Overseas Chambers of Peter Harris

Maison de la Boucterie
Rue de la Boucterie
Saint Saviour
Jersey, JE2 7ZW

The Wildenstein acquittal. How a prosecutor failed by not checking the law.

January 13th 2017

Given the acquittals of the Wildenstein family handed down in Paris on Thursday, and yet to be published, it appears from inter-avocat gossip that the Court found that the prosecutor and the tax administration had both totally missread the law by assuming that it meant something that, at the time,  it did not, and therefore missunderstood it, whether French legislation or for that matter those governing the foreign trust "arrangements" under review.
I can only cite the news coverage and Dumon Beghi's reaction to being "caught out": https://www.nytimes.com/2017/01/12/arts/design/guy-wildenstein-is-cleared-of-money-laundering-charges.html?_r=0

"The case grew out of legal battles waged by women in the family who have complained of having been excluded from the business and cheated out of inheritances. Sylvia Wildenstein, Daniel's widow, sued her stepsons over his estate, contending that assets had been hidden from her in the trusts.Those tensions were still apparent on Thursday. Outside the courtroom, a lawyer for Mr. Wildenstein trailed the late Mrs. Wildenstein's former lawyer, Claude Dumont-Beghi, and loudly called her a "crook" while she spoke with reporters. Ms. Dumont-Beghi ignored him, insisting that the nation's laws need to be changed to apply to trusts created before the new legislation was enacted to combat tax evasion."

As those laws did not suit her prior pleadings and position in the civil law case with which she was entrusted, that is hardly surprising.

Retrospective tax legislation? Does this lady have any legal training at all, or is she seeking to increase her copyright royalties as a writer of fiction? The whole French tax and economic system is based upon a clean slate after a period of "prescription".  Otherwise the very property rights and assets against which French money is issued and upon which their economy runs is compromised. The Banque de France would need to flood liquid treasury into the resulting holes in the paper system upon which the economy works to re-finance the French tax administration's pillaging of the past.

Perhaps if Dumont-Beghi had concentrated on what the law actually said, rather than attempting to reinvent the trust as a "contrat" "à la Marini" - I am tempted to coin a phrase marinated- she would not have had to seek the usual refuge behind a retroactive rewrite of the civil, criminal, fiscal and administrative law to save face in front of the press. Whilst defending the case of her deceased client to the hilt, she overstepped the mark. Given French politics, it is unlikely that her misleading sworn testimony before the Parliamentary Committee at which she attempted to paint the offshore world black, will be sanctioned, in either sense of the term. However, given their misleading contractual projection, Sénateur Marini, and incidentally the French administration through their representative voice at the OECD, Pascal Saint Amand may need to lower their tone as to a revisionist recasting of the English trust as the villain, and the trusts of states whose trusts laws are derived from it.  It all stems from a deliberate and dishonest requalification of the trust, a consept admitted by the French legal commlnity in the last millennium to be a property law mattere, into a contractual relationship.

It is not by retrospective refashioning of the "interpretation" of laws of property that any serious solution can be found. It just will not function, dare I say equitably?

The next issue will be whether, and to what extent, any wealth  tax or succession duty is actually due.  That issue is due to be heard later, but without the threat of penal proceedings.

Now that the judgment ahs been circulated, it is clear that whilst the Tribunal correctionnel de Paris might have found what we anglo-saxons might call "mens rea" in the use of offshore trust and corporate arrangements, yet found that there was no law against it at the time of the alleged actions. No "élément juridique" not quite "actus reus" of a criminalised nature was found by the Tribunal. It even noted in passing that it found it strange that despite the French legal system having cognizance of the trust concept for over a century, and had more or less given it a degree of status and recognition at the private international law level, it was only in 2011 that Parliament took action to attempt to apprehend the concept.

Having practiced in France since the 1980s, I can confirm that the French will only be able to approximate, not to understand.

However the notice of appeal by Mme Houlette, on the mere basis that the Tribunal had found what we might descibe as "mens rea", may mean that the Cour d'appel may be called upon to invent a new criminalisation of economic behaviour by mere intention to employ a foreign concept of property law. Phrasing that nonsense in a judgment is probably beyond the vocabulary of any current neo-cartesian thinking.

The problem for the Procurateur is that the Tribunal found that there had been no "fait juridique" to enable taxation to take place at the time of the allegations. Put simply, no tax had been triggered as there was no legal or for that matter ordinary fact or event which fell within the scope of the gift or succesion  legislation as it was at the time. The administration has stated as a general princple that a "fait juridique", if theoretically taxable, is only taxable if it is consigned to writing.

In short, actions taken since 2011 by other individuals or families with trust arrangements will need to be reviewed in relation to article 792-0 bis CGI et seq.