Who’s Who Legal brings together Stéphane Bonifassi of Bonifassi Avocats, Keith Oliver of Peters & Peters and Andrew Thorp of Harney Westwood & Riegels to discuss issues facing asset recovery lawyers and their clients today.
Stéphane Bonifassi: A bill on “transparency, the fight against corruption and economic modernisation”, also known as bill “Sapin 2”, is presently being discussed in Parliament and should be finally adopted in the course of summer 2016. This bill will introduce in the Criminal Procedure Code a differed prosecution agreement mechanism.
More relevant to the asset recovery and judgment recovery practice, the government has introduced in this bill, at the last minute, a very debatable provision to protect foreign states’ assets. This provision is undoubtedly linked to the Yukos case and to the general will of the French ministry of foreign affairs to safeguard a good diplomatic relationship with states should they be unwilling debtors. It is doubtful that this provision complies with either the UN Convention on the immunity of states that France has ratified, or article 6 of the European Human Rights Convention and the case law rendered on the basis of this article, which says that creditors have a right to the enforcement of court decisions.
Regarding case law developments, we are faced with contradicting tendencies; French bank secrecy – even in the case of fraud, or simply to enforce judgment – is construed very strictly by courts in civil proceedings. Still, if convincingly made, applications to obtain disclosure orders before initiating proceedings are now obtained on a regular basis as long as banks are not the target of such disclosure orders.
Keith Oliver: In March, the Department for Business Innovation and Skills published a discussion paper seeking input on proposals to introduce greater transparency in respect of certain foreign companies, which is set to impact the asset recovery side of my practice.
In broad terms, the proposals seek to bring foreign companies holding English or Welsh real estate, or intending to bid for UK government contracts, under a similar beneficial ownership disclosure regime to that being introduced in respect of domestic companies in June this year by Part 7 of the Small Business, Enterprise and Employment Act 2015 (the Act).
Part 7 of the Act introduces a new regime under which registered companies will be required to make available the details of anyone exercising significant control (ie, more than 25 per cent of company shares or voting rights) over the company at Companies House, effectively requiring public disclosure of the identity of the company’s ultimate beneficial owner or owners.
Further, under draft proposals contained in subordinate legislation, companies will be be under an overarching duty to take reasonable steps to find out if anyone is a registrable person exercising “significant control”. Criminal sanctions for non-compliance of these new duties may be imposed. The key word is transparency, with accountability not far behind.
Andrew Thorp: Perhaps the most significant and recent legislative development in the BVI is the enactment of the Arbitration Act 2013. This has the potential to create far-reaching effects in the BVI on dispute resolution. It is a great development for the jurisdiction, as the Act draws together international principles and practices already in existence in arbitration and applies them to the BVI.
While not as grand as the introduction of BVI-based arbitrations, there have been important amendments to BVI’s flagship Act, the BVI Business Companies Act. Perhaps the most important yet subtle change is for registered agents in the BVI to take heed of director resolutions over their own client demands. This amendment brings strength and clarity to a provision which previously lacked certainty. It is hoped that there will be a marked impact on the ability of those wronged by fraud to wrest control away from wrongdoers as a result of this amendment.
Stéphane Bonifassi: There seems to be in increase in such disputes although no statistics are available. From what we have seen, this increase is linked to the pressure put by private equity funds on companies, their directors and shareholders.
Keith Oliver: Yes. Shareholder disputes – engaging issues of unfair prejudice, as well as petitions for the just and equitable winding-up of a company and the derivative claim – continue to play an increasingly prominent part in my practice.
The greater transparency and governance imposed upon directors and controlling shareholders requires a best-practice approach to obligations shown towards other shareholders, with seriously adverse financial consequences for investors who get it wrong.
Andrew Thorp: Given the sheer volume of BVI incorporated vehicles, it is no wonder that shareholder disputes dominate the BVI legal landscape. As a result, we have gathered a strong line of jurisprudence with a sophisticated and experienced legal and accountancy community able to deal with the most complex of disputes. Judges sitting in the BVI Commercial Divisions such as Bannister J, Sher J and Eder J provide further momentum and confidence for litigants to have their disputes heard in the BVI.
Harneys has comfortably the largest transactional and litigation groups practicing BVI law.
As such we are embedded in the process from advising clients on the shape of their contractual relationships at the genesis of the relationship, to providing experienced advice on tactics and strategy when that relationship is threatened or failing.
The BVI Business Companies Act has a broad legislative framework for regulating companies’ conduct and that of its shareholders. Harneys has been able to deploy the relevant sections creatively to find tailored solutions for clients in a time frame and manner that would simply not be possible in other jurisdictions. This has led to a considerable increase in instructions over the previous 12 months in sectors ranging from energy to hedge funds.
Stéphane Bonifassi: Brazil is undoubtedly an active jurisdiction these days in the fight against corruption and fraud. It has repercussions in the asset recovery field where I see an increase of claims coming from that country. The CIS countries are still active as far as asset recovery cases in France are concerned.
Keith Oliver: I would agree. I have spent a significant amount of time in Asia in the last year, participating in a commercial legal forum with local lawyers in November 2015, and speaking engagements with the IPBA in Kuala Lumpur in April, and C5 in Hong Kong in June 2016. These trips have shown to me the particular vibrancy of the Asia markets.
The rise in arbitral proceedings has played a significant part in this. The caseload of the Hong Kong Arbitral Centre (HKIAC) and the Singapore International Arbitration Centre (SIAC), for example, is growing rapidly, with work in this sector only set to increase following the opening of the Singapore International Commercial Court (SICC) in May 2015.
The driving forces are the increasing globalisation of cross-border litigation, and the breadth of opportunities available to claimants to pursue claims in new jurisdictions that offer consistency, expedition and the highest levels of judicial integrity.
Andrew Thorp: As the only offshore law firm with offices across Asia and Latin America, it is perhaps unsurprising that Harneys dominates these spaces. The popularity of BVI vehicles as a structuring tool in Asia is well established, with Asia having been driven by the steady liberalisation of the PRC’s capital markets but also a tendency for investment vehicles, especially in Japan to harness offshore vehicles. Latin America too – notably in the mining and infrastructure sectors – has relied heavily on BVI, Cayman and Bermuda vehicles to channel investment.
The recent slowdown both in terms of oil prices and the burden of Asian debt has created a surge in work from both key areas. Much of this has a restructuring focus and, akin to 2008, we are beginning to see the uncovering of large scale frauds as returns have dwindled and defaults have been made on payments.
It is, however, not all doom and gloom; for example, in Peru economists predict GDP growth to accelerate to 4 per cent over the coming year.
Stéphane Bonifassi: We need to widen the potentialities of the civil route when it comes to fraud cases. France is still too restrictive in allowing victims to use civil proceedings to allow them to recover their assets. The hurdles facing victims are too numerous. Of course, victims can use the criminal route (as parties to criminal proceedings as possible under French law) but unless a major fraud case is at stake, prosecutors who are overwhelmed with cases will not be in a position to deal efficiently with fraud cases. We are seeing some progress in the frame of civil proceedings but it is still a difficult battle. My firm will keep on trying to raise the awareness of the French judiciary on this topic through articles and conferences.
Keith Oliver: On an operational level, security firms have long warned that law firms are at risk of cyber-attack, and I am alive to meeting these challenges, through the use of robust IT systems to minimise the risk.
My firm has entered into the government’s Cyber Essentials scheme, for example, which we hope to have implemented by the summer. We have further made more robust our public website and network perimeter and deployed full encryption to all end points, in addition to training staff and testing.
In terms of our practice, cross-border litigation cases continue to increase, in part following the continuing fallout from foreign exchange market rate manipulation. Peters & Peters remains alive to changes in Europe, and internationally, in laws and arbitral rules that govern these sorts of disputes.
Andrew Thorp: Uncertainty is the main threat to all markets and asset recovery is no different. While financial instability creates opportunities and often exposes wrongdoing, a robust global economy provides the drive to fight and recover diverted opportunity and assets. For many years, globalisation and cooperation have enhanced the ability to recover assets tucked away in jurisdictions and structures once thought impregnable.
A world where governments take a more insular approach will neither help global trade nor the important role that we play in cleaning up cross-border investment and deals that, inevitably on occasion, go wrong.