As with most civil law jurisdictions, Argentina has historically resorted to 'generic' remedies for civil asset recovery: compensation for damage and restitution within proceedings of a civil nature – whether exercised within the criminal law proceeding (e.g., the victim acting as a complainant) or in a separate (usually subsequent) civil action. On the criminal side, there is independent, usually post-conviction, confiscation of proceeds of crime.
With a strong focus on decreasing corruption and organised crime, the administration that took office in 2015 has passed some important reforms that are already impacting asset recovery. On the civil side, a 2015 reform of the Civil Code upgraded the remedies against fraud and simulation and added a separate action for unjust enrichment. On the criminal side, two statutes passed in 2016 increased the possibility of detecting and prosecuting economic crimes by establishing leniency agreements for defendants and economic rewards for whistle-blowers. In addition, regulatory reforms to the anti-money laundering system have increased the reporting obligations for gatekeepers. In 2018, a regime establishing corporate criminal liability for corruption-related offences entered into force, aligning corporate incentives for preventing corruption and cooperating with anticorruption authorities. Finally, the Senate is expected to pass in 2018 a civil forfeiture regime that has already been approved by the House of Representatives.
II LEGAL RIGHTS AND REMEDIES
i Civil remedies
The most commonly used remedies for civil recovery purposes in Argentina are damages and recovery motions, although victims may also seek results through other specific motions that have been incorporated, strengthened or clarified in the Civil and Commercial Code (AC&CC), which entered into force in August 2015. These include motions against fraud and simulation, motions to request the nullity of acts in cases of malice, motions for subrogation of the debtor's rights and a specific action against unjust enrichment that is potentially useful in cases where no other cause of action is available.
All remedies can be sought against both individuals and legal persons.
Damages are governed by the principle of complete compensation provided by Article 1716 AC&CC. The breach of an obligation, as well as the violation of the generic duty not to harm another, entitles the injured party to receive full compensation.
Civil liability may be attributed on the basis of either objective or subjective factors. The latter includes negligent and intentional damage. Regarding objective liability – for instance, breach of obligations to achieve a certain result – negligence is irrelevant and does not exonerate a party from liability. Article 1724 AC&CC defines negligence as the omission of due diligence according to the nature of the obligation and the circumstances of the time, place and individuals involved. By contrast, intentional damage is defined as being carried out on purpose or with a manifest indifference to a third party's interest. In the absence of a specific provision, liability will be attributed on the basis of negligence.
Claimants must prove that they have suffered a certain (non-hypothetical) and subsistent damage. The AC&CC contemplates the reparation of direct damage suffered by the victim of the breach, as well as indirect harm, where a third party's interest is injured as a consequence of the harmful event.
Further, claimants must show there is an adequate causal link between the events that took place and the production of an injury. To warrant reparation, damage must be the immediate consequence of a harmful act or a foreseeable remote result. Immediate consequences are defined as those that 'normally happen in the natural and ordinary course of things'. Those resulting from a connection with a different fact are called mediate consequences. Compensation encompasses the loss or diminution of the victim's assets, loss of profits and loss of chance. The latter is due if its contingency is reasonable and it has a proper causal link with the fact that caused the damage.
As a general rule, the burden of proof of damage, attribution factors, defences and causal links lies with the party invoking them. However, the court has some discretion to assign this duty upon consideration of which party is better able to provide evidence.
Victims are entitled to full reparation (i.e., the restitution of their situation to the state it was in prior to the harmful event). Claimants are allowed to request the restitution of specific assets; however, if this were partially or totally impossible, excessively onerous or abusive, restitution shall be stipulated in cash. Only in cases of non-contractual actions causing negligent damage may the judge mitigate the damages for equity reasons by considering the debtor's assets, the personal situation of the victim and the circumstances of the fact that caused the damage (Article 1742 AC&CC).
Claims can be filed against the people directly responsible for the commission of the harmful act or omission, or for the failure to comply with an obligation. Under specific circumstances provided by law, third parties may also be indirectly liable. For example, abettors may incur civil responsibility up to the extent of the damage caused by their participation (in contrast with criminal liability for abetting, which does not take the extent of the damage into account for sentencing purposes). Moreover, principals are objectively liable for damage caused by those under their dependence. The lack of discernment on the part of an agent does not exonerate the principal. Legal persons are also liable for damage caused by their directors or administrators in the performance of their duties. In cases of indirect liability, a motion can be filed jointly or separately against the individuals directly responsible for causing the damage and the third persons indirectly responsible.
When it is foreseeable that an unlawful act or omission will produce, maintain or worsen damage, the AC&CC allows motions enabling the judge to order the appropriate preventative measures. Claimants must prove a legitimate interest in the prevention of the damage; no attribution factors are required at this point.
Motion for recovery (restitution)
Victims of fraud may choose to file a motion for recovery, which is a remedy for the owner of a specific asset to uphold his or her rights against divestment. The judge may order the restitution of the asset in whole or in part, as well as the rectification of public registries if applicable (Articles 2252 to 2261 AC&CC).
Complainants are given the option to request either the reinstatement of the in rem right or compensation for damage. If they choose the first route, they are allowed to claim complementary reparation for damage; however, they lose the right to initiate a motion for recovery if they pick the second route. Motions for recovery shall not proceed for the recovery of immaterial objects, fungible assets, accessories when the main asset is not claimed or future goods at the moment of restitution.
Although it may be thought of as an in rem remedy, claims must be presented against the person holding the asset. In the specific case of stolen automobiles, the motion may be filed against the person who has registered them on public records in his or her own name.
Third-party possessors in good faith may not ask the claimant in a motion for recovery for the reimbursement of the price they paid for stolen non-registered movable property. An exception to this rule is made for third parties who have purchased the goods at a public sale or at a store where similar others were sold, or for a usual seller. Third parties may also request a reimbursement in the case of registered movable assets that were inscribed on the record in good faith. When reimbursement proceeds, the complainant may in turn require repayment by the bad-faith seller.
Motions for recovery over non-registered movable property may not be exercised against good-faith purchasers, but the outstanding amount of the price may be claimed. For the purposes of this provision, a purchaser may not allege good faith if he or she has acquired real estate or registered property through an act in which the titleholder of the asset did not intervene.
Motions against fraud and simulation
Victims of fraud can use a special motion for unenforceability against debtors that attempt to produce or worsen their insolvency by disposing of their assets. Through this action, acts of divestment and waivers of patrimonial rights carried out by debtors can be declared unenforceable to creditors (Articles 338 to 342 AC&CC). Claimants are required to show that their credit precedes the contested actions and that the third party was aware, or ought to have been aware, that the act produced or worsened the debtor's insolvency.
A motion can also be used against illicit simulation when an illicit act is concealed under the appearance of another, contains untrue clauses or dates, or appears to produce effects for intermediaries that are not its true beneficiaries, causing harm to third parties. This action purports to declare the simulated act void and can be filed by any third party whose rights or legitimate interests are injured by the simulated act (Articles 333 to 337 AC&CC).
The AC&CC regulates the effects of both motions with regards to third parties in analogous terms. Fraudulent or simulated acts do not produce effects against the creditors of the acquirer of the assets who may have in good faith executed the goods involved in the fraud. Motions against subsequent asset owners may only proceed when they have acquired the assets for free or in bad faith (i.e., when the subsequent owner is complicit in the fraud or in the simulated character of the act; bad faith is presumed regarding fraud when the acquirer was aware of the insolvency).
Subsequent acquirers in bad faith and those who concluded contracts with the debtor in bad faith are jointly and severally liable for the damage caused to the creditor who filed the motion, when the rights have been transmitted to a good-faith subsequent owner or have otherwise been lost to the creditor. Contractors in good faith and for free are also liable, though strictly to the extent of their profit.
Motion for nullity in cases of malice
When one of the parties in a legal act or a third person has made false assertions or employed any artifice, guile or contrivance to obtain the carrying out of the act, the injured party may request a judge to declare the act void because of malice, as provided in Articles 271 to 275 of the AC&CC. For the motion to proceed, the use of malice must be grave and determinant of the other party's will. This motion may not be invoked if malice has been reciprocal.
Motion for subrogation
Motions for subrogation can be used when a debtor is reluctant to exercise his or her patrimonial rights and this reluctance affects creditors. A creditor may in these cases 'take the debtor's place' by subrogating his or her rights to obtain fulfilment of the credit. For example, if a debtor refuses to appear in a probate proceeding, creditors may replace him or her before the court.
The debtor must be cited to intervene in the corresponding proceedings and may use as a defence any cause of extinction of the credit. Subrogation does not apply for rights that may only be exercised by their bearer. Motions for subrogation are contemplated in Articles 739 to 742 of the AC&CC.
When no other remedy is available, the new AC&CC allows the creditor to file a motion for unjust enrichment. Any person who has obtained profit without a legitimate cause at the expense of another must compensate the patrimonial loss they caused. If the profit consists in the acquisition of an asset, it must be returned if it is still held by the defendant at the time of the initiation of proceedings.
Defences in civil procedures
Respondents in civil procedures may oppose an exception stating that the limitation period has passed. Judges are unable to declare this ex officio; they may only do so at the parties' request at the stage of submission of their statement.
In the absence of a specific provision, the general term of limitation is five years, counted from the moment an obligation became enforceable. Claims for compensation for damage are subject to a limitation period of three years. Motions to obtain the unenforceability or nullity on the grounds of fraud, simulation and malice have a limitation term of two years counted from the moment when the act in question could have been known. Motions for recovery are imprescriptible, so respondents could not base their defence strategy on the grounds of limitation under these proceedings.
The limitation period can be suspended, stopping the count of the term for the duration of the suspension. At the end of that suspension, the count continues from the point where it was when the suspension started. Limitation periods may be suspended (e.g., by a formal request to the defendant to comply with an obligation or by soliciting a pre-judicial mediation).
Limitation periods may also be interrupted (making the limitation term begin anew) by the debtor's acknowledgement of the claimant's right, or by the filing of a court claim and by any petition made before the judge by a right holder with the purpose of confirming its right.
Defendants may also allege incompetence as an exception when submitting their statement. Civil proceedings should be brought before the civil courts of first instance. Argentina has both federal and local courts. Cases must be brought before the federal jurisdiction when they involve a 'federal interest' in terms of Article 116 of the National Constitution (e.g., if they involve a national public official). Pursuant to Article 75(12) of the National Constitution, non-federal proceedings regarding goods or persons located in a specific province must be brought before the local courts of that province.
Finally, in fraud claims, respondents usually defend themselves by rejecting that the elements of fraud are present, or proved. Facts and evidence are at the core of any asset recovery litigation.
ii Criminal remedies
Although the Argentine criminal system has been traditionally linked to the primary objective of punishing wrongdoers, victims' rights – including the recovery of losses – have gradually been incorporated into the criminal procedure.
Pursuant to Articles 82 to 86 of the National Criminal Procedure Code of Argentina (ACrPC) anyone 'particularly offended' by an offence shall be entitled to appear as a complainant or 'private, ad hoc prosecutor', and as such to carry the procedure forward. Under the federal criminal procedure, where the investigation is conducted by investigative magistrates, victims exercising these rights have similar powers to those available to the public prosecutors: to request as well as produce evidence, to argue before the court and to challenge the court's decisions through appeals. Following the Supreme Court decision of 1998 in Santillán, Francisco Agustín,2 victims may even pursue the conviction of a defendant if the public prosecutor decides not to prosecute the case. After some hesitation, lower courts have followed this precedent.
The main source of restitution or compensation for victims in criminal procedures is that of confiscation. Under Article 23 of the Argentine Criminal Code (ACrC), confiscation of the proceeds of crime must be ordered as part of the criminal judgment: 'forfeiture of the goods used to commit the crime and that of the goods and product or profit obtained from the crime for the benefit of the national State, of the provinces or the municipalities, except for the rights of restitution or compensation of the victim and third parties'.
Although asset forfeiture has in principle been thought of as a mechanism to benefit the state, it is increasingly considered as a procedure to give victims back what they have had stolen from them. In accordance with Article 29 of the ACrC, criminal courts have the power to order restitution, compensation to victims, their families and third parties, and any other necessary measures to restore the statu quo ante. All persons responsible for a crime are jointly and severally liable for the compensation for damage, and those profiting from the effects of a crime are responsible for reparations up to the amount of their participation.
Asset forfeiture has an accessory legal nature: as a general principle, it will be ordered when a conviction has been obtained. Nevertheless, there are certain circumstances where no prior judgment is required for the forfeiture to be ordered. In the case of crimes against the economic and financial order (including money laundering, terrorism financing, insider trading and other market-based offences), goods shall be forfeited in a definitive manner without need of a criminal judgment when the defendant cannot be tried because of his or her death or escape, the application of the statute of limitations, or any other grounds for suspension or extinction of the criminal action. The same is authorised when the defendant has admitted to the illicit origin or use of the goods, although it is required in these situations that the illicit origin of the goods or the material fact they are related to have been proven.
Besides, forfeiture can be obtained through criminal settlements (probation), as authorised by Article 76 of the ACrC, which stipulates that the accused benefiting from the settlement shall relinquish those goods that presumably would have been forfeited if a sentence had been passed.
Forfeiture shall be ordered against the principal, or against a legal person if the active party or its accessories have acted as an agent or as an organ, member or manager of the legal person, and when the product or profit has benefited the principal or the legal person. When the assets in question endanger public security, forfeiture can be ordered even if it affects third parties. However, third parties' right to reparation is preserved if they acted of good faith. In cases where the product or profit of a crime gratuitously benefits a third party, forfeiture shall be executed against them.
Victims may also choose to appear in criminal proceedings as civil complainants (Article 1774 AC&CC, and Articles 87 to 96 ACrPC). Participating in the criminal proceedings as a civil complainant allows the victim to submit a civil complaint before the criminal court for damages arising from the crime. The civil complaint can be directed at both the criminal defendant or defendants and third parties. The application shall be submitted in writing in the investigative stage and the civil complainant shall participate in the proceedings as necessary to prove the existence of the crime and the damage caused, and request the corresponding provisional measures, restitution and reparations.
Acting as a civil complainant within criminal proceedings is not yet a consolidated practice in Argentina, possibly because of a lack of trust in the criminal courts' criteria to assess and grant damages, but it is becoming increasingly familiar as an alternative to be chosen, on a case-by-case basis, to parallel civil and criminal litigation.
The applicable framework for independent civil and criminal proceedings resulting from the same fact is found in Articles 1774 to 1780 of the AC&CC. When a criminal complaint is filed prior to a civil one or during its course, the judgment in the civil proceedings must be stayed until the criminal process is concluded. Certain situations are exempt from this rule, for example, when an undue delay in the criminal proceedings produces in practice the frustration of the right to compensation, or when the civil proceedings are based on objective responsibility.
While the law only forbids the civil judgment, in practice, litigants and courts are reluctant to spend time and resources in producing evidence in civil actions when a criminal proceeding is ongoing. The reason for this is that the criminal judgment produces the effect of res judicata with regards to the civil proceedings, both on the existence of the facts and guilt. When the criminal judgment decides that the facts did not take place or the defendant had no participation, this cannot be discussed before the civil court; nevertheless, if it is found that the events do not entail criminal responsibility on the part of the defendant, his or her liability may be discussed before civil courts. A criminal judgment delivered after the conclusion of a civil trial has no impact whatsoever on the latter.
III SEIZURE AND EVIDENCE
i Securing assets and proceeds
Civil interim relief
The Argentine National Code of Civil Procedure (ANCCP) includes an array of interim measures that are available pre-judgment to prevent the dissipation of assets. Complainants may present a written motion for precautionary measures before or after the initiation of the main proceedings, showing that there is legal cause and that any delay may trump the purpose of a future judgment.
A common form of relief for securing assets is the 'embargo' (Articles 209 et seq. ANCCP). An embargo limits the disposition and enjoyment of specific assets, although it does not entail the taking of the asset by the court (seizure). Only the assets necessary to pay the debt at issue and trial expenses can be subject to embargo, and the AC&CC and case law state that some assets cannot be subject to embargo at all, generally when they are linked to human dignity (e.g., minimum salary, retirement pay), to a defendant's profession or work (e.g., necessary tools), or to the state's interests (e.g., the state's non-movable assets).
Moveable assets may also be seized when an embargo would prove inadequate to secure the complainant's alleged right. In deciding the seizure of assets, the judge will assign the 'most convenient' depositary, which can be either a person or a public office, and fix their remuneration. Naturally, assets that cannot be subject to embargo cannot be seized either.
In cases where the respondent's assets are unknown, the claimant can request a general restraint of the defendant's assets (Article 228 ANCCP).
The ACrC provides in Article 23 that judges may adopt from the beginning of judicial proceedings the necessary precautionary measures to ensure the forfeiture of the real estate, goodwill, deposits, vehicles, computers, technical elements and any other good or in rem right over which forfeiture may presumably apply.
The ACrC provides for seizure and embargo, the first directed at securing movable assets both as evidence and for their potential forfeiture after a conviction (Article 231); the second to secure the fines, compensation and other costs to be imposed against the defendant (Article 518).
The fact that asset recovery has historically been outwith the mindset of Argentine courts and prosecutors as a goal of criminal procedures made our criminal system scarcely adequate for asset-tracing purposes. However, this trend has been changing during the past decade; for example, prosecutors are now required to trace and freeze the assets from the beginning of the investigation of corruption offences, money laundering and other economic crimes. Indeed, a new Asset Recovery Unit was created in 2015 to assist prosecutors in this account.
ii Obtaining evidence
Pursuant to Article 378 ANCCP, evidence in civil proceedings may be produced by the means expressly provided by law (witnesses, expert witnesses, documentary evidence, etc.) or decided by the judge, ex officio or upon request of the interested party, provided that the means are not contrary to 'morality, freedom of the parties or third-parties, or are not expressly prohibited'.
Information can be obtained from third parties other than the defendant through production orders or testimonial means of evidence. Parties can request civil courts to order public and private entities to produce information about 'specific, clearly tailored, discussed facts' (Article 396 ANCCP). Any person older than 14 years may be asked to testify as a witness (Article 426 ANCCP), although close relatives of the defendant are excluded from this provision (Article 427 ANCCP). Witnesses must provide their testimony under oath. They are allowed to refuse to testify in special cases, such as when giving testimony would expose them to criminal liability, or when they are under professional, military, scientific, artistic or industrial privilege.
Complainants may obtain evidence from law enforcement and regulatory agencies by issuing a request for information, as stipulated in Article 396 ANCCP. Furthermore, individuals may gather public information from administrative agencies by requesting its disclosure in accordance with the Freedom of Information Act that entered into force in September 2017. Public information on, inter alia, vehicles, non-movable assets, taxes, ownership of registered trademarks, patents and industrial designs, company directors, statutes and acts is also available to the public.
Two important statutes for collecting evidence were passed in 2016. Of these, Law 27,304, which entered into force in October 2016, introduced the possibility of negotiating leniency agreements between prosecutors and defendants charged with specific crimes, including insider trading, money laundering, market manipulation, all forms of bribery and corruption and some forms of organised crime. Information leading to the recovery of assets is one of the types of information accepted for these agreements. The other, Law 27,319, which entered into force in November 2016, established several special investigative techniques, including controlled delivery, undercover agents and the possibility for law enforcement authorities to economically compensate whistle-blowers providing information about economic and organised crimes.
In the context of a private investigation, special attention is to be given to the scope of privacy and labour rights (both protected by the Constitution, Articles 17 and 18). Law 26,388 established that emails are to be deemed private correspondence, rendering their unauthorised use forbidden. Case law has consistently held that, as emails are personal and password protected, they are part of the individual's private sphere, which may not be affected without a judicial order.3 Therefore, employers can only access emails sent or received from work electronic addresses if that is consented to (i.e., if included in the internal norms of a company or if contractually agreed) (Articles 64, 66 and 86 of Law 20,744). Finally, there are precedents allowing employers to access emails sent or received by their employees where exceptional circumstances of urgency, flagrancy or necessity apply.4
IV FRAUD IN SPECIFIC CONTEXTS
i Banking and money laundering
Since 2000, Argentina has established and periodically improved a comprehensive anti-money laundering system in accordance with international standards. The system is fairly standard.
Law 25,246 defined the money laundering offences, created the Financial Intelligence Unit (FIU) and defined a long list of gatekeepers and their legal duties. The FIU exercises regulatory, supervisory and sanctioning powers over all gatekeepers and also has the right to appear as ad hoc prosecutor in criminal cases where money laundering is a charge.
The basic offence is defined as follows:
[T]he person who converts, transfers, manages, sells, encumbers, conceals or in any other way puts into circulation in the market, assets stemming from a crime, with the possible consequence that the origin of the original or surrogate assets acquires the appearance of a licit origin, and provided that their value exceeds the sum of three hundred thousand pesos ($300.000), whether through a single act or by the reiteration of various interrelated acts.
The threshold at the time of writing is the equivalent to US$10,000.
Money laundering is sanctioned with imprisonment of three to 10 years and a fine between two and 10 times the amount of the transaction. Aggravating circumstances include engaging in this conduct routinely, and when the author is a public official and engages in this conduct during the exercise of his or her duties.
In spite of its alignment with international standards, the system remained 'on the books' for quite some time. This lack of political will to enforce the system, coupled with indications that the FIU was using financial information to punish political opponents, prompted the Financial Action Task Force (FATF) in 2011 to place the country in its grey list, where the country remained until 2014. Apart from showing serious commitments to enforce the law, to be excluded from the list, the FATF also required the government to punish self-laundering and to amend the regulatory framework, which was done in 2013.
The FIU president appointed in 2016 has taken the lead in showing the gatekeepers that the new administration is ready to enforce the anti-money laundering system. In that regard, he has been very actively participating in the asset-recovery efforts in prominent cases of drug trafficking, trafficking in persons and corruption. Nonetheless, the FIU still has a formidable job ahead to re-educate the gatekeepers in improving the quality of suspicious transaction reports and to re-educate its own analysts to ensure that they have the necessary skills to provide useful criminal intelligence to the law enforcement authorities. In July 2017, the FIU issued Regulation 30-E, moving from a 'normative system' to a risk-based approach to preventing money laundering. The Regulation requires the financial industry to annually evaluate risks and adopt proportional measures to mitigate them. The basic duties of ongoing due diligence and performing enhanced due diligence with respect to certain clients (e.g., offshore vehicles, politically exposed persons and trusts), to keep records for 10 years and to report suspicious transactions have been updated, taking into account best international standards as well as local practices of the financial industry.
Banking secrecy is not an obstacle to investigations in Argentina. Regulated by Articles 39 and 40 of Law 21,526 on Financial Institutions, financial entities are free to share information on lending transactions and shall not disclose information on borrowing transactions except when requested by any court, the Central Bank or tax collection agencies, provided that the request refers to a specific taxpayer that is subject to assessment proceedings. Pursuant to Law 25,246, banks shall not deny information on the basis of banking secrecy with regards to their duty to produce reports of suspicious transaction (Article 14, Section 1).
The main remedies established by Argentine Law in the context of rescue and insolvency are judicial restructurings, which allow the debtor to restructure its outstanding debts while maintaining the administration of its estate; out-of-court restructurings to negotiate a restructuring plan outside the formal framework of a judicial restructuring; and liquidation proceedings, the purpose of which is to sell all the assets of the debtor and distribute the cash among the creditors.
The judicial restructuring can only be filed by a debtor on cessation of payment. If the restructuring plan is approved by more than 50 per cent of the creditors holding at least two-thirds of the total outstanding amount of the unsecured claims and it is approved by the court, it becomes binding on all non-consenting creditors.
During the judicial restructuring, the debtor maintains the administration of its estate under the supervision of a receiver appointed by the court, but he or she cannot pay any claim made before the application of the restructuring and must request the court's authorisation to perform any act exceeding the ordinary course of its business (such as disposing of certain assets). The debtor can also request the lifting of any precautionary measures over his or her assets, if necessary to continue with his ordinary commercial activity. Moreover, interest accruing on pre-application claims is suspended, pending collection actions are stayed and new legal actions based on pre-application claims are prohibited.
If the debtor fails to approve the plan, bankruptcy will be declared and a liquidation proceeding will automatically begin. In the case of corporations, limited liability companies, cooperatives and legal entities in which the state is a shareholder, any third party and the debtor can try to obtain the creditors' consent to a new plan consisting of the acquisition by a third party of the shares of the entity and the proposal of a new restructuring.
The out-of-court restructuring procedure is negotiated between the debtor and the creditors outside the formal framework of a judicial restructuring and it is then submitted for judicial confirmation, but no receiver is required to be appointed by the court. Majorities required for judicial restructuring apply. During negotiation of the plan, there is no stay on debt collection. All pending collection actions are suspended when the legal announcement required by law is published, after the debtor submits the plan for confirmation.
Bankruptcy can be declared when the debtor's judicial restructuring plan fails, or at the direct request of a creditor or the debtor. The main consequence of liquidation proceedings is that the debtor is dispossessed of all assets. A receiver is appointed by the court to convert all the assets into cash and distribute them among the creditors.
With the declaration of insolvency, pending collection actions are stayed, but creditors with a security interest (pledge or mortgage) can initiate foreclosure at any time and separately.
The liquidation proceeding is quite inefficient and can last for several years. It can be terminated because of lack of assets (which involves a presumption of fraud), on final distribution or if the debtor obtains the consent of all its creditors.
Argentine bankruptcy law provides for the extension of the declaration of bankruptcy to third parties (Articles 160 to 172 of Law 24,522). The legally appointed receiver of the assets, as well as any creditor, may request the extension from the judge acting in the insolvency proceedings. Extension takes place in the following circumstances:
- when a person, acting in appearance in the bankrupt's name, acts in his or her own personal interest in fraud to his or her creditors;
- when a person controlling a bankrupt company has unduly deviated from its corporate interest, subjecting it to unified management in the interest of the controlling company or the business group to which it belongs. A controlling party is defined as a person who directly or through another controlled company holds an interest that affords him or her the required voting percentage to adopt corporate decisions; or each person who, acting jointly, holds an interest in that same percentage; and
- when a commingling of assets and debts between the bankrupt and a third party has occurred, which impedes their clear distinction.
The extension shall not apply to other individuals who form part of an economic group with the bankrupt unless any of the aforementioned circumstances is present.
Regarding transnational cases, an insolvency declaration issued by a foreign court constitutes grounds to open insolvency proceedings in Argentina at the request of the debtor or a local creditor. A creditor is considered local if his or her claim is to be satisfied in Argentina, regardless of his or her nationality or domicile. The only purpose of the insolvency proceedings in this case is to sell the assets located in Argentina and distribute the proceeds among local creditors. A bankruptcy declared abroad cannot be invoked against local creditors to dispute their rights over the assets located in Argentina, or to set aside any agreement that they may have entered into with the debtor.
If the debtor is also declared bankrupt in Argentina, the creditor in the foreign bankruptcy proceedings can enforce their claims on the balance once the claims recognised in Argentina have been satisfied. To obtain recognition of his or her claim, a foreign creditor must prove that a local creditor (whose claim is satisfied in Argentina) would be recognised in a proceeding in the foreign creditor's country under equal conditions (reciprocity standard).
iii Corporate criminal liability for corruption
On 1 March 2018, Law 27,401 establishing criminal corporate liability for bribery and other corruption-related offences entered into force. The Law encourages corporate cooperation in the prevention and investigation of corruption. Legal entities may be exempt from penalties and administrative responsibility if they have implemented a compliance programme, the minimum requirements of which are defined in the Law. Entities may also be exempt from penalties if they self-reported their unlawful actions to the authorities and returned all undue benefits. Companies can also settle the case by signing an 'effective cooperation agreement' whereby, in exchange for the release of useful and verifiable information that clarifies the unlawful event under investigation, the prosecutor can substantially reduce the sanctions imposed on the company.
One of the main advantages of arbitration is its swiftness; therefore, it is very uncommon that a fraudster will consent to being subjected to this alternative dispute resolution procedure. The Civil Code, however, does not prevent the possibility of solving civil aspects of fraud through arbitration.
Arbitration used to be governed by local laws and has scarcely been used. The new Civil Code updated all previous regulations and made them coherent as a consequence of its wider development in countries commercially relevant to Argentina.
v Fraud's effect on evidentiary rules and legal privilege
There are no specific provisions in Argentina regarding lifting legal privilege or reducing the scope of rights in the context of evidence collection within fraud investigations. Attorney–client privilege and the right to defence are protected through robust constitutional provisions.
V INTERNATIONAL ASPECTS
i Conflict of law and choice of law in fraud claims
In principle, Argentine civil law is applicable to every person in the Argentine territory, whether permanently or temporarily, including foreigners. Additionally, Argentine law contains a number of rules of international private law to settle conflicts of laws (Articles 2594 to 2671 AC&CC). According to these, rules of international private law contained in international treaties take precedence over local provisions of this nature.
In absence of a treaty, Argentine law establishes the applicable law governing specific instances as follows:
- legal capacity is regulated by the law of the person's domicile;
- patrimonial effects of marriage are governed by the law of the first conjugal domicile;
- inheritance proceedings are regulated by the law of the deceased person's domicile at the moment of his or her death;
- contracts: in the absence of a specific agreement by the parties, the law of the place of fulfilment of the contract shall apply;
- civil liability, in the absence of a specific provision, is governed the law of the country where the damage is produced;
- securities are ruled by the law of the place where they were issued;
- property rights: for non-movable property, the law of their location applies; for registered property, the law of the state where it is registered applies; and for movable property, the law of the place where they are situated applies; and
- statutes of limitations are governed by the law that applies to the substance of the matter.
ii Collection of evidence in support of proceedings abroad
International cooperation on this matter is ruled by bilateral treaties and, in their absence, by reciprocity. Argentina has signed numerous treaties regionally (such as the Montevideo Treaties of International Procedural Law of 1889 and 1940, made with Bolivia, Brazil, Colombia, Paraguay, Peru and Uruguay), bilaterally (e.g., with China, Russia and Tunisia) and globally (such as the Hague Evidence Convention of 1972).
Regarding reciprocity, pursuant to Article 132 ANCCP, Argentine judges will satisfy foreign requests if they are requested by 'courts with jurisdiction according to Argentine rules of international jurisdiction' and do not affect the 'principles of public order of Argentine law'.
Moreover, Articles 2611 and 2612 of the AC&CC establish as a general rule that Argentine judges should provide broad judicial cooperation in civil, commercial and labour matters through international letters rogatory or direct communication. Argentine courts generally satisfy foreign requests, based on reciprocity, although it could entail a slow process.
iii Seizure of assets or proceeds of fraud in support of the victim of fraud
Pursuant to Article 2603 of the Civil Code, judges may issue any precautionary measure when acting in the principal fraud proceeding, regardless of the localisation of the assets or parties abroad; at the request of a foreign competent judge, or in urgent cases if the assets or the parties may be found in the country; or when a request for the recognition or execution of a foreign judgment has been issued.
iv Enforcement of judgments granted abroad in relation to fraud claims
Law 24,767 and the relevant treaties between Argentina and other jurisdictions provide the legal framework to meet foreign requests of legal assistance in criminal proceedings. Law 24,767 is used both to interpret treaties and to fill any gaps. Legal assistance is dependent on the existence or offering of reciprocity (Article 3). The central authority on legal assistance is the Ministry of Foreign Affairs, both according to Law 24,767 and to the cooperation treaties, with the sole exception of the cooperation treaty with the United States, which establishes as the central authority the Ministry of Justice and Human Rights.
Specifically regarding provisional measures, Argentina does not require that the prosecuted crime be a crime in Argentina, unless the required provisional measures include investigative measures requiring a restriction of constitutional rights (seizures, home searches, monitoring of people, interception of mail and telephone calls). The provisional measures requested would be applied following Argentine law. If the Ministry of Foreign Affairs decides to give effect to the provisional measure in question, it will solicit the intervention of the Ministry of Justice and Human Rights, which will call for the intervention of the competent authority (Article 74). If the measure demands the intervention of a judge, it shall be requested by the Prosecution Office (Article 74, Paragraph 3).
Regarding civil proceedings, Argentina's Civil Procedure Code provides that judgments granted abroad shall be enforceable according to the treaties signed with the granting country. Pursuant to Article 517, where there are no treaties in place, judgments granted abroad shall be enforceable if:
- they are res judicata granted by a court with jurisdiction according to the Argentine rules of international jurisdiction;
- the right of defence was properly guaranteed to the defendant;
- they meet the legal requirements to be considered enforceable according to both sets of legislation;
- they do not affect the principles of public order or Argentine law; and
- they are not incompatible with another judgment pronounced by an Argentine court.
All requirements must be fulfilled concurrently.
v Fraud as a defence to enforcement of judgments granted abroad
As a general principle, if it can be proven that the judgment was obtained fraudulently, it will not be enforceable. In civil matters, this is deduced from Article 517 of the AC&CC.
In criminal procedures, there is no explicit rule, but case law has recognised the application of 'fraudulent res judicata', as defined by the Inter-American Court of Human Rights, as a trial in which due process has not been respected, and by the Rome Statute of the International Criminal Court as a proceeding that was 'not conducted independently or impartially in accordance with the norms of due process recognised by international law and were conducted in a manner which, in the circumstances, was inconsistent with an intent to bring the person concerned to justice' (Article 20).
VI CURRENT DEVELOPMENTS
A number of draft bills have been sent to Congress in an attempt to strengthen the anti-corruption system, and propose measures against organised crime. These include a civil forfeiture regime to allow state authorities, without the requirement of a criminal judgment, to confiscate assets strongly presumed to have an illicit origin. Congress, however, is discussing whether to allow a civil forfeiture regime that is independent of criminal proceedings, or simply a 'non-conviction-based forfeiture regime' for cases where conviction is unlikely. Both drafts are being debated in the Senate and a final bill is expected to be in force by the end of 2018.