PRACTICE AREA FOCUSED LAW FIRM NETWORKS: An Introduction to Global: Multi-Jurisdictional

Economic Environment  

Following major political events such as Brexit, and international conflicts, the state of the global economy has left many businesses in crisis. This means that legal and operational budgets have been slashed to an absolute minimum and clients are putting pressure on their lawyers to deliver even more value for money. Never has it been more important for lawyers to demonstrate that they know how to deliver what their clients want. In the world of international asset recovery, delivering results means showing they can recover assets faster, more effectively and more economically than their competitors.

Worldwide economic crises inevitably lead to an uptick in international insolvencies and state capture fraud activity. Assets move across jurisdictional boundaries at frightening speeds, often disguised within sophisticated multi-layered networks of shell companies, making it even more difficult to identify the perpetrators and the location of stolen assets. To meet these challenges, asset recovery lawyers have become more reliant on technology and artificial intelligence, not only for data mining and asset tracing but also in predicting and tracking costs. Law firms must keep pace with technological advances and understand how to deploy them to cut through the ever-increasing masses of data in international asset recovery cases – or risk falling behind.

Trends and Developments  

In light of the cost implications of large-scale asset recovery campaigns, lawyers have become more creative in developing tailor-made information disclosure and evidence imaging orders as well as asset freezing injunctions. Doing this ensures they secure a pot of assets and/or a trove of evidence at as early a stage of the proceedings as possible. These orders are critical if victims are to change the agenda and put the fraudsters on the back foot.

We are also seeing the English courts’ willingness to adapt to the ever-changing fraud landscape. 2022 saw the introduction of the standard form imaging order, which reflects a trend towards this type of relief and away from “full blown” search orders. Although the traditional search order still has its place in the appropriate case, judicial thinking appears to be that imaging orders are often just as effective and less intrusive in a world where the majority of evidence will be stored electronically.

English courts have also demonstrated a clear willingness to expand and adapt existing legal remedies and causes of action to crypto fraud, a trend expected to continue. This has included a new jurisdictional gateway permitting the service of Norwich Pharmacal and Bankers Trust Orders out of the jurisdiction. This is particularly valuable in crypto fraud claims where exchanges are often based overseas, but it is also of importance in all types of fraud and asset recovery exercises.

Legislative Intervention  

Although to date we have seen a reluctance on behalf of most governments to introduce legislation to regulate crypto-assets and the exchanges on which they are traded, this is beginning to change. The downfall of some of crypto’s major players in 2022 will likely lead to a tightening of regulation in the crypto space. The EU Parliament recently approved the Markets in Crypto-Assets (MiCA) Regulation, and the UK government has also set out plans for a package of reforms in the crypto space.

In the meantime, victims are looking for alternative avenues of redress. The recent case of Tulip Trading Limited v Van der Laan & Others shows that the English courts are at least prepared to consider imposing legal responsibility on crypto software developers in cases where they may have the means to restore crypto-assets to victims through changes to the underlying software.

There is also increased attention on the question of who bears legal responsibility for losses when banks act upon fake emails and pay out money to fraudsters. Even though in many cases banks have been less than diligent with know-your-customer (KYC) checks, the courts (at least in England) have been extremely reluctant to hold financial institutions liable for KYC failures. This is not necessarily aligned with the direction regulators are taking in anti-money laundering accountability. 

The Future  

International asset recovery is by definition an area where those tasked with asset recovery are always playing catch-up. By the time the victims of fraud realise they have been cheated, those responsible have already spent weeks or maybe months planning how to dispose of their ill-gotten gains. As the value of assets capable of being stolen increases exponentially, so does the complexity of the task facing asset recovery professionals.

Lawyers in this field need support from international governments as well as their civil and criminal courts. In particular, judges need to take a flexible approach towards the creative use of the weapons within respective legal systems to help in the fight against commercial fraud and corruption. At the same time, those working in asset recovery need to constantly push the boundaries of what the law has on offer and use all possible technologies to rebalance the playing field in favour of victims.