HFHR speaks about draft law on extended forfeiture

The Ministry of Justice has prepared a draft law on the forfeiture of proceeds of crime. The proposed piece of legislation is designed to implement relevant provisions of EU law and make good on the government’s promise regarding the counteracting VAT fraud. According to the HFHR, the draft law goes beyond the requirements set in the applicable EU directive, which may lead to arbitrary violations of ownership rights.

Forfeiture of an enterprise is one of the measures introduced in the draft. If a criminal investigation establishes that an enterprise has been used for the purposes of a criminal activity, it can be appropriated by the State Treasury. The HFHR argues that this may harm the rights of third parties, especially in the situation where the seized enterprise is a corporation, whose most basic characteristics is the separation between the management and ownership roles. “In such a case, shareholders may potentially be punished for decisions beyond their control”, says Marcin Wolny, a member of the Foundation’s legal team. According to the HFHR, a much better solution from the perspective of protection of ownership rights is employed in the Collective Entities Criminal Liability Act.

A number of concerns expressed by the HFHR related to the measure known as the “extended forfeiture of assets”. Under this measure, which can be used against perpetrators of certain types of criminal offences (for example, the offences punishable by a prison term of at least five years), the assets obtained by the perpetrator after having committed an offence or within five years preceding the commission of an offence constitutes proceeds of crime. As such, the assets in question are subject to forfeiture unless the perpetrator or another interested person proves that they have not been obtained from crime. “In practice, the regulation is likely to be applicable to an extensively large number of offences. This may reduce the effectiveness of the justice system as courts will be obliged to engage themselves in the time-consuming inquiries into suspects’ means, even in less serious cases”, argues Mr Wolny.

The HFHR also commented on the possibility of seizing assets gathered within five years preceding the commission of a crime. The draft law stipulates that this measure may be applied also in proceedings conducted in the cases of offences committed before the law’s effective date. This means that the duty to show that assets have been obtained from lawful sources may be invoked also with respect to assets actually acquired decades earlier. Arguably, in such cases, the passage of time may deprive suspects of the ability to produce evidence of the legality of such assets. This is even more true given the fact that the aforementioned duty will require a much greater degree of care than that required under tax laws. “All in all, suspects will likely be unable to overthrow the assumption that their assets are proceeds of crime. In consequence, the new regulation may unintentionally target the persons whose assets have been obtained legally”, says Marcin Wolny.

Moreover, the proposed measure of the criminal interim injunction must be modified. Under the current version of the law, an injunction does not lapse upon the issue of the decision to discontinue criminal proceedings in the event that a perpetrator is not identified or dies, or when an offence becomes time-barred. If an interested person fails to show that the assets named in an injunction have been obtained from lawful sources, after three years such assets will become the property of the State Treasury.

This means that the draft law enables authorities to seize assets in a case in which there is only a suspicion that a criminal offence may have been committed. What follows is that without a conviction there are no grounds for assuming that the forfeited assets have been obtained from crime. “Although the forfeiture will be ordered by a court, the proportionality and reasonableness of the applied measure will remain outside the scope of judicial discretion”, Mr Wolny notes.