After having implemented stricter anti-bribery and corruption regulations in late 2015 and mid2016, new criminal law provisions regarding confiscation orders and asset recovery will enter into force on 1 July 2017. The present legislation was considered to be insufficient. Further, the law implements European provisions into national law. The law provides new rules for compensation of damaged parties and lower prerequisites for confiscations.

European Union

The recent case of Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch) (Singularis) is an important decision affecting any institution that handles client payments, including banks. It decided that a stock broker was liable in negligence for having breached its duty of care to its customer, Singularis Holdings Ltd (in liquidation) (Singularis), by paying monies out of its client account on the instruction of one of Singularis' directors and its only shareholder, Mr Al Sanea.

Background

Hong Kong

An insolvent corporate subsidiary’s payment of its parent’s contractual obligations was not a fraudulent transfer when “the [subsidiary] Debtor received reasonably equivalent value in exchange for [its cash] transfers,” held the U.S. Court of Appeals for the Eleventh Circuit on Sept. 4, 2015. In re PSN USA, Inc., 2015 WL 5167803, at *7 (11th Cir. Sept. 4, 2015) (per curiam).

A creditor’s guaranty claim “arising from equity investments in a debtor’s affiliate should be treated the same as equity investments in the debtor itself — i.e., … subordinated to the claims of general  creditors,” held the U.S. Court of Appeals for the Fifth Circuit on April 28, 2015. In re American Housing Foundation, 2015 WL 1918854, at *8 (5th Cir. April 28, 2015).

A bank did not engage in “egregious conduct” sufficient to subordinate its lien on equitable grounds, held the U.S. District Court for the Northern District of Illinois on Dec. 10, 2014. In re Sentinel Management Group, Inc., 2014 WL 6990322 (N.D. Ill. Dec. 10, 2014) (“Sentinel IV”). Moreover, because of the bank’s “good faith,” the corrupt borrower’s fraudulent pledging of customer funds to the bank to secure a so-called $312-million rescue loan “cannot be avoided.” Id. at *10.

The U.S. Court of Appeals for the Eleventh Circuit, on Aug. 15, 2014, ordered a bankruptcy court to vacate a final asset sale order almost four years after its entry because of insider misconduct. In re Global Energies, LLC, 2014 WL 3974577 (11th Cir. Aug. 15, 2014).

The U.S. District Court for the Southern District of New York, on April 27, 2014, issued a decision directing the bankruptcy court to dismiss fraudulent transfer complaints brought by the Madoff Securities Investor Protection Act of 1970 (“SIPA”) trustee against investment funds, their customers and individuals when the trustee failed “plausibly [to] allege that defendant[s] did not act in good faith.” SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2014 WL 1651952, at *5 (S.D.N.Y. April 27, 2014).

The U.S. District Court for the Southern District of New York, on April 23, 2019, denied the litigation trustee’s motion for leave to file a sixth amended complaint that would have asserted constructive fraudulent transfer claims against 5,000 Tribune Company (“Tribune”) shareholders. In re Tribune Co. Fraudulent Conveyance Litigation, 2019 WL 1771786 (S.D.N.Y. April 23, 2019). The safe harbor of Bankruptcy Code (“Code”) § 546(e) barred the trustee’s proposed claims, held the court. Id., at * 12.