Confiscation of Proceeds of Crime and Illegal Contracts

In this paper, I explore the relationship between the law of confiscation of proceeds of crime (CPC) and the private law regulation of illegal contracts.

Until 1988 there was no general statutory regime in England & Wales allowing the State to deprive criminal wrongdoers of their ill-gotten gains (this would only happen through the Criminal Justice Act 1988, which complemented the Drug Trafficking Offences Act 1986). Hence, compared to private law, CPC is a new body of rules. The emergence of CPC in the legal landscape implies a paradigm shift towards illegal transactions, moving from a hands-off approach (defence of illegality or ex turpi causa non oritur actio) to a hands-on approach to ill-gotten gains (CPC). The move has been from judicial abstention (defence of illegality) to an active role of the courts (CPC).

I argue that traditional private law doctrine, by its reluctance to reconsider the institutional role of the defence of illegality, ends up promoting an obstacle to the achievement of the public policies behind CPC. An example that illustrates this issue is the hitman contract: if A promises B to pay £ 10,000 if B kills C, which she does, and the payment was made, the State can confiscate from B because it is a benefit derived from a criminal wrong. On the contrary, if the payment has not been made the State cannot confiscate the agreed sum to A. Why is this so? Nothing in the Proceeds of Crime Act 2002 explains this. The reason is that if the State seeks to confiscate the promised money from A, arguing that B has a contractual right against A, then A would contend that the contract is void and so the defence of illegality would apply. In other words, it would be argued that there is no juridical obligation binding A and B. Prospectively speaking (i.e. when no crime has been committed) this is perfectly reasonable in the context of private law litigation: the legal system would never enforce an illegal contract that generates reasons for action of criminal nature. But if the crime was committed and bearing in mind that payment is irrelevant for criminal responsibility: why should the law protect A in a confiscation proceeding? The defence of illegality in these cases operates against CPC. If A wouldn’t be allowed to plead the defence of illegality ‘against’ B (in a confiscation proceeding) this would mean that he could be made financially responsible for the crime in question. The paradox is evident: traditional substantive limitations of contract law operate as a limit for the enforcement of CPC.

Finally, I argue that debts between criminal wrongdoers that amount to fees or remuneration for the commission of crimes deserve proper attention. Accordingly, I suggest that the private law doctrine of illegality should yield in favour of the operation of CPC given its predominant role in this context.