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Standardization of Community Rules in Criminal Matters vs. Instrument for Limitation of Exercising the Right to Property

Standardization of Community Rules in Criminal Matters vs. Instrument for Limitation of Exercising the Right to Property

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Nowadays, in the Romanian judicial practice the proceedings in which, apart from the criminal prosecution of natural persons for the perpetration of criminal offences, criminal liability of legal persons (various companies, smaller or larger, producers of goods, service providers or operators, etc.) is also pursued, have got to become more and more often.

In many of these cases the judicial bodies have the possibility, and sometimes even the duty, to order against the persons subject to criminal investigations measures that have the effect of limiting or restricting the exercise of their patrimonial rights, the legal persons not being exempted from this kind of measures but, on the contrary, they may even be preferred in consideration of their solvency, alleged to be higher than the amount of such measures. 

Very often, in cases when the investigated legal entities are either owners of assets outside the Romanian borders, affiliates or subsidiaries of other companies headquartered in other EU states, such restrictive effects may as well trace the patrimony of legal persons throughout the entire European territory.

In this respect, in the EU, instruments of judicial cooperation have been adopted in order to recognise and enforce, in the Member States, the restrictive measures referred to above, namely the so-called freezing orders with a view for further confiscation (hereinafter generally referred to as “freezing orders”) or confiscation orders in its own sense, which are applicable not only to individuals, but also to legal persons, companies or other entities possessing legal personality, including when the executing State does not recognise the principle of criminal liability of legal persons in its domestic law.

As such, in the context of free movement of persons, goods and services in the community space, where an increasing tendency of movement of patrimonial assets in the territory of other Member States of the European Union outside their state of residence can be noted, the possibility of the judicial bodies to order restrictive measures of  the property right becomes particularly important and also represents a risk that should be evaluated by companies,  by taking into account the business features of each of them.

Freezing measures adopted at national level. At national level, the criminal procedural law provides for measures of freezing the assets owned by natural or legal persons involved in the criminal proceedings or of other persons in whose property or possession the assests may be found, for which the law provides the obligation or, as the case may be, the option of the judicial bodies to order them so as to ensure any further application of the safety measure of special or extended confiscation. The purpose of these measures is to avoid the concealment, destruction, alienation or absconding the assets that may be subject to confiscation of any type, from being tracked. 

These freezing measures have proven to be a judicial instrument that can generate the most and undesirable effects over a company, given that they can be often ordered only by formally fulfilling the legal requirements, regardless of the degree of contribution of the legal person to the commission of a criminal offence or its alleged contribution to causing the damage, while they can be maintained up until the end of the criminal trial, in most of the cases even after this moment.

In many cases, the criminal investigation also entails the identification of the possibilities to recover the damages caused by criminal offences, thus securing further enforcement of the fine penalty or of judicial costs, in the event that a a conviction judgment is passed, or to avoid concealment, destruction, alienation or absconding the assets that may be subject to special or extended confiscation or extended. As a rule, all these possibilities can be materialized in the criminal proceedings through the orders of the judicial bodies imposing freezing measures on the assets pertaining to the person under investigation. In addition, at national level there are several special laws setting the obligation for the judicial bodies to order freezing measures when the investigations are being carried out with respect to specific criminal offences, such as, for example, tax evasion offences (art. 11 of Law no. 241/2005 on the prevention and fight against tax evasion), money laundering offences (art. 50 of Law no. 129/2019 to on the prevention and fight against money laundering and terrorism financing) or corruption offences (art. 20 of law no. 78/2000 on the prevention, discovery and sanctioning of corruption offences), which are very widely met in the criminal proceedings carried out at the present moment.

In general, the freezing measures taken by the judicial bodies during criminal proceedings, are, by their nature, temporary (persisting until the disappearance of the cause that determined the measure or until the end of the criminal proceedings) and consist of freezing the  movable and immovable assets, which subsequently may be subject to special or extended confiscation ordered by way of a final criminal judgment. The measure of freezing the assets of a person, under any form provided by the law, implies a limitation to the exercise of the property right, which has different effects depending on the type of measure and/or the nature of the goods which it refers to, while also representing an interference with the scope of the fundamental right to property. In most cases, this interference is extended throughout the entire duration of the criminal proceedings, which can last even years, thus being able to generate disruptions in the operational activity of the legal persons in question.

Measures adopted at European level. In the context of an accentuated tendency Community lawmaking, which has been noted in the last years by the multitude of Regulations adopted, including the already famous GDPR Regulation, at European level a new Regulation with direct internal applicability for all Member States, namely the EU Regulation 2018/1805 of the European Parliament and of the Council of 14 November 2018, which seeks to standardize the applicable Community regulatory framework for the freezing of assets, currently delimitted by the Framework Decisions 2003/577/JHA (on the execution in the European Union of orders freezing property or evidence) and 2006/783/JHA (on the application of the principle of mutual recognition to confiscation decisions), which is to be applied starting with 19 December 2020.

Behind the declared goal to facilitate the effective and uniform application of the legal instruments on mutual recognition between the Member States stands the inability to obtain the expected results by adopting the Framework Decisions 2003/577/JHA and 2006/783/JHA, as found by the European Commission further to the evaluation of the degree of transposition of the two framework decisions by the Member States, since, in most cases, in practice, the freezing measures have failed to cross the borders of the issuing State and produce the sought effects.

This was largely due to the fact that the Framework Decisions do not have a direct internal effect within the Member States and can only be applied to the extent and within the limits of their transposition into national laws, thus the Member States maintaining a significant margin of appreciation  regarding the implementation and, subsequently, the application of the procedures of judicial cooperation in the matter of freezing measures.

In this context, EU Regulation 2018/1805 represents the solution conceived and adopted at EU level to overcome the practical impediments, in the sense that, as of the date of its application, the possibility of action of the Member States in the field of asset freezing measures will be limited, by regulating a unique conduct to comply with within the procedures of asset freezing, which will not allow internal limitations.

The limits of action of the Member States according to the Regulation. As shown above, EU Regulation 2018/1805 aimed to take over and improve the provisions contained in the Framework Decisions 2003/577/JHA and 2006/783/JHA to the level where, in the matter of freezing measures or, as the case may be, of assets confiscation, all Member States are bound to go through the same procedure starting with the moment when the measures are adopted until their effects are exhausted.

However, this does not plead for the automation of the procedures and elimination of the filters for analyzing the conditions that must be met when the measures are ordered and implemented, the judicial bodies of the Member States that either adopt such measures or are called upon to execute them, having the duty to verify the fulfillment of the necessary requirements for the adoption and/or the implementation of the measures.

In what regards the manner of implementation of the measures of asset freezing by the Member States, others than those adopting them, a series of observations, as a matter of principle, are required, as follows:

A first observation refers to the provision in the EU Regulation 2018/1805 according to which the execution of the freezing measures is made without checking the double criminality rule, which, usually, makes the execution of any measure conditional upon the incrimination of the act under investigation, both in the state member, which adopts the measure (the issuing State), and in the member State called to bring its support in the judicial cooperation procedure, by enforcing the adopted measure (the executing State).

The exception to the rule of double criminality is, however, limited to the list of criminal offences listed in the Regulation (see Article 3, paragraph 1), in relation to which the European legislator has operated a presumption of uniformity of incrimination in the Community area, while for any other criminal offences  the executing State may make the recognition and execution of a freezing order subject to the condition of double criminality verification, whatever the prima facie elements and the legal definition of the offence in the issuing state may be.

On the other hand, the exception to the rule of double criminality can operate only subsequent to the fulfillment of the condition that the offence referred to in the freezing measure is punished in the issuing by a custodial sentence of a maximum duration of at least three years.

The second observation relates to the possibility of not executing a freezing order transmitted by the issuing State, in case one or more grounds for non-recognition or non-execution are applicable, as regulated by the Regulation (see art. 8 par. 1). As a prior condition before deciding for the non-recognition or non-execution of a freezing order, the Regulation stipulates the obligation of the state in whose territory the assets are found (e.g. the executing State) to consult with the state that issued the freezing order (e.g. the issuing State) with respect to any relevant information regarding the execution of the order, any omission in the transmission of the requested information may lead to the refusal of recognition or, as the case may be, the execution of the European freezing order. In case the executing State proceeds to the non-recognition or non-execution of the order, the executing Member State is bound to deliver its judgment in this sense without delay and to promptly inform the issuing State.

Also in relation to the grounds for non-recognition or non-execution of an freezing order, the Regulation provides that in the situation in which the ground which may lead to the refusal of recognition or, as the case may be, of execution, appears at a date subsequent to the date when the freezing order was ordered, the state that freezed the assets may decide to withdraw this order, regardless of the position of the issuing State, which must be informed immediately of the lack of effects of the freezing order.

The third observation is related to the postponement of the execution of the freezing order, which depends on the analysis performed by the executing State on an ongoing criminal investigation and the opportunity of notifying the person about the freezing of his assets, in the context in which the person whose assets are to be freezed is not aware of the subject of the ongoing criminal investigation.

Furthermore, if the freezing order was previously applied to the assets by way of a freezing order already executed or by other measures taken in another criminal investigation in relation to the person who owns the assets, this hypothesis is a cause of postponement of the freezing order.

In these cases, the limits for the execution of the freezing orders are relative and temporary, the execution measure being initiated upon the exhaustion of the grounds of delay presented above.

The fourth observation concerns the impossibility to execute a freezing order, which is based on grounds that objectively prevent the execution of the freezing order, given that the assets are either missing, have disappeared, have already been confiscated or cannot be found in the location indicated in the freezing order, either because they do not exist in that place or because the issuing state has not indicated enough their location.

It is important to keep in mind that the issuing State has the possibility to request the freezing by equivalent of the value of the assets, as an alternative measure, an issue that must also be evaluated by the authority of executing State in order to adopt a solution regarding the asset freezing.

Last but not least, it should be taken in consideration that the Regulation gives due importance to the protection of fundamental rights (e.g. the right to property and the right to a fair trial), this protection representing, nevertheless, a common objective of the Union undertaken by its constitutional and functioning treaties. Thus, even if the Regulation does not expressly provide for, the refusal to recognize or, as the case may be, the execution of a freezing order, may also be ordered if the two types of orders result from the procedures carried out in the issuing State in violation of the fundamental rights.

Instead of conclusions. In the context of setting and institutionalizing the concept of European justice, where the Member States must ensure both the respect for the human rights and the order of domestic law, the European Union has introduced a series of provisions meant to be applied per se within each national jurisdiction, with a view to simplify the transnational act of justice.

By the entry into force of EU Regulation 2018/1805, the Community rules providing for the freezing of assets were unified in a single normative act, which is an important step of standardization and simplification in the field of community judicial cooperation in criminal matters.

However, the modality of application of the Regulation will have to be analyzed in particular, on a case-by-case basis, in the context of the accentuated tendency of freezing assets thay may be subject to a criminal investigation, in the light of the balance between the uniformity of the Community legislation in criminal matters and the full exercise of its fundamental right to property in all its components.

By Adrian Chirvase, Partner, and Bogdan Dobre, Attorney at Law, Popescu & Asociatii

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