Intelligence-gathering techniques to support legal disputes in opaque jurisdictions

In the absence of easily accessible public record information, employing unique intelligence-gathering techniques to support disputes and recovery efforts can unlock the information needed to make informed decisions and shape effective legal strategies. This is particularly true when conducting investigations or seeking enforcement in opaque jurisdictions, such as many Middle Eastern countries, where intelligence contributes to the success of legal strategies.

Publicly information is limited but becoming accessible 

A common phrase repeated among corporate investigation specialists is the public record in most Middle Eastern countries is not truly public. A lack of centralised authorities, records being maintained physically rather than digitally, and difficulties in gaining permission to access public record information can present challenges to gathering the information needed to help shape a legal strategy. However, these obstacles can be circumvented with an intelligence-driven investigation. 

Publicly accessible information remains scarce across most emerging markets. Although such jurisdictions remain lucrative investment opportunities, when disputes arise owing to a breakdown in the commercial relationship or delays in debt repayment, clients often find themselves in challenging situations. Such situations often include litigation proceedings in jurisdictions that do not adopt common law, or obtaining the information required to help shape counsel’s legal strategy.
In recent years, many Middle Eastern countries have demonstrated an increased willingness to become more transparent, both to further encourage foreign investment and to deflect accusations that they are safe havens for money launderers, who utilise corporate secrecy and the lack of public record access to conceal investments.

The actions of financial centres such as the Dubai International Financial Centre (DIFC), the Abu Dhabi Global Market (ADGM), and Qatar Financial Centre (QFC) testify to this. All three centres practice common law in their respective courts, but more telling is the significantly more accessible public record they provide in comparison with their respective onshore authorities. Public record disclosures in these jurisdictions include publicly accessible corporate ownership structures and directorships. Litigation filings are widely accessible, and progress of proceedings and court judgments are readily accessible, allowing parties to develop an understanding of their partner, even ahead of proceeding with engagements.

Yet, despite the increasingly accessible public record across Middle Eastern jurisdictions, the region as a whole still has some catching up to do with regards to best practice in public record transparency. UAE Cabinet Resolution 58 of 2020 is a great step in the right direction, requiring companies in the UAE to disclose the ultimate beneficial owner to the corporate authorities. The natural next step is for this information to become public accessible in order for contracting parties to be better informed on the counterparty they engage. 

As authorities in the region move towards a fully accessible process, a reliance on other means to obtain the required information to shape an effective dispute strategy will continue. 

Understanding the requirements

When there is a lack of available information, an intelligence collection plan is essential to meeting requirements. In any dispute which requires information to inform strategy, companies should ask themselves what they are seeking to achieve, and what questions need to be addressed to meet the goal. Consider a shareholder dispute, where one party is facing several lawsuits. Questions may include who is driving the lawsuits? Is there a hidden motive? What is the ultimate goal? This information will not be typically accessible in the public record, and therefore only by holding conversations with human sources would a comprehensive picture be developed, around which a legal strategy could be formed.  

Intelligence gathering in support of disputes 

With limited publicly accessible information, corporate investigation practitioners in the Middle East often resort to intelligence-gathering techniques to develop leads, which can sometimes then be substantiated with the limited information obtained from the public record. In many scenarios, incorporating intelligence gathering into asset tracing and other dispute support investigations is the difference between a successful legal strategy and a failed one. 

Modern technology has paved the way for improved intelligence-gathering techniques, but it has not replaced the quality of information that can be obtained by conducting human source enquiries. Identifying and obtaining information from key sources, with first-hand knowledge, can prove invaluable when seeking information to shape a legal strategy.

The lack of publicly accessible financial accounts in most jurisdictions in the Middle East, makes it difficult to accurately assess whether registered companies are a going concern. It is common in the region for struggling businesses to remain legally active and to run down the remaining period on their trade licence. There is no immediate indication in corporate records as to whether the business is actually trading or is dormant. This is particularly true of small-medium enterprises that do not have a significant public profile, as it is not possible to develop an accurate reflection of the company’s operational and financial status from official records or online media. As such, the only effective means to develop information on the profitability and financial performance of such businesses is by reaching out to informed human sources, who are privy to industry news and can provide an accurate and timely assessment of current affairs. Such sources are also likely to shed light on whether there are competing creditors seeking redress, and consequently whether the client is in a line of creditors who may have already foreclosed on assets or are already at the enforcement stage. Such information will provide counsel with a broader understanding of the situation so they can assess whether there is merit in litigating or pursuing other avenues of recovery.

Likewise, parties often find themselves with a guarantee over a company’s shares but are unable to determine the value of these shares without financial statements. It is simply impossible to provide an accurate value without learning revenue and profit figures; however, developing intelligence on revenue, profitability, and liability position can provide a close approximation as to what the value of these shares may be. 

Equally key in the Middle East is assessing the counterparty in a dispute, specifically developing a comprehensive picture of who they are, who the ultimate beneficiaries are, and whether they maintain political connections. It is no secret that the judicial independence in some Middle Eastern countries can be questioned, so ahead of any contentious legal proceedings, counsel and clients should understand the counterparty’s connections and influence, assess where to litigate, and evaluate the likelihood of obtaining a favourable award. Establishing a counterparty’s political connections is unlikely to be achievable through public record research, with the exception of certain prominent individuals who are publicly linked to high-profile political figures. As such, the knowledge of informed individuals will allow the client to better understand the counterparty’s political ties and determine whether there are powerful silent beneficiaries with interests that do not feature in public record disclosures. This can be vital in providing an accurate assessment of the probability of obtaining a successful award. 

Conducting site visits to develop a first-hand perspective of the scene on the ground is often used to assess the scale of operations, determine the condition of particular assets, or obtain market information. From experience, site visits are specifically relevant when investigating the source of intellectual property theft. On a previous case we conducted a physical visit to markets where counterfeit products are being sold in order to hold a discreet conversation with the retailers which unlocked the information required to initiate legal proceedings, including the source and location of where the illicit goods are being manufactured and the supply chain. Armed with this information, we referred back to the public record and accessed corporate information to confirm the identity of the culprits manufacturing the products and mapped out the supply chain, allowing counsel to effectively develop the most effective legal strategy. Similar to site visits, surveillance is another technique often utilised by investigators to gather intelligence on the counterparty, however it remains illegal in most of the Middle East.  Therefore, while it is practiced by colleagues in offices outside of the region, surveillance is a technique that cannot typically be used in the Middle East, as it is vital for investigation practitioners to operate within the confines of the law, and uphold an ethical approach, to ensure the client’s reputation and legal case are not jeopardised. 

 

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Intelligence-gathering techniques during asset tracing investigations 

Utilising intelligence gathering techniques during asset tracing investigations in the Middle East, for clients seeking to recover outstanding debts, pursue perpetrators of frauds and embezzlements, as well generally seeking to enforce awards against a counterparty’s assets, can critically enhance the outcome of the investigation.  

In the example of a counterparty that does not own tangible assets, the obvious means of recovery is via enforcement against receivables or other financial assets. While obtaining information on financial assets and intangible assets is challenging in any jurisdiction, this proves increasingly more challenging in Middle Eastern jurisdictions that do not require financial statements to be published. Human sources can provide critical information about a counterparty’s ongoing projects and contracts, amounts due, financial flows, and expected payment dates, which can allow the claimant to tailor an effective legal strategy to focus recovery efforts on the counterparty’s financial assets. 

Case study: A freezone company registered to a serviced office and does not maintain a physical presence in country. As the contracting entity, the client had engaged with this company, but when a dispute arose, was unable to enforce due to the lack of physical assets. Using human sources provided insight on how the company operates and its financial position, and identified its financial assets, such as contracts, receivables, and cash held, which proved the only opportunity for recovery and enforcement.


Intelligence-led asset traces can also help to reveal tangible assets, such as ownership of inventory and machinery, the value of such equipment, the location where assets are stored, and other details that help to focus recovery efforts. Moreover, determining whether the assets of larger, privately owned corporations, who publicly disclose their inventory on commercial websites and brochures, are owned or leased typically requires verification from informed human sources with primary insight. Meanwhile, investigating the asset position of Small-Medium Enterprises, who do not publish this information will no doubt require an intelligence-led investigation to effectively map out their asset position, such as by reaching out to industry contacts who are able to provide their perspective on whether the business owns or leases equipment. 

Intelligence gathering becomes paramount when seeking to understand whether a counterparty has been dissipating assets to avoid enforcement procedures. Proving dissipation of assets is challenging irrespective of jurisdiction, but in countries where public record disclosures are more readily available, it might be possible to prove historical ownership of assets, receiving parties and dates of transfer by reviewing available information. The lack of public record accessibility in the Middle East makes the use of intelligence a necessity when seeking to demonstrate dissipation. An intelligence-gathering exercise may unearth proxies, such as family members in the case of a dispute with an individual, or affiliate companies if seeking enforcement against an entity. Markets in the Middle East are typically smaller than those in the western world, and as such, identifying informed industry sources who are well placed to provide insight can often be achieved quite successfully. Holding discreet conversations with industry sources who have had business dealings with a counterparty can be enlightening when procuring information on the dissipation of assets and will often lead to the development of a comprehensive picture of timelines of dissipation. Likewise, identifying suitable individuals to comment on asset dissipation concerning an individual has proven extremely fruitful, and allows the investigator to develop leads and refer back to the public record to confirm date of transfer, or provide counsel with the required intelligence to persuade courts to issue disclosure orders.    

Case study: To assist a client recover dues from a defaulter, we undertook site visits and surveillance of properties owned by the target family in the UK, discreet intelligence enquiries in relevant business communities in the UAE and Pakistan and corporate interest checks and financial statement analysis across the UAE, UK and Pakistan to review the asset base of the targets and track dissipation. We located the counterparty to allow them to serve proceedings and identified USD45m of assets, including shipping vessels and dissipated property.


Intelligence gathering therefore represents a diverse set of tools to gain access to information that, in many Middle Eastern jurisdictions, would otherwise remain elusive. While these jurisdictions are gradually becoming more transparent as they seek to comply with international regulations, a variety of factors, from poor-quality information to restricted access, means that this process is slow and uneven, and human sources will remain invaluable for the foreseeable future.