rules on preventing fraud and corruption, the World Bank defines a corrupt practice as "the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party," (1) without distinguishing between private or public sector. Similarly, Transparency International defines corruption as "the abuse of entrusted power for private gain." (2)

The global legal standard for the fight against corruption, the UNCAC, does not contain a definition of corruption itself. Instead, in Chapter 3, the UNCAC lists a whole array of conduct that is considered to be corrupt, including both public and private sector bribery and the embezzlement of both public and private sector funds, (3) thus implicitly endorsing the same idea, namely that corruption straddles both the public and the private spheres. …