Why civil actions against corruption? - Management & Professional ...

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Why civil actions against corruption?

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Centre for Comparative and Public Law, Faculty of Law, University of Hong Kong, Pokfulam, Hong Kong

Simon N.M. Young

Abstract Purpose – The purpose of this paper is to identify and examine motivating factors for why public and private actors initiate costly and risky civil actions to recover loss due to corruption in an era of increasing multilateral consensus and cooperation against corruption and organised crime. Design/methodology/approach – Research into recent global trends and types of civil lawsuits against corruption is conducted. Several cases, particularly from Canada, Hong Kong, the USA and the UK, are used to illustrate the attractions and difficulties of civil litigation. The implications of the recent international treaties on corruption are analyzed. Qualitative findings are made on a range of motivational factors that lie behind different types of civil actions against corruption. Findings – The paper notes an apparent rise in interest in civil actions against corruption and describes five types of actions brought by governments and companies. Civil actions are indicative of the want of better alternatives to recovery. While recent anti-corruption treaties help to remove barriers to civil actions, the treaties themselves cannot explain the increased interest in civil lawsuits. Full explanation lies in the empowering effect of suing, the political significance of these lawsuits particularly for a new regime suing to recover plundered property from the old regime, and the ease by which a lawsuit can be launched. Originality/value – This paper contributes to the literature in identifying types of civil actions against corruption, the practical and political motivations behind civil actions, and the positive relationship between international cooperation regimes and civil actions. Keywords Bribery, Civil law, Corruption, International cooperation, International law Paper type Research paper

1. Introduction Modern criminal justice systems try to ensure that victims are compensated for injuries and losses suffered at the hands of the defendant[1]. If the victim initiates a civil action to recover losses, this is usually a sign that there may have been a failing in the criminal justice system. Sometimes, it is because the wrongdoers cannot be prosecuted (whether due to a stay of proceeding, death or disappearance); other times, the defendant is acquitted due to an insufficiently strong case for the prosecution. An impecunious victim unable to sue in these circumstances goes uncompensated, unless there is state-funded criminal injuries compensation. Does the same apply to victims of corruption? The crime of corruption is unique in many ways. The gains and losses involved can be massive. The state or government

Journal of Financial Crime Vol. 16 No. 2, 2009 pp. 144-159 q Emerald Group Publishing Limited 1359-0790 DOI 10.1108/13590790910951821

This paper is based on a presentation that was delivered at the 26th International Symposium on Economic Crime, Jesus College, Cambridge University. The work described in this paper was fully supported by a grant from the Central Policy Unit of the Government of the Hong Kong Special Administrative Region and the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. HKU 7023-PPR-20051). The author wishes to thank Peter Chau for his excellent research assistance.

is often the victim. The proceeds of corruption, if traceable, are often in another jurisdiction thereby complicating recovery. The criminal justice system may be working fine, in that it has convicted and punished the wrongdoer, yet the victim may still need to sue locally or abroad to recover fully the corruption proceeds. Civil actions against corruption are indicative not necessarily of a failing of the criminal justice system but of the absence of a better alternative to recovery (such as by confiscation and international cooperation). Even with better alternatives to recovery, civil actions will still continue for a number of reasons including the ease by which they can be launched, the empowering effects of civil actions, the political implications of such actions, and the facilitating role of international cooperation. Civil actions will also proliferate if states enact laws that provide for more effective civil actions, fewer barriers to litigation and a wider array of plaintiffs. This paper develops and supports the above thesis by reference to relevant cases, treaties and domestic laws around the world. It seeks to understand the multitude of factors that affect why civil actions against corruption are launched or not launched. The meaning and significance of these civil actions are discussed in the context of multilateral treaties and initiatives against corruption. The paper begins by noting an apparent global rise in civil actions of this kind and in literature promoting such actions. Five types of civil actions are identified and discussed. Next, the international law context is examined to assess the extent to which it has or will contribute to the phenomenon of civil actions. Finally, an examination of the motivating factors for civil actions leads to conclusions about their contemporary significance. 2. Rise of civil actions against corruption There is a perception that civil actions against corruption have been on the rise in recent times. Cases appear regularly in the news headlines from all parts of the world. The USA is no stranger to corruption litigation, yet even there, cases seem to be on the rise. In recent literature, lawyers, academics, students, policy makers and insurance companies have predicted and advocated more civil lawsuits in the fight against corruption. 2.1 Classification of civil actions Recent cases can be classified in one of the five categories. Regime change lawsuits are generally cases of grand corruption. The new regime sues those who were in power before to recover embezzled state property or other property that the new regime now claims. The 2007 Indonesian lawsuits against former President Suharto and his son Tommy are a recent example (Deutsche Presse-Agentur, 2007; Aljazeera, 2007; BBC News, 2007). The US$1.5 billion civil lawsuit alleged that the former Indonesian president appropriated US$440 million from a charity scholarship fund. The suit against the son alleged that the state suffered US$55 million in damages as a result of the defendant’s involvement in a corrupt land exchange scheme. Both cases were necessitated by failed criminal proceedings. Other recent examples of regime change lawsuits are two English cases, one involving the former (and deceased) Zambian President Chilubu[2], and the other now failed lawsuit against Asif Ali Zardari, Pakistan’s newly elected President following the assassination of his wife Benazir Bhutto (former Prime Minister of Pakistan)[3]. Law suits together with criminal investigations also loom against former leaders and their family members in Thailand and Taiwan.

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Breach of trust lawsuits involve principals suing their agents to recover benefits gained or losses incurred in breach of trust owed to the principal. Hong Kong’s Independent Commission Against Corruption (ICAC) has brought several civil suits to recover corruption proceeds from ex-public officials, including the infamous case of the senior government prosecutor, Warwick Reid. Reid’s case in the Privy Council is still one of the leading common law authorities on the use of constructive trusts to recover bribery proceeds from an unfaithful fiduciary[4]. In 2007, the Privy Council had to consider another notorious case involving the royal family of Brunei[5]. The State of Brunei sued Prince Jefri Bolkiah, the youngest brother of the Sultan of Brunei, for misappropriating US$13.5 billion while he was serving as Minister of Finance and Chairman of the Brunei Investment Agency. Further litigation all the way to the Privy Council occurred when a dispute arose over the settlement of the original case. The pending lawsuit in Germany to be brought by Siemens against 11 former executive managers and two chief executive officers (CEOs) is a variation on the traditional breach of trust lawsuit (Boston, 2008). The defendants are to be sued not for receiving but paying US$2 billion in bribes to generate business for the company. The financial fallout for the company in having to pay fines, back taxes, advisory fees and other costs globally has reportedly reached nearly US$3 billion (Moulson, 2008). Overpayment and recovery lawsuits are brought by the principal against a third-party whose corruption or wrongdoing resulted in loss to the principal, such as in having to overpay for goods or services. In February 2008, Aluminum Bahrain B.S.C. (Alba) filed a civil Racketeer Influenced and Corrupt Organizations (RICO) suit in the US District Court against Alcoa and others claiming over US$ 1 billion in damages (van Voris and Crofts, 2008). Alba bought alumina from Alcoa. The suit claims that Alcoa bribed senior officials of Alba and the Government of Bahrain to induce Alba to overpay for alumina for 15 years. The case is still pending and ironically one of the ex-CEOs involved in the Siemens case, Klaus Kleinfeld, is the current CEO of Alcoa (Daily, 2008). Unfair competition lawsuits are brought by private companies that claim to have suffered loss after participating in a tendering exercise in which the tender was awarded to another company as a result of bribes or corruption. These claims sometimes fail from inability to show that the tender would have been awarded to the plaintiff had it not been for the corruption (Burger and Holland, 2006, p. 43). The US Foreign Corrupt Practices Act (FCPA) was enacted in 1977 to deal with bribery of foreign government officials by the US companies and nationals. Criminal and civil proceedings under the FCPA are brought only by the Department of Justice or Securities and Exchange Commission as the statute creates no private right of action (Rider, 1997, Chapters 14 and 15). Burger and Holland (2006, pp. 51-2) note a sharp rise in enforcement action under the FCPA since 2001[6]. They also note a number of interesting cases where private companies had brought unfair competition lawsuits on various rights of action, including civil RICO, and sometimes alleging breaches of the FCPA (Burger and Holland, 2006, pp. 63-8). Qui tam lawsuits are actions brought by individuals on behalf of the government to enforce penal legislation. If successful, the individual enjoys a portion of the monetary award made by the court. Carr (2003, p. 241) traces these “common informer actions” to the end of the thirteenth century, when there was no modern police force, and notes that Britain abolished them in 1951. Qui tam lawsuits against corruption have

a modern existence in the US False Claims Act (FCA), enacted in 1863 but amended and strengthened in 1986. Under the FCA, individuals with original information can sue a defendant for committing a specified act of fraud against the government, typically by submitting a false claim for payment (Roberts, 2008, pp. 171-80). Carr (2003, p. 242) notes a “marked increase” in qui tam actions. In the fiscal year 2006-2007, the US Government obtained US$2 billion in FCA settlements and judgments; 73 per cent of this amount (i.e. US$1.45 billion) was from qui tam actions (United States Department of Justice, 2007). The idea of adopting qui tam actions in the UK was raised in a UK Home Office (2007) consultation document on asset recovery. 2.2 Recent academic, practitioner and policy interest The perception of the rise in civil actions against corruption is buttressed by the flurry of recent academic writing and activities in the area. In March 2008, the Centre for European Law and Politics at the University of Bremen in Germany organized an international conference on the civil law consequences of corruption[7]. Burger and Holland (2006, p. 73) argued that private actors “are in a position to lead the next stage of the global fight against corruption”. They concluded as follows: International conventions recognize private claims for damages from corrupt acts and plaintiffs are bringing civil suits. MDBs [multilateral development banks] and corporations should start to bring more civil actions when they have suffered from the corrupt acts of others. Monitoring bodies should start to devote more attention to civil law enforcement. Attorneys in private practice should start to consider this as a promising field. There is an opportunity for corporations to begin to police their own in the next stage in the global fight against corruption (Burger and Holland, 2006, pp. 73-4).

American law firms have indeed devoted more attention to this area, and at least one firm has already written a “client advisory” on the topic (Maton and Gardner, 2008). The firm predicted more international civil lawsuits resulting from increased enforcement of the FCPA and FCA. In relation to the corruption of weak governments, Carrington (2007, p. 111) has made a number of suggestions that: [. . .] entail the use of the American practice of private enforcement of public law, a system that minimizes the dependence on public officials who are subject to capture by wealthy outsiders.

He considers adding qui tam actions to the FCPA to allow foreign governments to sue bribers and allowing foreign governments and their citizens to bring qui tam actions under the FCA. Other writers have also identified the benefits of civil suits as a response to grand corruption, or in extreme cases to what has been labelled corruption as a crime against humanity (Bantekas, 2006, pp. 476-81; Webster, 2008, pp. 821-3). Policy researchers have also called for civil actions. Bryane Michael (2007) has argued that “criminalization of corruption offenses [. . .] could actually worsen corruption in the developing world” and that “[i]nstead of pushing for criminalization, donors should support civil law remedies against corruption”. The World Bank (2006, p. 183) has noted the advantages of civil lawsuits over criminal proceedings in that the former “empowers victims to litigate on their own initiative, potentially relieving public prosecutors of a complicated burden”, and that civil courts are “less onerous, have a longer reach, and their burden of proof is less demanding”[8].


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3. Treaty obligations and civil actions Until recently, countries that came together to agree upon multilateral instruments and declarations on corruption did not feel civil actions were important enough to receive mention in the document[9]. This changed with the Council of Europe’s 1999 Civil Law Convention on Corruption (Civil Law Convention), but this instrument was primarily regional not international in membership. Recognition of civil actions in an international treaty on corruption finally came in the innovative 2003 United Nations Convention against Corruption (UN Convention). This section reviews the measures in these two treaties to assess their past and future impact on civil actions in practice. 3.1 Civil law convention on corruption The Twenty Guiding Principles for the Fight against Corruption, a directive adopted by the Committee of Ministers of the Council of Europe in November 1997, called upon its members states to “ensure that civil law takes into account the need to fight corruption and in particular provides for effective remedies for those whose rights and interests are affected by corruption” (Council of Europe, 1997, principle 17). This ultimately led to the Council of Europe’s Civil Law Convention, which opened for signature in November 1999, about a year after the Committee of Ministers adopted the Criminal Law Convention on Corruption (Council of Europe, 1999b). The Civil Law Convention (Council of Europe, 1999a) was a milestone as it was “the first attempt to define common principles and rules at an international level in the field of civil law and corruption” (Council of Europe, 1999c). Parties must provide “for effective remedies for persons who have suffered damage as a result of acts of corruption” (article 1). Corruption is defined broadly in article 2 to include both public and private sector bribery; however, other corruption related offences such as theft and money laundering are not included. There is no restriction that the acts of corruption occur within the territorial boundaries of the party. There is a duty to provide victims of corruption a right to initiate an action in order to obtain full compensation for damages (both pecuniary and non-pecuniary losses) suffered (article 3). Civil liability is predicated on the fulfilment of three conditions: (1) The defendant committed or authorised the act of corruption, or failed to take reasonable steps to prevent the act of corruption. (2) The plaintiff suffered damage. (3) There is a causal link between the act of corruption and the damage (article 4(1)). The explanatory report to the convention interprets these conditions liberally, noting particularly that parties are not prevented from “allowing a person other than the one who suffered damage to bring a claim for its compensation” (Council of Europe, 1999c, para 44). The convention clearly contemplates that the plaintiff can be a private individual, company, state or governmental actor. Where a party’s public officials in the exercise of their functions have caused damage by their act of corruption, the person who has suffered damage will be provided with an appropriate procedure to claim compensation from the party concerned (article 5). The preconditions to obtaining compensation on this basis are unspecified and are left to be decided by individual parties (Council of Europe, 1999c, para 49). Other articles require parties to have laws that provide for rules and procedures typically applicable in civil law suits such as joint and several liability (article 4(2)),

contributory negligence (article 6), limitation periods (article 7), effective procedures for acquiring evidence (article 11), and interim measures to preserve rights and interests (article 12) (Council of Europe 1999c, Paras 46-7, 51-62, 77-84; Kofele-Kale, 2006, pp. 178-83). Limitation periods were seen as being necessary because they “provide a degree of certainty for plaintiffs and defendants about the risks of litigation” and also ensure “balance and fairness” as “the defendant may not have access to the evidence after a great number of years” (Council of Europe, 1999c, para 60). The convention does not fix a specific limitation period but sets lower (not less than three years from the discovery of the damage or corruption) and upper limits (not more than ten years from the act of corruption) on periods prescribed in domestic law (article 7(1)). Any contract or clause of a contract providing for corruption is to be null and void (article 8(1)). An important provision to encourage whistleblowers to come forward is article 9 which requires parties to provide appropriate legal protection against any unjustified sanction for employees who report corruption in good faith and with reasonable grounds to suspect. As a preventative measure for better corporate governance, article 10 imposes duties to ensure that companies present a true and fair view of their financial position. Finally, there is a general obligation on parties to co-operate effectively in matters relating to civil proceedings in cases of corruption, “especially concerning the service of documents, obtaining evidence abroad, jurisdiction, recognition and enforcement of foreign judgements and litigation costs [. . .]” in accordance with the internal law and international obligations of each party (article 13). The group of states against corruption is mandated to monitor the implementation of the convention by the parties (article 14). 3.2 United Nations Convention against Corruption The drafters of the UN Convention (United Nations, 2003a) were obviously well aware of the Civil Law Convention, as evidenced by the fact that the latter is noted in the former’s preamble. There are however important differences between the two instruments. Generally, the provisions relevant to civil actions in the UN Convention are not as extensive as those in the Civil Law Convention. However, the UN Convention applies to a broader range of offences. Chapter III requires states parties to criminalize a host of activities including bribery of national and foreign public officials, embezzlement or misappropriation by public officials, money laundering, and obstruction of justice. It also requires states parties to consider establishing criminal offences for trading in influence, abuse of functions, illicit enrichment, bribery and embezzlement in the private sector, and knowing concealment or retention of proceeds of crime. Like the Civil Law Convention, article 35 of the UN Convention requires that: [. . .] entities or persons who have suffered damage as a result of an act of corruption have the right to initiate legal proceedings against those responsible for that damage in order to obtain compensation[10].

The interpretative notes for the travaux pre´paratoires indicate that the expression “entities or persons” includes “States, as well as legal and natural persons” (United Nations, 2003b, para 37). States parties are to implement this obligation by taking “such measures as may be necessary, in accordance with principles of [their] domestic law” (article 35). Unlike the Civil Law Convention, no preconditions to liability are specified as “article 35 does not restrict the right of each State Party to determine


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the circumstances under which it will make its courts available” (United Nations, 2003b, para 38)[11]. The use of civil actions is also referred to in Chapter V which is concerned with asset recovery. The UN Convention is unprecedented in achieving consensus on this challenging area. Article 51 declares that the:

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[. . .] return of assets pursuant to this chapter is a fundamental principle of this Convention, and States Parties shall afford one another the widest measure of cooperation and assistance in this regard.

Chapter V recognized “the need to have a range of flexible measures available for the return of assets” (United Nations, 2006, para 708). Two general approaches to recovery are specified: direct recovery of property (article 53) and recovery through international cooperation in confiscation (article 54). Civil actions are one of the three means of direct recovery that states parties must make available to other parties (article 53). Parties are required to: [. . .] take such measures as may be necessary to permit another State Party to initiate civil action in its courts to establish title to or ownership of property acquired through the commission of [a Convention] offence (article 53(a)).

The second method of direct recovery is for the courts of one state party to order offenders to pay compensation or damage directly to the harmed state party (article 53(b)). The essential difference between this method of recovery and the first one is that in the first method, “the victimized State is a party in a civil action it initiates”, and in the second method, “there is an independent proceeding at the end of which the victim State must be allowed to receive compensation for damages” (United Nations, 2006, para 715). The convention does not specify whether this independent proceeding is to be civil or criminal in nature (United Nations, 2006, para 714). The third method of direct recovery is to recognize another state party’s claim as a legitimate owner of property when deciding on confiscation (article 53(c)). All three methods of direct recovery see states (and not private persons) initiating, intervening or appearing in domestic proceedings to enforce their claim for compensation (United Nations, 2006, para 710). In contrast to direct recovery, the second general approach to recovery combines confiscation by mutual legal assistance (MLA) with the return of confiscated property. The convention sets out one of the most detailed and sophisticated frameworks for international cooperation in respect of proceeds of crime. International cooperation is dealt with separately in Chapter IV of the convention; Chapter V elaborates a special regime of cooperation for the purpose of asset recovery. Two main methods of confiscation by MLA are specified: recognition of foreign confiscation orders (article 54(1)(a)) and confiscation following adjudication of an offence of money laundering or other offence (article 54(1)(b)). The first method tends to be more expeditious as it is only concerned with the enforcement of the foreign order, as if it was a domestic one. The second method requires a trial of the substantive offence (even if it is the easier-to-prove money laundering offence), a finding of liability, followed by an order of confiscation and finally enforcement. The success of both methods (and particularly the second one) hinges on the quality and sufficiency of the information provided by the requesting state and the responsiveness and diligence of the requested state.

There is a further provision on non-conviction based confiscation. Parties need only consider adopting measures “to allow confiscation [. . .] without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases” (article 54(1)(c)). This is a reference to some countries’ exceptional criminal confiscation powers that apply when the accused has died or absconded and to in rem civil forfeiture regimes that have recently proliferated in many countries[12]. Once corruption proceeds have been confiscated in the requested state, the convention requires the return of the proceeds to the victims of corruption. To reconcile possible competing claims by states and private persons, the return of assets is to be done in accordance with a formula in article 57 that favours “return to the requesting State Party, depending on how closely the assets are linked to it in the first place” (Vlassis, 2005, p. 122). An important provision sets out the rule that the requested state may deduct reasonable expenses incurred in investigations, prosecutions or judicial proceedings leading to the return or disposition of confiscated property (article 57(4)). This rule is an exception to the general rule in Chapter IV that the ordinary costs of executing a request shall be borne by the requested state party (article 46(28)). However, states parties can always agree to dispose of the confiscated property in a different manner (article 57(5)). There are several other provisions relevant to civil actions. The preamble to the UN Convention recognizes the “fundamental principles of due process of law [. . .] in civil or administrative proceedings to adjudicate property rights”. Like the Civil Law Convention, there are provisions on protecting whistleblowers (article 33) and annulling or rescinding contracts obtained by corruption (article 34), but the obligations imposed here are put in terms less onerous than those in the Civil Law Convention. While there is a provision on statute of limitations (article 29), it appears to be directed towards limitation periods in criminal proceedings[13]. Finally, mention should be made of the UN Convention’s position on international cooperation in civil proceedings other than in relation to asset recovery. The detailed cooperation regime in Chapter IV is mandatory in criminal matters (article 43(1)). However, in relation to civil and administrative matters relating to corruption, states parties need only consider assisting each other where appropriate and consistent with their domestic legal system (article 43(1)). Again, this falls short of the cooperation obligations imposed in the Civil Law Convention (article 13). Other treaties such as those under the auspices of the Hague Conference on Private International Law will continue to provide the framework for some international cooperation in civil proceedings (McClean, 2002, Chapters 3 and 4). 3.3 Significance of the international instruments Both treaties have only entered into force within the last five years[14]. The Civil Law Convention has limited membership. After almost five years of having entered into force, only 32 of the 47 member states and one of the non-member states were parties to the convention[15]. The UN Convention has greater worldwide membership. In its first three years of entering into force, there were already 121 parties and 140 signatories. Both treaties require states parties to provide private persons and foreign states and governments with rights of action in their own courts. Many countries already allowed for such actions; for them the basic obligation was already implemented. The obligation


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removed legal barriers if any to launching civil suits, but did not address or remove legal and practical barriers in the litigation process itself. The obligations on civil actions largely reflected existing practice, and it was unlikely that these obligations on their own would generate more practice. Carrington (2007, p. 121) has questioned what if any impact the Civil Law Convention has had on corruption. While the convention is a “step forward”, he notes that “there is as yet no report of civil actions against offenders” (Carrington, 2007, p. 121). He lists the barriers to civil litigation that European plaintiffs face, many of which would be lessened or non-existent in the US system, before concluding that: European courts are unlikely to make the Civil Law Convention a threat sufficiently serious to deter European firms motivated by the marketplace to engage in corrupt practices, except for blatant misdeeds (Carrington, 2007, p. 122).

Carrington is too harsh. He fails to mention the influence of the Civil Law Convention on the UN Convention. It is the UN Convention with its already large and growing number of parties that stands to have the greatest impact. Its potential impact lies not in the provision of a civil right of action by states parties but in achieving a stronger and workable international cooperation regime for the recovery of corruption proceeds. As discussed below, a strong cooperation regime will affect the frequency and efficacy of civil actions. 4. Meaning and significance of civil actions against corruption The two treaties have made governments and people more aware of the role of civil actions against corruption. But, this in itself cannot fully explain the apparent recent rise in civil actions. Long before the Civil Law Convention, states and private persons sued both domestically and internationally to recover from corruption. There are other factors that affect the decision of whether or not to sue. 4.1 Civil actions: easy to start, hard to win The apparent rise in civil actions may simply reflect the advantages and relative ease of commencing a civil lawsuit. Common law courts, sympathetic to crime victims, have developed injunctive remedies, legal doctrines and causes of action to facilitate the process of recovery (Ulph, 2006). Private victims with resources will naturally resort to a civil action to achieve justice when the alternative requires waiting on enforcement action to be taken by one or possibly several governments. The civil action is empowering and allows the victim to maintain control over the process. There are also the benefits of secrecy to protect reputation and speedy action to preserve evidence, both of which may not be possible if government agents become involved (Ulph, 2006, pp. 30-31). Private actions may also avoid human rights challenges which a state-led process might attract (Roach, 1999, p. 301). What is difficult, however, is seeing the case through to a favourable judgment or settlement. There are the barriers of cost and delay that the plaintiff must be willing and able to overcome. Rider (2007, p. 31) warns of a host of other practical issues and possible impediments to civil actions: no cause of action, defences to the action, waiver of rights, having the proper plaintiff, limitation periods, providing security of costs, issues of parallel proceedings, and costs exceeding recovered amounts. All of these factors come together to create a great amount of risk and uncertainty for civil actions.

The pitfalls and risks of civil actions were seen in the Canadian case, Qatar Central Bank v. Himadeh[16] The bank sued Himadeh, who had served as an expert advisor to the bank for nine years, to recover US$5.2 million which Himadeh transferred into his personal account shortly before he left the bank and migrated to Canada in somewhat unusual circumstances. The judge found for Himadeh and dismissed the claim on the basis (albeit disputed by the bank) that there had been a collateral agreement between Himadeh and Prince Aziz (one of the sons of the Emir of Qatar) to pay this amount as a commission for his successful management of funds. It was obvious that the court struggled with the evidence given the international dimension of the case and the significant cultural differences. At various points in the judgment, the judge expressed difficulties: Much of the evidence was designed to create explanation and atmosphere in order to bring plausibility to circumstances which might, in Canada, be implausible. In the end, the totality of the evidence had woven a tale not unlike the tales of the Arabian Nights replete with contradictions, mysterious and unusual conduct, rich and intriguing explanations and, in the final analysis, a broad spectral confrontation in the evidence between the parties which ultimately required me to make the determination of the issues based upon the credibility of the individual witnesses [. . .] (para 10). Conducting a trial in Ontario surrounding events which took place in Qatar is difficult. Understanding the nature of the relationship between Al-Thani and Prince Aziz is not something which can arise from the normal or natural affairs of employment and/or commerce here in Ontario (para 153).

The judge repeatedly mentioned the failure of Prince Aziz to testify which obviously prejudiced the bank’s case. Attempts to appeal up to the Supreme Court of Canada were dismissed. Himadeh illustrates the forensic challenges of trans-national corruption lawsuits. These challenges would not entirely disappear with the adoption of laws that allow for better civil actions. The Qatari authorities would not have been assisted with civil RICO, FCPA or even FCA with its qui tam standing. The case turned ultimately on basic issues of credibility and reliability, which were made more challenging by the different cultural and international context. 4.2 Civil actions for want of a better alternative Cases like Reid and Himadeh occurred at a time when there was no better legal alternative to recovery. Reid was convicted of an illicit enrichment offence and required to serve seven years of imprisonment in Hong Kong[17]. As part of his sentence, he was ordered to pay HK$12.4 million in restitution. No confiscation order could have been made at that time. Reid failed to pay, but this did not result in penal consequences; the government could only enforce the order as a civil judgment. The corruption proceeds were traceable to three properties, including an orchard, in New Zealand held by Reid. At the time, there was no MLA treaty between Hong Kong and New Zealand. Likewise, at the time of Himadeh’s case, there were no MLA arrangements between Canada and Qatar. Other than by a lawsuit, the only conceivable alternative to recovery at the time was if the Canadian or New Zealand authorities undertook their own criminal prosecutions, probably for money laundering, obtained forfeiture orders after conviction and shared the forfeited proceeds with the victim jurisdiction. This was highly unlikely in both cases.


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Hong Kong’s ICAC has also sued in local courts to recover proceeds from a notorious history of corruption. The law suits have been necessitated mostly due to an inadequate confiscation regime (Young, 2009, Chapter 10). Hong Kong does not have civil forfeiture yet and until recently its criminal confiscation regime did not apply to many corruption offences. As mentioned already, restitutions orders obtained after conviction require civil enforcement in the absence of voluntary payment. A recent case saw a settlement for HK$140 million with the family of Hon Sum, a former policeman, who had evaded capture for many years before his death in 1999. It took six years for the civil suit to come to an end. An ongoing case points to another deficiency in the Hong Kong legal regime, the absence of formal MLA arrangements with other parts of China. Macau’s former minister of transport and public works, Ao Man Long, was convicted of very serious corruption offences in January 2008 involving an alleged amount of about HK$800 million. He was sentenced in Macau to 27 years imprisonment and a confiscation order of about HK$250 million was made. A significant amount of his bribery money was paid into Hong Kong bank accounts. In the absence of a MLA agreement between the two Chinese special administrative regions, Macau launched a civil suit in Hong Kong’s High Court in July 2008 to recover more than HK$230 million (Brieger, 2008). Civil actions are thus a litmus test of the availability (or perceived availability) of effective alternatives to recovery. In Reid, if the sentencing judge had the power to order confiscation of the New Zealand properties and if appropriate MLA arrangements had been in place, enforcement would only have required having the Hong Kong order recognized as a New Zealand one. Himadeh’s case is more complicated. Avoidance of the civil suit would have required a power in Qatar to order confiscation either in rem or after a trial in absentia of property in Canada. Through MLA, the Qatari order would be sent to Canada for registration and enforcement[18]. Himadeh would certainly have challenged the registration of the order, and in the end it could well be that the result would have been the same. Procedurally, the difference is that in this proceeding it would be the Attorney General of Ontario pursuing the case rather than the Qatari authorities. Victims must feel that the alternative can provide full and expeditious recovery if they are to forgo a civil action. Extra-territorial in rem civil forfeiture orders, coupled with mutual recognition of orders and return of confiscated property can in theory be a highly effective alternative. The UN Convention attempts to provide for such a regime although without requiring states to adopt civil forfeiture. In the end, actual effectiveness will depend on the countries involved, the MLA relationship and experience between those countries, and the experience on the ground of those in charge of executing requests for assistance. 4.3 Political dimension of civil actions There can be a political dimension to civil actions against corruption. Regime change lawsuits have an inherent political agenda. If corruption allegations contributed to the toppling of the old regime, the survival of the new regime may well hinge on maintaining the pursuit of recovery, whether or not it is profitable in the end. It is the pursuit that becomes political and any relenting might be seen as condoning the wrongdoing and that would undermine the very legitimacy of the new regime. But, the pursuit cannot be too long because political winds change quickly, like the fortunes

of Zardari in Pakistan; public support could quickly become public criticisms of the expense and time taken to realise justice. Hong Kong’s ICAC has been undeterred by delay. It sends a different political message with its civil suits: “This case demonstrates the ICAC’s unrelenting determination to pursue corruption and to recover ill-gotten gains through legitimate channels” (Ng, 2003). This was a statement made by the ICAC after the civil verdict in Cheung Wing-shu’s case, which involved another former policeman, like Hon Sum, who could not be prosecuted. The bank accounts were restrained in 1975, and the civil proceeding concluded in 2003, some 28 years later (Ng, 2003). There may also be commercial politics at play, such as in cases of corruption involving large multinational corporations. The looming Siemens lawsuit has many implications beyond the immediate one of recovery. Individuals have been convicted but this does little to restore Siemens’ international reputation and integrity in the eyes of the public. The civil case which sees Siemens suing its former senior officials represents an act of corporate responsibility and has a greater potential to lift its public image. The suit, whatever its outcome, would allow the company to cleanse itself of a diseased practice, deter others in the company from possible re-offending, send a public message that the company does not tolerate the practice and has taken steps to eliminate it, and ultimately reach a sense of closure to the scandal. 4.4 Dual process: civil actions aided by international cooperation A stronger international cooperation regime can facilitate and promote further civil actions, particularly those brought by government. For example, international cooperation could be used to restrain property to prevent their transfer or dissipation. Such a measure would reduce costs for the civil litigant who could dispense with having to obtain a Mareva injunction[19]. This occurred in the Ao Man Long case (Godinho, 2007). Though the civil suit was necessitated by the absence of a MLA agreement, ironically earlier informal cooperation resulted in Hong Kong’s ICAC freezing bank accounts and executing search warrants to aid the recovery of the proceeds. No Hong Kong criminal prosecution has ever taken place. It is the funds in these bank accounts, now restrained under Hong Kong’s bribery laws, which are the subject of the civil litigation. Dual process may have its limits in that a court might find that the statutory powers are being used for an improper purpose. This may call for legislative reform to make clear that confiscation laws also share the same recovery purposes as civil law suits. Similarly, government policies must also recognize that private civil actions and public enforcement are not mutually exclusive but can work together towards the same goal. This recognition is consistent with the design of Chapter V of the UN Convention. 5. Conclusion Civil actions against corruption are launched when the plaintiff sees the need to take decisive and immediate action towards compensation and recovery. Civil actions have a public and political dimension, and plaintiffs are usually conscious of the message that they wish to send by initiating the suit. It is no longer enough for governments to prosecute and punish financial wrongdoing only. It is irresponsible government (and possibly an illegitimate government) that fails to take steps to recover stolen and unjustly acquired public property. Shareholders and members of the


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public are starting to demand the same of corporations that have been tainted by domestic and international corruption. In line with the UN Convention, civil actions should not be seen as being in competition with multilateral and public law alternatives to recovery. There is room for dual processes that can lead to more effective recovery. However, safeguards must always be in place to avoid unfairness and improper self-incrimination that might ultimately undermine any criminal proceeding. Notes 1. For a Canadian account of victim-centred models of criminal process, see Roach (1999). 2. See Attorney General of Zambia v. Meer Care & Desai [2007] EWHC 952 (Ch), rev’d [2008] EWCA Civ 875 (CA). 3. See dismissal of challenge to set aside service out of the jurisdiction, Pakistan v. Zardari [2007] EWCA Civ 134 (CA) where the court affirmed the judge’s finding that there was a reasonable prospect of success in the suit alleging the use of bribe money to acquire Rockwood Estate in Surrey. However, in March 2008, the lawsuit was withdrawn by the Pakistan Government (Ziauddin, 2008). Butto was assassinated on 27 December 2007 and Zardari was Elected President on 6 September 2008. 4. See Attorney General for Hong Kong v. Reid [1994] 1 AC 324 (PC). 5. The Privy Council gave two decisions dismissing the appeals of Prince Jefri, see Bolkiah v. Brunei Darussalam (Procedural Issue) [2007] UKPC 62; Bolkiah v. Brunei Darussalam [2007] UKPC 63. 6. US insurance companies have also noticed the rise in enforcement, see LaCroix (2008). 7. The papers from the conference are to be published as a book by Nomos Publishers, visit: www.zerp.uni-bremen.de, for more information. 8. The World Bank Report refers to Transparency International (2000). 9. For a summary of relevant international legal instruments, see United Nations (2005, pp. 1-19). 10. See further Council of Europe (1999c, paras 46-7, 51-62, 77-84); Kofele-Kale (2006, pp. 178-83). 11. This provision was adopted partly due to the lobbying efforts of Transparency International in the US business community who were concerned about facing lawsuits in foreign courts, Webb (2005, p. 214). 12. A restriction that requires the acts to “have a legitimate relationship to the State Party where the proceedings are to be brought” is an example given in the note. 13. However, United Nations (2006, para. 371) mentions limitation periods in civil proceedings in the discussion of this paper. 14. The Civil Law Convention entered into force on 1 November 2003, after obtaining the necessary 14 ratifications. The UN Convention entered into force on 14 December 2005, after obtaining the necessary 30 ratifications. 15. Andorra, Denmark, Germany, Iceland, Ireland, Italy, Luxembourg, Spain and the UK had yet to ratify the treaty. Liechtenstein, Monaco, Portugal, Russia, San Marino and Switzerland had yet to sign the treaty. None of the five other non-member states (Canada, Holy See, Japan, Mexico and the USA) were signatories to the treaty. 16. Agence Mone´taire de Qatar v. Himadeh, 1996 WL 1778520 (Ont.Gen.Div.), aff’d 1996 WL 1787365 (Ont.C.A.), leave to appeal to SCC refused [1997] 2 SCR xiii.

17. Originally sentenced to serve eight years but remitted by the governor to seven years for his subsequent cooperation and assistance in other cases, see In re Charles Warwick Reid [1994] 1 HKLR 14 (CA). 18. Both Canada and Qatar became parties to the UN Convention in 2007. 19. Mareva Compania Naviera SA v. International Bulk Carriers SA [1980] 1 All ER 213; [1975] 2 Lloyd’s Rep. 509 (CA).

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