In most major international fraud cases, the money trail will eventually pass through or reach Switzerland, Liechtenstein or similar jurisdictions. This tends to be where the trail goes cold. A significant feature of such jurisdictions, which makes them so attractive to fraudsters, is their stringent protection of financial confidentiality and banking secrecy.

This in turn precludes claimants from obtaining any meaningful disclosure of documents or, indeed, any information that assists in the tracing of assets or information that supports their claims.

Switzerland, for example, vehemently asserts that its financial community has undergone a transformation and now actively promotes money laundering regulations and procedures.

However, Swiss banks still appear to vigorously oppose any form of discovery and hide behind a veil of banking secrecy, while Swiss courts have consistently shown themselves to be unable or unwilling to enforce international letters of request or letters rogatory issued pursuant to the Hague Convention of 18 March, 1970, on the Taking Of Evidence In Civil And Commercial Matters.

Switzerland is unique in that it contends with two conflicting international criteria – to remain neutral and at the same time harbouring a deep-rooted desire to form an integral part of expanded Europe and, as such, be a recipient of the substantial benefits available to the player of such a role.

It is a signatory to the Lugano Convention that was entered into between the European Community and the then-states of the European Free Trade Association (EFTA). Its sister convention, the Brussels I Regulation, replaced the Brussels Convention. As of 1 May, 2004, 10 new members became signatories to the Council Regulation, the most notable being the Baltic states.

These conventions have two objectives – the imposition of rules governing the allocation of jurisdiction over nationals of contracting states and a mechanism for the recognition and enforcement of judgments issued by the national courts of contracting states, similar to the US principle of 'full faith and credit'.

As a signatory to the Lugano Convention, Switzerland has abrogated the rights of its citizens to be sued only before its national courts, and has allowed the courts of other contracting states to assume jurisdiction over their domiciliaries in the circumstances prescribed in the convention. At the very core of the convention is the principle of mutual trust and confidence between the legal systems and judicial institutions of contracting states.

The primary purpose of the Brussels-Lugano regime is to prevent multiplicity of proceedings in contracting states between the same parties in relation to identical or similar causes of action and also to simplify the formalities needed to fulfil mutual recognition and enforcement of judgments. The aim is to create a free market in judgments, so that a claimant who has obtained judgment from a court within the European Union or EFTA has the ability to have the judgment automatically recognised and enforced in other contracting states.

However, Switzerland fails to comply adequately with its European obligations in this regard. In a recent case in which Howrey was involved, the exequatur (enforcement) proceedings had been progressing for nearly five years in Lugano when, finally, the Swiss Federal Court – the highest appellate court – elected not to recognise or enforce a judgment from the English High Court of Justice in an international fraud case. It did this on the basis of a highly technical alleged procedural deficiency that was, in any event, inconsistent and contrary to the authority it relied on in arriving at its judgment.

It is important to point out that the Ticino Court of Appeal had previously found that there had been a breach of the defendant's human rights enshrined in article 6(1) of the European Convention on Human Rights. It did so on the basis that the judgment from the High Court in London was contrary to public policy pursuant to article 27(1) of the Lugano Convention and, therefore, was contrary to Swiss public policy.

The Swiss Federal Court, however, upheld the Ticino Court of Appeal judgment, not on the basis of its findings but on the basis of a perceived procedural defect. The fact that the Swiss took such a long time to go through the recognition and enforcement process is, in itself, contrary to the spirit and intent of a regime which has at its core the goal of achieving expeditiously mutual recognition and enforcement of judgments between contracting states.

Liechtenstein, a country that is not a signatory to the Brussels-Lugano regime, imposes significant financial deterrents on claimants wishing to file suit there by demanding a significant, non-refundable percentage of the monies being claimed by way of a deposit.

What is more, if a claimant wishes to have a judgment of a foreign court recognised and enforced, the claimant must positively demonstrate the existence of current assets in Liechtenstein against which he wishes to enforce his judgment. The court will decline jurisdiction for recognition and enforcement proceedings if the claimant is unable in the first place to show the existence of current assets; and there exists no system or mechanism to assist in the tracing of assets.

In offshore jurisdictions, fraudsters continuously incorporate their companies in circumstances where minimum information is provided and the task of establishing beneficial ownership, direct or indirect, ranges from difficult to impossible. All of these deficiencies go towards the promotion, not the prevention, of fraud.

This contrasts starkly with the English legal system, which is uniquely equipped to combat fraud and has an armoury of weapons it can easily deploy to this effect, including worldwide freeze orders, search and seize orders and preaction discovery.

Generally, English law in seeking to combat fraud is evolving and the boundaries of enforcement are being progressively extended but, at the same time, the judiciary is keeping a watchful eye not to create disharmony or confusion in other jurisdictions, so as to respect the territorial jurisdiction of other states.

The English courts have consistently shown themselves to be prepared in an appropriate case to take on the role of an 'international policeman' to provide effective relief in cases of international fraud. Such relief is granted on principles of comity; that is, to render whatever assistance the courts can properly give to aid the judicial process of another state.

Geoffrey Gauci is a partner at Howrey.