Problems of Solving Property Issues in Criminal Proceedings in Latvia

30,923 criminal offences were registered in Latvia in 2021; therefore, there is a reason to believe that in Latvia every year there are several tens of thousands of cases when the person directing the proceedings in criminal proceedings have to decide upon the concerns related to the resolution of property issues, including those related to ensuring solution of property issues (Report on work done by the Prosecutor's Office in 2021, and priorities for activities in 2022).

The right to property is nowadays considered one of the fundamental human rights. In accordance with the Article 105 of the Constitution of the Republic of Latvia, everyone has the right to property. Property must not be used against the public interest. Property rights may be restricted only in accordance with the law (Law of the Republic of Latvia: Satversme of the Republic of Latvia, Latvijas Vēstnesis No. 43, 01.07.1993).

The sixth section of the Criminal Procedure Law “Property issues in criminal proceedings” regulates a number of institutes of property issues. Property issues affecting a person's property, possession and unsufruct rights are also relevant within the framework of criminal proceedings because, when conducting an investigation and later in the trial of a criminal case, the person directing the proceedings needs to decide on a number of issues related to the action with the property acquired within the framework of criminal proceedings. Property depends on the circumstances of its acquisition, individual characteristics, necessity within the framework of the investigation and other circumstances referred to in the Criminal Procedure Law, has a different procedural position and also different possible patterns of action related to it.

The topic of research is relevant because in practise there is no common understanding of the correct resolution of property issues. Moreover, it is often heard that persons directing the proceedings within the framework of criminal proceedings do not apply correctly or do not apply the institute of property issues at all in situations where it would be necessary.

The aim of the research is to examine regulation of property issues in pre-trial investigations within the framework of the Criminal Procedure Law and to evaluate application of statutory regulation in practice and issues related to the application of the existing regulation.

Within the framework of the research, the analytical method, the comparative method, the method of dialectical cognition, the legal-comparative method, logical and legal method and, in particular, the sociological method have been used in the research.

Compensation for damage caused by a criminal offence is regulated by Section 26 of the Criminal Procedure Law. As one of the types of property issues in criminal proceedings is compensation for damages to the victim. The right to the compensation is also enshrined in the form of the principle of criminal proceedings in Article 22 of the Criminal Procedure Law.

Compensation is an element of the settlement of criminal legal relations. Part one of Article 350 of the Criminal Procedure Law contains a definition and explanation of compensation. The term “compensation” is understood as the pecuniary payment made to the victim by the person who caused the damage by the criminal offence, as satisfaction for moral damages, physical suffering and property loss. For example, from English, compensation is understood as the money payable to a person who has suffered a loss or injury because something they once owned has been damaged. (Bullion, 2002)

Comparing the concept and content of “compensation” in civil law, there the goal of this institute is to compensate to the injured party for the damages incurred as a result of the offence, restoring legal position of the injured party as it had been before the offence was committed. It must be admitted that the concept of “compensation” contained in the Criminal Procedure Law is short and concise.

In the decision of the Senate of the Supreme Court of 5 November 2010 (Case SKK-508/2010), the Senate has indicated that compensation for damages determined by the court, regardless of its amount, is the resolution of property issues in accordance with the procedures laid down in the Criminal Procedure Law and is not considered either as a punishment within the meaning of Section 35 of the Criminal Law or as a double penalty within the meaning of Section 25 of the Criminal Procedure Law.

The Compensation institute is a mechanism provided for in the Criminal Procedure Law to achieve one of the objectives enshrined in Article 1 of the Criminal Procedure Law – to establish a criminal procedure that ensures effective application of provisions of the Criminal Law and the fair settlement of criminal law relations without unjustified interference in a person's life.

In accordance with Article 22 of the Criminal Procedure Law, a person who has been harmed by criminal offence, considering moral damages and physical suffering, is guaranteed procedural possibilities for applying for and receiving moral compensation. Thus, the legislator has provided for a person a special procedure and conditions for applying for compensation. However, attention should be paid to what is de facto meant by the concept of “person” contained in Article 22 and Article 350 of the Criminal Procedure Law.

Regarding the subject of compensation, this issue can be dealt with in two ways. The entity may be the person on whom the obligation to pay the compensation has been imposed, or the entity entitled to apply for compensation. Compensation for damage claimed by a person who has suffered damage is related to the status of the victim in criminal proceedings. As for the sum of compensation, Article 352 of the Criminal Procedure Law states that the court determines the amount of compensation by assessing the victim's application. In accordance with Article 351 of the Criminal Procedure Law, application must justify the amount of compensation claimed for material damage, but only indicate the sum for moral damage and physical suffering.

In accordance with Article 351 Part 1 and 2 of the Criminal Procedure Law, the victim has the right to apply for compensation for damages at any stage of the criminal proceedings until initiation of a judicial investigation with the court of first instance. This may be done either by submitting a written application for damages or by expressing it orally, which is recorded in the minutes of the questioning by the person directing the proceedings. As a rule, the victim applies for compensation for property damage in the value of property stolen, medical costs, etc, by submitting relevant documents to prove the amount applied for – a purchase receipt indicating the value of the property, documents confirming the cost of medical treatment.

Fulfilling their official duties, subject to the conditions laid down by the law, the person directing the proceedings must in practice face the preparation of a statement to the legal aid administration in order for the victim to receive the intended material damage. In practice of the authors of the current study, there are cases where pre-trial investigation manages to reach a final resolution of the compensation issue. This is most often the case when the injured party applies for compensation and the suspect has the opportunity to compensate for damage suffered.

When assessing victim's applications for compensation, it should be noted that persons often reapply for compensation even though they have actually suffered one of the types of damage. This is usually the case in circumstances of family conflicts or when the damage caused to the legal entity does not seem significant.

In general, the authors of the study conclude that the definition of “compensation” contained in the Criminal Procedure Law is exhaustive. In other words, compensation is a benefit, in the form of a material value in monetary terms, which is entitled to claim by a person who has been identified as a victim.

The institute of criminally acquired property has existed in criminal proceedings since the moment of adoption of the Criminal Procedure Law, namely, on April 21, 2005. Section 27 of the Criminal Procedure Law contains regulation of criminally acquired property and what action is possible with it. Existence of the institute of criminally acquired property has been evaluated quite controversial in the Criminal Procedure Law. There is an opinion among legal scholars that confusions and discussions are caused by the understanding of the concept of “property”.

A characteristic feature of modern criminal proceedings is the potential infringement of property interests, which can occur both in the course of criminal proceedings and as a result of it, and also affect persons who are not directly related to the criminal offence (Meikališa & Strada-Rozenberga, 2021). The procedure (form and content) of criminal proceedings regulated by the CPL must be such as to ensure the achievement of an appropriate material result, while avoiding disproportionate procedural restrictions. Property, as defined in Directive 91/308/EEK of the Council of the European Communities “On prevention of the use of the financial system for the purpose of money laundering”, is corporeal or incorporeal property, as well as legal documents evidencing the ownership of property or rights relating to such property.

In practice, understanding and dealing with criminally acquired property is difficult. It is impossible to combat and completely destroy people's tendency to commit crimes; therefore, in criminal proceedings, especially, in economic crimes, the question of what to do with the property, if there is any, of persons having the right to a defence, is always relevant. It is important that property issues in the criminal procedure law are interpreted correctly and do not cause problems in the course of criminal proceedings.

The institute of criminally acquired property is one of the most sensitive issues in criminal proceedings, as it is the property obtained by criminal means that can significantly hurt interests of other people, not at all unrelated to criminal proceedings. Professor Sandra Kaija points out that the achievement of the goal of the Criminal Procedure Law presupposes provision of conditions for the effective application of the provisions of the Criminal Law and that Criminal Law relations must be fairly regulated without unjustified interference in a person's life. An awful threat to a person involved in criminal proceedings shall be considered as a threat to implementation of criminal proceedings. In case of an unlawful threat to a person, harm is caused not only to the interests of the individual, but also to society and the state. (Kriminâlprocesa likuma komentâri, 2019, p. 109).

Confiscation of criminally acquired property is only one way of dealing with property in criminal proceedings. The second way of dealing with criminally acquired property is for it to be returned to its rightful owner or lawful possessor. The Criminal Procedure Law provides for a number of options for when and in what order the criminal proceeds can be confiscated. Everyone must be aware of traditional criminal confiscation at the end of the criminal proceedings when the guilt of the person accountable of the offence has been proven. This is provided for in the first Part of Article 356: “Property may be declared as criminally acquired by a court ruling that has entered into force or by a decision of the prosecutor to complete criminal proceedings”. This decision may include confiscation of both proven and presumed criminally acquired property.

Sections 27 and 59 of the Criminal Procedure Law regulate the procedure by which property is recognised as criminally acquired in criminal proceedings. In turn, Part 2 of Article 356 of the Criminal Procedure Law stipulates that during pre-trial criminal proceedings, property may also be recognised as criminally acquired by a decision of a district (city) court in accordance with the procedure set out in Section 59 of this Law, and by a decision of the person directing the proceedings, if during the pre-trial criminal proceedings, property has been found or seized from the suspect, accused person or a third party in respect of which its owner or lawful possessor had previously claimed the loss of property and, after finding it, proved their rights by removing doubts.

The stated norm provides for two different procedures for declaring property as criminally acquired, namely: (1) by a decision of a district (city) court and (2) by a decision of the person directing the proceedings.

Article 356, Part 2, Paragraph 2 of the Criminal Procedure Law stipulates that a decision on the recognition of property as criminally acquired may be taken by the person directing the proceedings. As known, pre-trial criminal proceedings consist of stages of investigation and prosecution. At each of these stages, there is its own person directing the proceedings, that is, the official who directs the criminal proceedings.

Article 256, Part 2, Paragraph 2 of the Criminal Procedure Law stipulates that property may have been found and seized from the alleged perpetrator of the criminal offence, as well as from a third party. A third party in this case could be any person both the person to whom the property came, knowing that the property was criminally acquired and the bona fide acquirer of the property. However, even, if the person acquires property without knowing and without any possibility of knowing that property has been lost by its owner because of crime it cannot be regarded that for the purchaser such acquisition would create a property right.

In order for the person directing the proceedings to be able to recognise the property as criminally acquired in accordance with Article 356, Part 2, Paragraph 2 of the Criminal Procedure Law, two preconditions must be fulfilled, namely: (1) the owner or lawful possessor of the property must apply for the loss of the property in advance and (2) after finding it, by removing reasonable doubts, must prove their rights.

If the owner or lawful possessor had claimed the loss of property, they must prove their rights by removing reasonable doubts. It should be noted here that the obligation to prove lies on the owner or lawful possessor of the property, but that obligation does not concern the proof of the criminal origin of the property but the proof of a person's right to the property in question. In addition, the standard of proof in this case corresponds to the standard of “elimination of reasonable doubts”, which primarily applies in criminal proceedings to the person directing the proceedings in pre-trial criminal proceedings and the prosecuting attorney in court. This is due to the fact that recognition of property as criminally acquired in pre-trial proceedings should be regarded as an exception to the general principle that property is recognised as criminally acquired by a court decision or a decision of the prosecutor to complete criminal proceedings.

The fourth part of Article 356 of the Criminal Procedure Law stipulates that during pre-trial criminal proceedings or after termination of criminal proceedings on the basis of non-exoneration of a person in the case referred to in part two, Paragraph 2 of this Article, property on the right registered in the public register and the entry in this register has been amended after committing a criminal offence may be recognised as criminally acquired only by a decision of a district (city) court in accordance with the procedure laid down in Section 59 of this Law. Consequently, it is considered that the legislator has solved the mentioned problematic situations, but simultaneously limited the powers of the person directing the pre-trial criminal proceedings in certain cases to decide on the recognition of property as criminally acquired, leaving it to the discretion of the court and accordingly expanding the scope of application of the special procedure.

Regarding disposition of property, which in pre-trial criminal proceedings is recognised as criminally acquired by a decision of the person directing the proceedings, it must be said that Article 356, Part 2, Paragraph 2 of the Criminal Procedure Law provides only for the return of property as disposition of criminally obtained property, which is regulated in Articles 367 and 360 of the Criminal Procedure Law. It should be noted that if the property is found in the possession of a third party and returned to the owner or lawful possessor, the third party who was the bona fide acquirer of this property, in accordance with Article 360, Part 2 of the Criminal Procedure Law, has the right to file a claim for damages in civil proceedings, including against the accused or convicted person. In turn, a third party runs the risk of not receiving damages in cases where the penetrator of the criminal offence has died or does not have property to which recovery can be directed. Everyone should carefully assess the potential risks before entering transactions.

The case of application of Article 356, Part 2, Paragraph 2 of the Criminal Procedure Law differs slightly in terms of the burden of proof imposed on participants in proceedings and the standard of proof from other cases of recognition of property as criminally acquired. It can be distinguished as a separate type of criminally acquired property, since in this case the person directing the proceedings can make a decision only on such property: (1) in respect of which its owner or lawful possessor had previously claimed the loss of property and (2) after finding it, having eliminated reasonable doubts, proved their rights. Consequently, this concerns the property claimed by a person, and the burden of proving the rights lies, beyond reasonable doubts, on the owner or lawful possessor. In turn, that property cannot be one to which the right is registered in the public register and the entry in that register has been amended after the commission of the criminal offence.

Article 356, Part three of the Criminal Procedure Law provides that after termination of criminal proceedings based on non-exoneration of a person, property may be recognised as criminally acquired by a decision of a district (city) court in accordance with the procedure laid down in Part 59 of this Law. In turn, Article 380 of the Criminal Procedure Law, mentions those cases when it is considered that criminal proceedings are terminated by a decision that does not exonerate a person. It should be noted that not only the investigator or prosecutor but also the court can terminate criminal proceedings on the basis of non-exoneration of a person. In turn, the wording of Article 356, Part three of the Criminal Procedure Law seems to also cover the possibility of applying the procedure of Part 59 procedure in cases where the court has terminated the criminal proceedings.

The institute of seizure of property is one of the most controversial issues in criminal proceedings as the seizure of property can sometimes even significantly restrict the fundamental rights of a person. The Criminal Procedure Law provides for a separate institution – the seizure of property – as a means of resolving property issues.

Section 28 of the Criminal Procedure Law regulates the procedure by which a solution to property issues may be ensured. That is, in the course of criminal proceedings, it is necessary or may reasonably arise, to take action against a person's property, the proceedings (the person directing the proceedings) must ensure that this property is preserved until the relevant property issue has been decided. This security in criminal proceedings is called the seizure of property. In the legal literature there is an opinion that the seizure of property is one of the types of procedural coercive measures.

In order to identify the institution of application of the seizure of property, it is necessary to focus on the purposes of the seizure of property in accordance with Article 361 of the Criminal Procedure Law, that is to ensure: 1)

resolution of property issues;

Several Latvian legal scholars, such as professors Kristīne Strada-Rozenberga, Ārija Meikališa and others, have for a long time pointed out various significant shortcomings in the legal framework regarding the seizure of property in criminal proceedings. Although the Criminal Procedure Law has been amended several times in relation to the institute of seizure of property, there are still problems regarding the application of the seizure of property in criminal proceedings.

Neither the Criminal Procedure Law nor other regulations provide a legal definition of seizure of property. The seizure of property is, by its very nature, a criminal procedural act, i.e., act regulated by the Criminal Procedure Law. Performance of any procedural action must be justified, aimed at achieving the specific goal. Seizure of property is made not only for the purpose of ensuring the execution of a possible confiscation sentence but also for the purpose of ensuring the confiscation of proceeds of crime, as well as the instrument and proceeds of committing the crime.

According to the authors, the person directing the proceedings does not have any discretion in imposing the seizure of property but must state the circumstances established by law. The content of the seizure of property must be such as to ensure its purpose – preservation of the immutability and belonging of the property. Such an objective can be achieved only by imposing restrictions on the disposal of property. The content of a particular restriction depends on the property to be seized – whether the property is registered in a public register, it is a movable item, or whether it is corporeal or incorporeal.

One of the issues that concerns the property to be seized, or even rather its amount, is at what point the amount of property is to be determined. Nowhere is it determined at what point in time the amount of the confiscated property is to be determined in the event of a criminal penalty – confiscation of property – at the time of commission of the offence, at the time of the final decision, or at some other point in time.

According to the authors, when imposing an arrest to ensure the possible confiscation, the amount of property to seizure must be determined by the person directing the proceedings objectively and proportionately to how serious the criminal offence is, the characteristics of the criminal offence committed, the identity data of the person against whom the criminal proceedings are continuing. Persons whose property is seized may have a different procedural status in criminal proceedings. First, an arrest may be imposed on the property of a person who has the right to a defence in particular criminal proceedings. These may be persons with the following procedural statuses: a person against whom criminal proceedings have been initiated; detainee; suspect; the accused; a person against whom the proceedings for the determination of coercive measures of a medical nature is underway; a person against whom proceedings are pending for the application of coercive measures to a legal person.

When examining the issue of who may impose seizure of property, it follows from Article 361, Part 3 of the Criminal Procedure Law that in pre-trial proceedings the seizure of property is imposed by a decision of the person directing the proceedings, who has been approved by the investigating judge, but during the trial the decision is taken by the court. This provision immediately makes a clear distinction from the procedural order inherent in investigative measures or procedural coercive measures, which require the consent of the investigating judge for the measure to be taken or the measure to be applied. An investigative act – search – in accordance with Article 180 of the Criminal Procedure Law, or a security measure – detention – in accordance with Article 271 of the Criminal Procedure Law, a decision shall be taken by the investigating judge in pre-trial criminal proceedings on the basis of a proposal of the person directing the proceedings and the attached materials. In turn, in the case of seizure of property in pre-trial criminal proceedings, the decision is taken by the person directing the proceedings, having received the approval of the investigating judge.

In accordance with Article 318, Part three of the Criminal Procedure Law, if the investigating judge takes a decision within the scope of their competence, it must be motivated. The regulation of the seizure of property cannot be regarded as special, but Article 318 is general in this case. Existing regulation hinders implementation of the principle of equivalence of procedural powers provided for in Article 18 of the Criminal Procedure Law. Based on this principle, the rights and obligations of persons involved in criminal proceedings are those that ensure equivalent implementation of the tasks and rights specified in regulatory enactments. A person affected by the decision to seizure property has limited possibilities to appeal against this decision, as the investigating judge's motivation for upholding such a decision is unknown, except as stated by the person directing the proceedings in their decision. In addition, balance of these rights and obligations upset by the fact that the person directing the proceedings is obliged to make and motivate a decision that significantly affects the constitutional right of a person to property. Search of the investigative activity requires a decision of the investigating judge, which is based on the arguments chosen by the judge themselves. According to the authors, there is no reason to establish a different procedure in the regulation of the seizure of property since this leads to unreasonably unequal regulation. It is necessary to consider that decisions on the seizure of property are briefly drawn up, indicating only the property to be seized and the purpose for which someone needs to arrest it.

To facilitate the control of the investigating judge over respect of human rights, the authors of the current study suggest amending Part three of Article 361 of the Criminal Procedure Law, to read as follows: “In pre-trial proceedings, the seizure of property shall be imposed by a decision of the investigating judge”.

Section 28 of the Criminal Procedure Law “Ensuring the resolution of property issues” does not specify the procedure for appeal of the decision to seizure the property. Having analysed the regulatory framework, the authors consider that the different regulation of the seizure of property from other procedural actions (which require a decision of the investigating judge) leaves room for different interpretations of the norms regarding the procedure for appealing the decision. Part 2 of Article 337 of the Criminal Procedure Law determines to whom the complaint is to be referred for decision. It may seem that the decision to seizure property in reality equals two decisions – the decision of the person directing the proceedings and the decision of the investigating judge when it comes to pre-trial criminal proceedings. It follows that in accordance with part two, Paragraph 2 of Article 337 of the Criminal Procedure Law, a complaint regarding the investigator's decision shall be referred to the supervising prosecutor for decision. Nevertheless, in accordance with Paragraph 4, the complaint regarding the decision of the investigating judge shall be referred to a higher court for decision. With this interpretation of the rules, it is not clear who is dealing with a complaint against a decision to seizure property – the supervising prosecutor or a higher court. The investigating judge and the prosecutor belong to the judiciary. In turn, it follows from the criminal procedure system that the court and the investigating judge are in superior “in hierarchy” than the prosecutor, as apparent from the fact that the prosecutor is approached only in the cases of urgency and, likewise, the investigating judge has the final word (special investigative actions). Often investigating judges require indicating in the decision a certain appeal procedure.

It is most often encountered that the following appeal procedure shall be indicated in the decision – the decision shall be appealed to a higher-level court in accordance with Part 2, Paragraph 4 of Article 337 of the Criminal Procedure Law. According to the authors, in order not to have different interpretations of the provisions, it is possible to include amendments to Section 28 of the Criminal Procedure Law. Namely, to provide that decision to seize property is appealed to the highest court. The establishment of a precise appeal procedure will exclude the possibility of different interpretations of the provisions of the Criminal Procedure Law.

The provisions of the Criminal Procedure Law on the seizure of property do not regulate the issue of the content or actual form of seizure of property – movable or immovable, obligations, rights and other things that may be considered as property subject to seizure within the meaning of the Criminal Procedure Law. The content of the seizure of property must be such as to ensure the purpose of preserving the immutability and belonging of the property. Such an objective can be achieved only by imposing restrictions on the disposal of property.

In 2017, significant amendments were made to the Criminal Procedure Law. Almost all articles included in Section 28 of the Criminal Procedure Law devoted to the seizure of property have been amended. In turn, the Criminal Procedure Law was supplemented by a new Article 361.¹ which, among other things, defines the content of seizure of capital shares (shares) and cooperative shares, as well as cash deposits, financial instruments and capital shares (shares) held in credit institutions or investment brokerage firms.

Seizure of capital shares (shares) and cooperative shares, property took the form of a prohibition to alienate them and encumber them with other rights of property or obligations. In addition, capital company or cooperative society, capital shares (shares) or cooperative shares of which have been seized, have an obligation to transfer all funds due to the relevant person from the capital company or cooperative society to the bank account indicated by the person directing the proceedings (institution, Treasure or in the account of the person subject to the seizure). By contrast, cash deposits, financial instruments and capital shares (shares) held in credit institutions or investment brokerage firms will be subject of suspension of expenditure operations in the event of seizure.

According to the authors, the research includes relevant issues regarding the problem of solving property issues in criminal proceedings in Latvia. The research puts forward suggestions for improvement of the Criminal Procedure Law to promote respect for the rights of participants in criminal proceedings, as well as respect for human rights.