Breach of Trust in Cambodia

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					PRIVATE SECTOR DISCUSSIONS

Number

23

BREACH OF TRUST
Its Improper Use and Impact on the Cambodian Economy

Table of Contents
Acknowledgements	 Executive	Summary	 Chapter	1:	Introduction	 1.		Purpose	of 	Study	 2.		What	is	Breach	of 	Trust	 3.		Why	does	Cambodia	have	a	Breach	of 	Trust	Law	 4.		Why	Application	of 	the	Breach	of 	Trust	Law	is	a	Problem	in	Cambodia	 Chapter	2:	Criminal	Breach	of 	Trust	 1.	Elements	of 	Criminal	Breach	of 	Trust	 2.	Physical	Elements	of 	Breach	of 	Trust	 3.	The	Mental	Element	–	Intent	to	Commit	the	Crime	 4.	The	New	Criminal	Code	 Chapter	3:	Misapplication	of 	Breach	of 	Trust	in	Cambodia	 1.	Misapplication	of 	the	Breach	of 	Trust	Law	is	a	Problem	 2.	Misapplication	of 	the	Breach	of 	Trust	Law:	Why	and	How?	 Chapter	4:	Breach	of 	Trust	Costing	Millions	in	Lost	Investment	 Chapter	5:	Recommendations	&	Conclusion	 Appendix	1	–	Research	Methodology	 Appendix	2	–	Case	Studies	 Appendix	3	–	Media	Reports	 Appendix	4	–	Business	Sentiment	Survey	Results	 Appendix	5	–	Technical	Legal	Analysis	of 	Breach	of 	Trust	Law	 Appendix	6	–	Ministry	of 	Justice	Case	Data	 Appendix	7	–	The	Joint	Instruction	by	the	Minister	of 	Justice	 and	the	President	of 	the	Supreme	Court	on	Criminal	Breach	of 	Trust	 5 7 11 11 11 12 13 17 17 18 21 22 25 	25 26 33 37 43 47 53 55 59 73 77

Acknowledgements
This	 Discussion Paper	 on	 the	 improper	 application	 of 	 the	 “Breach	 of 	 Trust”	 provision	 of 	 Cambodia’s	 transitional	 penal	 code	 was	 prepared	 by	 an	 Ad	 Hoc	 Sub-Committee	 set	 up	 by	 the	 Government-Private	 Sector	 Forum’s	 (G-PSF)	 Working	 Group	 on	 Law,	 Tax,	 and	 Good	 Governance,	 which	 is	 co-chaired	 by	 H.E.	Keat	Chhon,	Senior	Minister,	Minister	of 	Economy	and	Finance,	and	Mr.	 Bretton	Sciaroni,	Managing	Partner	of 	Sciaroni	&	Associates	and	representing	 the	private	sector.	The	Ad	Hoc	Sub-Committee	consisted	of 	representatives	from	 the	Ministry	of 	Justice,	the	business	community,	and	the	International	Finance	 Corporation’s	 Mekong	 Private	 Sector	 Development	 Facility	 (IFC	 MPDF).	 	 Both	H.E.	Keat	Chhon	and	Mr.	Sciaroni	have	been	strong	supporters	of 	this	work	 and	provided	useful	guidance	to	the	Ad	Hoc	Sub-Committee	during	the	course	of 	 the	study.	Their	continuous	support	led	to	the	successful	completion	of 	the	study.	 	 Many	 people	 helped	 make	 this	 Discussion Paper	 a	 reality.	 H.E.	 Hy	 Sophea,	 Secretary	of 	State,	and	Mr.	Seung	Panhavuth,	Director	of 	Prosecutorial	Affairs,	 both	 from	 the	 Ministry	 of 	 Justice,	 assisted	 the	 Ad	 Hoc	 Sub-Committee	 to	 arrange	interviews	with	the	judiciary	and	to	obtain	statistics	on	court	cases	in	 five provinces. Mr. Eng Touch, Chief of the Private Sector Development Bureau of 	 the	 Ministry	 of 	 Economy	 and	 Finance,	 was	 instrumental	 in	 coordinating	 the	 work	 of 	 the	 Ad	 Hoc	 Sub-Committee	 with	 the	 Ministry	 of 	 Justice.	 Ms.	Seng	Hun	of 	Sciaroni	&	Associates	was	an	active	representative	of 	the	private	 sector	in	meetings	with	the	Ministry	of 	Justice	to	discuss	the	various	drafts	of 	the	 report.	James	Brew,	who	coordinated	the	G-PSF	until	December	2007,	helped	 to	facilitate	the	discussion	with	the	Ad	Hoc	Sub-Committee	by	distributing	the	 draft	 report	 to	 the	 private	 sector	 and	 coordinating	 the	 receipt	 of 	 comments.	 Many	business	people	participated	in	this	work	by	cooperating	with	the	research	 team	through	direct	interviews	and	responding	in	writing	to	survey	questions.	 IFC MPDF Operation Officer Soneath Hor was principally responsible for	 the	 development	 of 	 this	 Discussion Paper,	 and	 the	 work	 was	 carried	 out	 under	 the	 supervision	 of 	 Trang	 Nguyen	 and	 Charles	 Schneider.	 	 Stuart	 Ford	 was	 the	 primary	 author	 and	 was	 supported	 by	 Dugald	 Richards	 and	 Anita	 Surewicz, both of whom made significant contributions to the report. Ann	 Bishop	 edited	 and	 proof 	 read	 the	 manuscript	 and	 Kong	 Vannarith	 translated	 the	 document	 to	 Khmer.	 Khy	 Touk,	 Khemara	 Ros,	 and	 Ieng	 Sophealeak	 edited	 the	 Khmer	 version	 and	 Kea	 Kunthea	 was	 responsible	 for	 graphic	 design	 and	 layout.	 Tonie	 Tan	 provided	 administrative	 support.	 

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Executive Summary
EXECUTIVE SUMMARY

Introduction
The	business	community	in	Cambodia	has	expressed	concern	that	the	Breach	 of 	Trust	Law	is	used	in	an	improper	manner,	to	the	detriment	of 	the	business	 community	and	Cambodia’s	economy.	In	January	2006,	H.E.	Keat	Chhon,	Senior	 Minister,	Minister	of 	Economy	and	Finance,	created	an	Ad	Hoc	Sub	Committee	 to study breach of trust issues and make recommendations for clarification of the	law	and	improvement	of 	its	application.	This	report	is	the	product	of 	the	Ad	 Hoc	Sub	Committee’s	work	and	was	compiled	from	information	gathered	from	 interviews	with	stakeholders,	a	review	of 	publicly	available	information,	and	a	 series	of 	interviews	with	businesses.	Improper	use	and	application	of 	the	Breach	 of 	Trust	Law	is	likely	to	be	costing	Cambodia	millions	of 	dollars	per	year	in	lost	 investments.	It	is	hoped	that	the	information	and	recommendations	contained	in	 this	discussion	paper	will	contribute	to	reducing	the	costly	impact	of 	improper	 breach	of 	trust	cases	on	the	Cambodian	economy.

Elements of a Breach of Trust
Breach of trust is a criminal offence defined in Article 46 of the “Provisions Relating	to	the	Judiciary	and	Criminal	Law	and	Procedure	Applicable	in	Cambodia	 during	the	Transitional	Period”	(hereafter	called	the	“Transitional	Criminal	Law”).	 Breach	of 	trust	can	be	broken	down	into	three	physical	elements	and	one	mental	 element1.	The	essential	physical	elements	are:	 1. The	property	must	have	been	entrusted	to	the	accused; 2. The	accused	must	have	promised	to	return	the	property	to	its	owner	or	 use it for a specific purpose; and 3. The	accused	must	have	disposed	of 	or	misappropriated	the	property	 either	by	refusing	to	return	it	or	by	failing	to	use	it	for	the	agreed	 purpose. The	required	mental	element	is	a	criminal	intent.	To	have	the	requisite	criminal	 intent,	the	accused	must	have	intended	to	deprive	the	owner	of 	the	property	and	 must	have	known	that	what	he	was	doing	was	wrong.		It	cannot	have	been	simply	 a	mistake	or	an	accident.
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1	A	technical	legal	analysis	of 	the	crime	of 	breach	of 	trust	by	the	prominent	Cambodian	

lawyer,	Mr	Koy	Neam	is	provided	in	Appendix	5.



Mekong Private Sector Development Facility

Breach of Trust Cases in Cambodia
The	business	community	is	of 	the	opinion	that	breach	of 	trust	charges	are	used	 improperly	during	business	disputes	to	pressure	people	into	making	payments	 to	 their	 accusers.	 One	 of 	 the	 most	 consistent	 complaints	 is	 that	 the	 courts	 ignore the	elements	of 	the	law	and	treat	simple	contract	disputes	as	breaches	of 	 trust.	A	major	cause	for	this	is	the	complexity	and	ambiguity	of 	the	law,	which	 contributes	to	the	problem	of 	simple	contract	disputes	being	treated	as	breaches	 of 	trust	by	the	courts.		Technically,	most	contract	disputes	cannot	give	rise	to	 a	breach	of 	trust	charge	because	only	a	small	number	of 	contracts	involve	one	 party	entrusting	the	other	party	with	something	that	must	be	returned.		 Improper	breach	of 	trust	charges	are	said	to	often	be	used	as	a	bargaining	chip	 to	force	the	settlement	of 	business	disputes.	While	recovering	money	through	 a	 civil	 lawsuit	 can	 be	 complicated	 and	 time	 consuming,	 a	 criminal	 breach	 of 	 trust	case	immediately	places	tremendous	pressure	on	the	accused	to	settle	the	 underlying	business	dispute	because	warrants	are	issued	for	the	arrest	of 	almost	 all	people	charged	with	breach	of 	trust.		

EXECUTIVE SUMMARY

What Happens to People Charged With Breach of Trust
People	who	are	charged	with	criminal	breach	of 	trust	face	immense	pressure.	 Warrants	are	issued	for	the	arrest	of 	almost	anyone	charged	with	breach	of 	trust,	 meaning	that	the	accused	is	likely	to	be	arrested	and	held	in	custody	until	he	or	 she	 is	 taken	 before	 an	 investigating	 judge	 and	 a	 preliminary	 charge	 of 	 breach	 of trust is confirmed. At this point, it is very likely that the accused will be put in	 pre-trial	 detention.	 This	 is	 the	 chief 	 source	 of 	 pressure	 on	 the	 accused,	 as	 almost	all	of 	the	interviewees	for	this	study	stated	that	spending	time	in	jail	over	 a	business	dispute	is	something	they	would	try	to	avoid	at	all	costs.		Once	in	pretrial	detention,	in	order	to	be	released	from	prision,	the	accused	may	agree	to	 make	a	bail	payment,	which	in	most	cases	seems	to	range	from	thousands	to	tens	 of 	thousands	of 	dollars.		Most	interviewees	stated	that	there	is	little	to	no	chance	 of 	recovering	the	bail	payment	regardless	of 	the	outcome	of 	the	case.			

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The Economic Impact on Cambodia
The effect of improper breach of trust cases on Cambodia is difficult to measure because	there	is	no	easy	way	to	estimate	how	many	of 	such	cases	occur	each	year.	 	 Nevertheless,	 the	 information	 gathered	 for	 this	 report	 suggests	 that	 improper	 breach of trust cases are a significant problem for the business community. There appear	 to	 be	 several	 types	 of 	 costs	 associated	 with	 improper	 breach	 of 	 trust	 cases. The most obvious costs are the direct ones – the lawyer fees and unofficial payments.		The	next	category	of 	costs	is	business	losses.		The	largest	category	of 	 costs	associated	with	improper	breach	of 	trust	cases	is	lost	investment	opportunity.	 	 This	cost	represents	the	money	that	would	have	been	invested	in	Cambodia	if 	



Breach of Trust

not	for	investors’	concern	over	being	improperly	charged	with	breach	of 	trust.	 The	amount	in	lost	investment	opportunity	for	those	surveyed	for	this	report	 exceeds $5 million per year. The clarification of the current Breach of Trust Law and	improvement	in	its	application	would	do	a	great	deal	to	improve	investor	 confidence and benefit the overall economy of Cambodia.

Summary of Report Recommendations
Based	on	this	study	of 	the	Breach	of 	Trust	Law,	as	well	as	detailed	interviews	 with	18	businesses	and	key	stakeholders	and	11	survey	responses,	the	Ad	Hoc	 Sub	Committee	makes	the	following	recommendations: 1. Pass	the	draft	Penal	Code	provisions	on	breach	of 	trust. 2. Focus	on	the	key	elements	of 	criminal	breach	of 	trust	(entrustment	and	 criminal	intent)	by: a. Issuing	a	new	Joint	Instruction	that	requires	breach	of 	trust	 decisions	to	separately	discuss	the	evidence	supporting	each	 element	of 	the	crime; b. Providing	training	to	the	Judiciary	on	the	elements	of 	breach	of 	 trust,	particularly	entrustment	and	criminal	intent,	in	conjunction	 with	the	new	Joint	Instruction	recommended	above;	and c. Publishing	all	breach	of 	trust	decisions.	 3. Coordinate	the	activities	of 	the	government,	business	community,	civil	 society	and	the	media	to	focus	scrutiny	on	breach	of 	trust	cases. 4. Create	a	mechanism	for	anonymous	reporting	of 	persons	who	solicit	 unofficial payments. 5. Restrict	the	use	of 	pre-trial	detention	by	issuing	formal	guidelines	that	 describe	when	pre-trial	detention	is	appropriate.

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EXECUTIVE SUMMARY


Introduction
1. Purpose of Study
The	 business	 community	 in	 Cambodia	 is	 concerned	 about	 the	 improper	 application	of 	the	Breach	of 	Trust	Law	and	its	negative	effect	on	both	the	business	 community	and	Cambodia’s	economy.	As	early	as	1999,	when	the	government	 created	the	Government-Private	Sector	Forum	to	foster	public-private	dialogue,	 the	private	sector	began	to	raise	the	issue	of 	improper	use	of 	the	Breach	of 	Trust	 Law,	primarily	through	the	Working	Group	on	Law	Tax	and	Good	Governance	 (LTGGWG).	Responding	to	the	concerns	expressed	by	the	private	sector,	the	 Senior	Minister	and	Minister	of 	Economy	and	Finance,	H.E.	Keat	Chhon,	with	 the	assistance	of 	the	International	Finance	Corporation’s	Mekong	Private	Sector	 Development	Facility	(IFC	MPDF),	created	an	Ad	Hoc	Sub	Committee	of 	the	 LTGGWG	to	study	issues	associated	with	the	application	of 	the	Breach	of 	Trust	 Law.		 The	Prime	Minister	of 	Cambodia,	H.E.	Samdech	Hun	Sen,	has	stressed	that	the	 confidence of investors in Cambodia can be secured by clarifying issues relating to the	Breach	of 	Trust	Law2.			For	this	reason,	it	is	hoped	that	the	recommendations	 expressed	in	this	report,	which	is	the	product	of 	the	Ad	Hoc’s	Sub	Committee’s	 work,	will	contribute	to	the	reduction	of 	the	costly	impact	of 	improper	breach	 of 	trust	cases	on	the	Cambodian	economy.

CHAPTER 1

2. What is Breach of Trust
Breach of trust is defined in Article 46 of the Transitional Criminal Law. The crime	of 	a	breach	of 	trust	is	comprised	of 	three	key	physical	elements	and	one	 mental	element.		The	essential	physical	elements	are:	 1. The	property	must	have	been	entrusted	to	the	accused; 2. The	accused	must	have	promised	to	return	the	property	to	its	owner	or	 use it for a specific purpose; and 3. The	accused	must	have	disposed	of 	or	misappropriated	the	property	 either	by	refusing	to	return	it	or	by	failing	to	use	it	for	the	agreed	 purpose.
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2	Summary	of 	Prime	Minister	H.E.	Samdech	Hun	Sen’s	speech	related	to	the	issue	of 	breach	 of 	trust	at	the	11th	Government-Private	Sector	Forum,	January	24,	2007.

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The	 required	 mental	 element	 of 	 criminal	 breach	 of 	 trust	 is	 a	 criminal	 intent.	 	 The	accused	must	not	only	have	performed	each	of 	the	physical	acts,	he	or	she	 must	also	have	possessed	criminal	intent.	To	have	the	requisite	criminal	intent,	 the	accused	must	have	intended	to	deprive	the	owner	of 	her	property	and	must	 have	known	that	what	he	was	doing	was	wrong.		It	cannot	have	been	simply	a	 mistake	or	accident.

3. Why does Cambodia have a Breach of Trust Law
The	United	Nations	Transitional	Authority	in	Cambodia	(UNTAC)	was	set	up	 in	February	1992	to	implement	the	Paris	Peace	Accords	of 	October	1991,	the	 product	 of 	 intense	 diplomatic	 activity	 over	 many	 years.	 Its	 job	 was	 to	 restore	 peace	and	civil	government	in	the	country,	to	hold	free	and	fair	elections	leading	 to	 a	 new	 constitution	 and	 to	 ‘kick-start’	 the	 rehabilitation	 of 	 the	 country.	 3	

CHAPTER 1

UNTAC	reported	that	Cambodia	in	1992	lacked	the	basic	legal	institutions	and	 processes	required	of 	a	legal	system.	The	existing	legal	and	institutional	structures	 were	 essentially	 those	 which	 had	 developed	 over	 the	 previous	 decade.	 	 There	 were	inadequate	or	no	legal	texts,	whether	on	civil	law,	contracts	and	property,	 criminal	law	and	procedure,	rules	of 	court,	evidence,	or	labor	law.	Furthermore,	 institutions	such	as	the	police	and	courts	were	under	rigid	political	control	backed	 by	an	active	military	force.	 Political	control	of 	the	judiciary	and	unsatisfactory	penal	legislation	prompted	 UNTAC	to	draft	the	Provisions	Relating	to	the	Judiciary	and	Criminal	Law	and	 Procedure	Applicable	in	Cambodia	during	the	Transitional	Period	(Transitional	 Criminal	Law),	which	was	adopted	by	the	Supreme	National	Council	on	September	 10,	 1992.	 This	 law	 formed	 the	 legal	 framework	 within	 which	 the	 courts	 and	 security	apparatus	were	supposed	to	work	during	the	transitional	period.	It	also	 emphasized	 the	 “independence	 of 	 the	 judiciary	 and	 incorporated	 all	 relevant	 provisions	 of 	 the	 international	 human	 rights	 instruments	 into	 Cambodian	 national	law.”(Honoring	Human	Rights	–	Alice	H	Henkin)	 The	Transitional	Criminal	Law	was	viewed	by	UNTAC	as	a	temporary	measure,	 which	 would	 quickly	 be	 replaced	 by	 more	 permanent	 legislation.4	 UNTAC’s	 mandate	 highlighted	 an	 “urgent	 need	 to	 indicate	 clearly	 to	 all	 the	 Cambodian	 parties	the	rules	of 	law	which	must	be	applied	throughout	Cambodia	and	the	 judicial	procedures	which	must	be	put	in	place	in	order	to	ensure	their	effective	 application	during	the	transitional	period.”	5

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3	See	for	example,	http://www.un.org/Depts/dpko/dpko/co_mission/untac.htm	(accessed	10	 December	2007) 4	Economic	and	Social	Council 5	See	for	example,	http://www.un.org/Depts/dpko/dpko/co_mission/untac.htm	(accessed	10	 December	2007)

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Breach of Trust

Today	 the	 Transitional	 Criminal	 Law	 remains	 a	 foundation	 for	 most	 of 	 the	 substantive	criminal	law	in	Cambodia,	including	in	relation	to	the	criminal	breach	 of 	trust.	The	Transitional	Criminal	Law	was	created	in	a	hurry	and	was	intended	 to	be	replaced	following	the	adoption	of 	the	Cambodian	Constitution	and	the	 seating of the first National Assembly. Although the Cambodian constitution has	been	adopted	for	many	years,	the	Transitional	Criminal	Law	is	still	in	use.	 Perhaps	the	drafters	would	have	made	different	decisions	if 	they	had	realized	the	 Transitional	Criminal	Law	would	still	be	in	use	well	into	the	21st	Century.	

4. Why Application of the Breach of Trust Law is a Problem in Cambodia
A	 weak	 legal	 system,	 corruption	 and	 inappropriate	 application	 of 	 laws,	 such	 as	the	Breach	of 	Trust	Law,	deter	foreign	investment	and	affect	the	country’s	 economic	 development.	 The	 World	 Economic	 Forum’s	 2006	 competitiveness	 survey	ranked	Cambodia	103	out	of 	125	countries	surveyed.6	The	World	Bank’s	 Doing	Business	2008	study	also	ranked	Cambodia	quite	low	in	terms	of 	the	ease	 of 	doing	business,	(145	out	of 	178	economies	surveyed).	7	With	many	investors	 reluctant	to	invest	in	Cambodia,	international	trade	and	investment	comprises	 a	very	small	part	of 	economic	activity	in	Cambodia	and	is	concentrated	in	the	 garment	manufacturing,	services,	construction	and	tourism	industries.	 The	 inappropriate	 application	 of 	 the	 Breach	 of 	 Trust	 Law	 damages	 the	 	 Cambodian	economy.	The	Ministry	of 	Justice	and	the	President	of 	the	Supreme	 Court	 have	 recently	 issued	 a	 Joint	 Instruction	 acknowledging	 that	 improper	 application	of 	Breach	of 	Trust	Law	is	a	problem	when	it	comes	to	the	protection	 of 	 the	 rights	 of 	 the	 citizens	 to	 take	 part	 in	 the	 development	 of 	 the	 national	 economy and increasing the public and investors’ confidence in the Cambodian judicial	system	and	laws.8 While it is difficult to generalize from the interview and the survey results conducted by the Ad Hoc Sub Committee, the figure	 for	 overall	 lost	 investment	 opportunities	 in	 Cambodia	 appears	 very	 high.	 	 Totaling	the	amounts	reported	by	the	stakeholders	and	businesspeople	regarding	 the	 value	 of 	 foregone	 investment	 opportunities	 turned	 down	 because	 of 	 the	 	 risk	of 	breach	of 	trust,	indicates	a	range	of 	lost	investment	worth	between	$3	 million	and	$12.1	million	dollars	for	those	seven	individuals	alone.	9

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CHAPTER 1

6	The	Global	Competitiveness	Index	(GCI),	developed	for	the	World	Economic	Forum	by	 Columbia	University	Professor	Xavier	Sala-i-Martin	and	originally	introduced	in	2004.	The	 GCI	is	based	on	12	pillars	of 	competitiveness:	Institutions,	Infrastructure,	Macroeconomic	 Stability,	Health	and	Primary	Education,	Higher	Education	and	Training,	Goods	Market	 Efficiency, Labor Market Efficiency, Financial Market Sophistication, Technological Readiness, Market	Size,	Business	Sophistication	and	Innovation. 7	Doing	Business	2008,	World	Bank,	2007. 8	See	Appendix	7.	 9	See	Appendix	4.	

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CHAPTER 1

Improper	application	of 	the	Breach	of 	Trust	Law	can	deter	foreign	investors	as	 they	 may	 be	 concerned	 about	 the	 possibility	 of 	 criminal	 sanctions	 being	 used	 against	 them	 for	 breaches	 of 	 contract	 or	 simply	 out	 of 	 malice.	 For	 years,	 the	 business	 community	 has	 reported	 that	 breach	 of 	 trust	 charges	 are	 improperly	 used	to	pressure	people	into	making	payments	to	their	accusers	and	that	simple	 contract	disputes	are	often	treated	as	cases	of 	criminal	breach	of 	trust	because	 the	provisions	of 	the	law	are	either	misapplied	or	misunderstood.	These	private	 sector	concerns	are	legitimate	because	individuals	who	are	charged	with	breach	 of 	trust	are	likely	to	be	imprisoned,	and	if 	found	guilty,	sentenced	to	jail.	In	the	 past	 judicial	 authorities	 have	 misapplied	 the	 criminal	 Breach	 of 	 Trust	 Law	 to	 non-criminal	contract	and	other	civil	disputes,	which	should	have	been	dealt	with	 under	civil	rather	than	criminal	law.	The	practice	of 	turning	civil	suits	into	criminal	 ones	is	one	of 	the	major	problems	with	the	court’s	application	of 	the	Breach	of 	 Trust	Law.	The	distinction	between	civil	disputes	arising	from	failures	to	perform	 contractual	obligations	and	disputes	arising	from	actions	that	constitute	elements	 of breach of trust are still issues that need to be clarified. The clarification of the	current	Breach	of 	Trust	Law	and	improvement	in	its	application	would	do	 a great deal to improve investor confidence and benefit the overall economy of Cambodia.

“The abuse of breach of trust has a negative impact on business. It discourages investors from coming to and investing in Cambodia. Commercial disputes can occur anywhere in the world, but they are generally considered civil offenses. When investors learn that simple commercial disputes can be easily criminalized in Cambodia, they stay away and don’t invest to avoid the risk of being put in jail. As a result, the country loses as investors turn down opportunities.”
Mr.	Bretton	G.	Sciaroni, Co-chairman	of 	the	Law,	Tax	and	Good Governance	Working	Group	of 	the Government-Private	Sector	Forum

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Criminal Breach of Trust
1. Elements of Criminal Breach of Trust
Criminal breach of trust is defined in Article 46 of the Transitional Criminal Law,	which	was	drafted	by	staff 	at	UNTAC	and	passed	by	the	Supreme	National	 Council	on	September	10,	1992.	This	is	the	foundation	for	most	of 	the	substantive	 criminal	law	in	Cambodia.	Article	46	of 	the	Transitional	Criminal	Law	describes	 the	crime	of 	breach	of 	trust	as	follows:

Any person who misappropriates or disposes of, against the interest of the owner, possessor or holder, any property, money, merchandise, or document containing or establishing an obligation or release, which was entrusted to that person as rent, deposit, commission, loan or remuneration for paid or unpaid work, having promised to return it or to offer it back or to put it to an agreed upon use, is guilty of breach of trust and shall be liable to a punishment of a term of imprisonment of one to five years.10
Unfortunately, Article 46 is not concise and is complex and difficult to understand.	Several	Cambodian	lawyers	interviewed	for	this	study	complained	 that	the	language	of 	the	provision	(both	the	English	and	the	Khmer	texts)	causes	 confusion	and	contributes	to	the	problem	of 	improper	breach	of 	trust	cases. There	 are	 several	 reasons	 for	 the	 complexity	 of 	 the	 language	 used	 in	 Article	 46	of 	the	Transitional	Criminal	Law.		First,	the	text	of 	the	Article	is	based	on	 complex	language	used	in	Article	408	of 	the	French	Criminal	Code	of 	1810.		The	 Criminal	Code	of 	1810	has	been	replaced	in	France	with	much	simpler	language	 in	 the	 current	 French	 Criminal	 Code.	 It	 is	 unclear	 why	 the	 law	 supported	 by	 UNTAC	is	so	closely	based	on	the	language	of 	the	old	French	Penal	Code,	but	it	 would be beneficial to simplify the text to improve its clarity. Second, according to former UNTAC staff members, the law was first drafted in French, then translated into English, and finally translated into Khmer. As a result the Khmer text	is	a	translation	of 	a	translation.	This	also	explains	why	Cambodian	lawyers	 and	scholars	have	noted	that	the	Khmer	text	lacks	precision	and	is	confusing.		

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10	There is no official English translation of the Transitional Criminal Law. The only official version	of 	the	law	is	the	Khmer	text.		The	translation	used	here	is	the	one	that	was	produced	by	 UNTAC and published by the Cambodia Office of the High Commissioner for Human Rights in	“A	Selection	of 	Laws	Currently	in	Force	in	the	Kingdom	of 	Cambodia”	(2001).		Others	have	 translated	Article	46	differently;	for	example,	the	Council	of 	Jurists	has	a	somewhat	different	 version	of 	the	translation	available	on	its	website.

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Despite	the	complex	and	sometimes	confusing	language	of 	Article	46,	the	actual	 crime	of 	breach	of 	trust	is	fairly	simple.		It	can	be	broken	down	into	its	physical	 elements	and	its	mental	element.		The	physical	elements	refer	to	those	physical	 acts	 that	 the	 person	 accused	 of 	 the	 crime	 (the	 accused)	 must	 perform	 to	 be	 guilty	of 	breach	of 	trust.		The	mental	element	refers	to	the	intent	with	which	 the	 physical	 elements	 must	 be	 performed.	 	 The	 mental	 element	 is	 often	 the	 most	important.	In	fact,	many	crimes	have	identical	physical	elements	and	are	 distinguished	only	by	the	intent	of 	the	accused. For	example,	under	the	Transitional	Criminal	Law,	voluntary	manslaughter	and	 involuntary	manslaughter	have	the	exact	same	physical	element	–	the	killing	of 	 a	person.		If 	the	killing	is	done	deliberately	(with	the	intent	to	kill	the	person)	 then	the	crime	is	voluntary	manslaughter.		Voluntary	manslaughter	is	punished	 with a prison term of eight to fifteen years. If the killing occurs as a result of 	 “carelessness,	 negligence,	 inattention,	 or	 failure	 to	 heed	 regulations,”	 then	 it	is	involuntary	manslaughter.		Involuntary	manslaughter	carries	a	prison	term	 of 	only	one	to	three	years.		A	completely	accidental	killing,	one	which	occurs	 without	the	intent	to	kill	or	any	carelessness	on	the	part	of 	the	killer,	is	not	a	 crime	 at	 all.	 	 As	 these	 examples	 demonstrate,	 the	 mental	 element,	 the	 intent	 with	which	the	physical	acts	are	committed,	often	determines	the	existence	and	 severity	of 	the	crime.

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2. Physical Elements of Breach of Trust
Although	the	language	of 	Article	46	is	not	clear,	there	are	essentially	three	key	 physical	elements	to	the	crime	of 	breach	of 	trust.		They	are: 1. Property	 (including	 intangible	 property)	 must	 have	 been	 entrusted	 to	 the	 accused; 2. The	accused	must	have	promised	to	return	the	property	to	its	owner	or	use	 it for a specific purpose; and 3. The	accused	must	have	disposed	of 	or	misappropriated	the	property	either	 by	refusing	to	return	it	or	by	failing	to	use	it	for	the	agreed	purpose. Each	element	will	be	discussed	below.		This	discussion	is	not	intended	to	be	a	 technical	legal	analysis.		Rather,	it	is	intended	to	focus	on	the	key	elements	and	 explain	them	in	a	manner	that	is	clear	and	understandable.		The	target	audience	is	 the	business	community,	donors,	and	the	Royal	Government	of 	Cambodia.		There	 are some moderately difficult legal questions that can arise in a small number of cases	that	have	not	been	addressed	in	this	report.		A	technical	legal	analysis	that	 was	previously	published	by	prominent	Cambodian	lawyer	Koy	Neam	has	been	 included	as	Appendix	5	for	those	who	want	more	detailed	information.

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2.1 Property Must Have Been Entrusted to the Accused The first physical element is that property must have been entrusted to the accused. This	requirement	is	found	in	the	language	“any	property,	money,	merchandise	 or	 document	 containing	 or	 establishing	 an	 obligation	 or	 release,	 which	 was	 entrusted	to	that	person	as	rent,	deposit,	commission,	loan,	or	remuneration	for	 paid	or	unpaid	work	.	.	.	.”		The	language	is	complicated,	but	“property,	money,	 merchandise,	or	documents	containing	or	establishing	an	obligation	or	release”	 can	be	restated	in	most	cases	simply	as	“property.”		 The	next	part	of 	the	phrase	states	that	the	property	must	have	been	entrusted	 to	 the	 accused	 as	 “rent,	 deposit,	 commission,	 loan	 or	 remuneration	 for	 paid	 or	 unpaid	 work	 .	 .	 .	 .”	 	 This	 language	 is	 probably	 unnecessary.	 	 It	 describes	 six	different	types	of 	contracts	which	can	be	created	by	entrusting	property	to	 another	person.		In	practice,	entrusting	property	to	another	will	probably	give	 rise,	either	implicitly	or	explicitly,	to	one	of 	these	six	kinds	of 	contracts.		Most	of 	 the	time	the	key	will	be	whether	property	was	entrusted	to	the	accused,	not	which	 kind	of 	contract	was	created	between	the	accused	and	the	owner	of 	the	property.	 	 Consequently,	the	language	of 	this	element	of 	the	crime	can	be	restated	in	most	 cases	as:	property	must	have	been	entrusted	to	the	accused.11 2.2 The Accused Must Have Promised to Return the Property 	 to	the	Owner	or	to	Use	the	Property	for	a	Specific	Purpose This	element	is	found	in	the	language	“having	promised	to	return	it	or	to	offer	it	 back	or	to	put	it	to	an	agreed	upon	use	.	.	.	.”		This	element	obviously	depends	on	 the existence of the first element. The accused must have been entrusted with some	property	before	she	can	promise	to	“return	it	or	to	offer	it	back	or	put	it	to	 an	agreed	upon	use.”		This	language	describes	three	things	that	the	accused	must	 have	promised	to	do	with	the	property.		First,	the	accused	can	promise	to	return	 the	property.		This	covers	situations	where	the	accused	has	borrowed	an	item,	 for	example	a	car,	and	promised	to	return	it	to	its	owner.		The	accused	lawfully	 possesses	the	property	because	the	owner	gave	it	to	her	willingly,	but	she	has	 made	a	promise	to	the	owner	that	she	will	return	it.		This	limits	her	rights	to	the	 property.		She	cannot	sell	it	or	give	it	away.		She	must	return	it. The	“offer	it	back”	language	is	aimed	at	a	situation	where	the	accused	has	been	 entrusted	 with	 some	 property	 but	 promised	 to	 offer	 the	 owner	 a	 chance	 to	 reacquire	it	before	the	accused	disposes	of 	it.		For	example,	the	accused	might	 have	rented	a	piece	of 	farm	equipment	for	a	period	of 	three	years.		The	owner	 and	the	accused	agree	that	the	owner	has	the	right	to	re-purchase	the	equipment	 for	a	set	fee	at	the	end	of 	the	three	year	period.		If 	the	owner	does	not	want	to	

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11	There	may	be	some	cases	where	the	existence	of 	the	crime	of 	breach	of 	trust	does	depend	 on	what	particular	kind	of 	contract	was	created	between	the	accused	and	the	owner	of 	the	 property. This is a difficult and technical subject and has been addressed by Cambodian scholars.		For	example,	Koy	Neam’s	article	entitled	“Breach	of 	Trust”	(see	Appendix	5)	 addresses	this	issue	in	some	detail.

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re-purchase	the	equipment,	then	the	accused	has	the	right	to	sell	it	to	the	highest	 bidder.		In	common	law	countries,	this	would	be	described	as	taking	the	property	 subject to a “right of first refusal.” The key is that the accused has made a promise	to	the	owner	that	limits	his	right	to	dispose	of 	the	property.		He	cannot	 simply sell the property without first offering it back to the owner. The	third	way	this	element	may	be	met	is	through	a	promise	to	put	the	property	 to	 an	 agreed	 upon	 use.	 	 Again,	 the	 key	 here	 is	 that	 the	 accused	 has	 made	 a	 promise	to	the	owner	that	prevents	her	from	treating	the	property	like	it	belongs	 to	her.		The	classic	case	is	that	of 	the	employee	who	is	entrusted	with	money	by	 her employer for a specific purpose. For example, an employee who is given cash by her employer to take to the bank to deposit has received property for a specific use. She lawfully possesses it, but she only possesses it for a specific purpose – to take	it	to	the	bank	and	deposit	it.		She	has	made	an	express	or	implied	promise	 to use it for that specific purpose, and this limits her ability to treat it as her own money.		The	key	to	each	of 	the	three	parts	of 	this	element	is	that	the	accused	has	 made	a	promise	to	the	original	owner	of 	the	property	that	limits	his	or	her	right	 to	dispose	of 	the	property.		It	is	the	deliberate	violation	of 	this	promise	that	is	a	 breach	of 	trust. 2.3 The Accused Has Disposed of or Misappropriated the Property This	element	arises	when	the	accused	fails	to	carry	out	his	promise	with	regards	 to	the	property.		It	stems	from	the	language	“any	person	who	misappropriates	 or	 disposes	 of 	 [the	 property]	 against	 the	 interest	 of 	 the	 owner,	 possessor	 or	 holder	.	.	.”of 	the	property.12			It	relates	to	the	failure	of 	the	promise	made	in	 the	 second	 element.	 	 If 	 the	 accused	 promised	 to	 return	 the	 property	 then	 he	 must	try	to	return	it.		If 	he	promised	to	offer	it	back,	he	must	try	to	offer	it	back.	 	 If he promised to use it for a specific purpose, he must try to use it for that purpose.		Misappropriation	can	occur	in	numerous	ways,	but	the	most	common	 are	 probably	 destroying	 the	 property,	 selling	 the	 property	 to	 a	 third	 person,	 keeping	it	and	refusing	to	return	it,	or	using	it	for	some	purpose	other	than	the	 one	that	was	agreed	on.		So,	for	example,	misappropriation	might	occur	when	 someone	who	has	borrowed	a	motorcycle	from	a	friend	sells	that	motorcycle	to	a	 third	person.		Equally,	it	might	occur	in	a	situation	where	an	employee	was	given	 money to buy supplies for the office and instead gambles the money on a football match.		In	either	case,	the	actions	of 	the	accused	prevent	his	or	her	promise	from	 being	carried	out. There	 is	 also	 a	 requirement	 of 	 harm	 to	 the	 owner	 in	 this	 element.	 	 It	 is	 not	 enough	that	the	accused	has	technically	failed	to	meet	his	promise.		Rather,	the	

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12	The	language	“owner,	possessor	or	holder”	is	used	in	the	law	(rather	than	simply	“owner”)	 to	make	it	clear	that	breach	of 	trust	can	be	committed	against	someone	who	is	the	lawful	 possessor	of 	property,	even	if 	that	person	is	not	the	actual	owner.		In	most	cases,	the	 distinction	will	not	matter	because	the	person	entrusting	the	accused	with	the	property	will	be	 the	actual	owner.		

Breach of Trust

failure	must	result	from	the	misappropriation	or	disposal	of 	the	property	against	 the	interest	of 	the	owner.		In	other	words,	the	failure	must	be	such	that	the	owner	 can	no	longer	recover	the	property.		So,	for	example,	if 	a	woman	rented	a	car	for	 a	week	and	returned	it	a	day	late,	she	would	not	have	misappropriated	the	car.		It	 is	true	that	she	did	not	meet	the	strict	terms	of 	her	promise,	but	her	actions	did	 not	destroy	the	owner’s	interest	in	the	car.		The	woman	might	owe	an	additional	 day’s	 rent,	 but	 she	 did	 not	 “misappropriate	 or	 dispose”	 of 	 the	 car	 within	 the	 meaning	of 	Article	46.		However,	a	man	who	rents	a	tractor	for	a	week	to	move	 some	earth	on	his	property	and	sells	it	to	a	third	person	has	misappropriated	the	 tractor	because	the	owner	cannot	get	it	back	from	the	accused.

3. The Mental Element – Intent to Commit the Crime
To	be	guilty	of 	criminal	breach	of 	trust,	an	accused	must	not	only	commit	the	 physical	acts	described	above,	but	he	must	also	perform	them	with	the	appropriate	 intent.		It	is	not	enough	simply	that	the	accused	committed	the	physical	acts.	 	 This	can	be	demonstrated	with	two	simple	examples: • A	man	borrows	$500	from	his	neighbor	so	that	he	can	plant	corn.		He	 promises	to	use	the	money	to	buy	corn	seed	and	fertilizer	and	also	promises	 to	return	the	money	in	six	months,	once	the	corn	has	been	sold.		He	plants	 corn,	but	there	is	a	terrible	drought	and	all	of 	his	corn	plants	die.	There	is	 nothing	he	can	do	to	prevent	it.		He	is	unable	to	repay	his	neighbor. A	 man	 borrows	 $500	 from	 his	 neighbor,	 telling	 him	 that	 he	 intends	 to	 plant	corn.		He	promises	to	use	the	money	to	buy	corn	seed	and	fertilizer	 and	also	promises	to	return	the	money	in	six	months,	once	the	corn	has	 been	 sold.	 	 But	 he	 does	 not	 intend	 to	 actually	 plant	 corn.	 	 Instead,	 he	 intends	to	take	the	money	and	move	to	Phnom	Penh.		He	knows	when	 he	takes	the	money	that	he	does	not	intend	to	repay	his	neighbor	after	six	 months.		Shortly	after	taking	the	money,	he	moves	to	Phnom	Penh	and	 disappears.

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It	is	obvious	that	these	two	people	should	not	be	treated	in	the	same	manner.	 	 One	is	a	criminal;	the	other	is	the	victim	of 	bad	luck.		Yet	both	have	committed	 the	physical	elements	of 	the	crime	of 	breach	of 	trust.		Both	have	been	entrusted	 with	a	piece	of 	property	and	promised	to	return	it.		In	both	cases,	something	 happened	to	the	property	that	prevented	it	from	being	returned	to	the	owner. The difference is the intent of the two men. The man in the first example did not	intend	to	default	on	the	loan.		He	planted	corn	and	did	everything	he	could	 to fulfill his obligation. However, through no fault of his own, a drought killed his	 crop.	 	 The	 man	 in	 the	 second	 example	 intended	 to	 commit	 a	 crime.	 	 He	 lied	 to	 his	 neighbor	 about	 why	 he	 wanted	 the	 money,	 and	 he	 knew	 when	 he	 took	 it	 that	 he	 did	 not	 intend	 to	 return	 it.	 	 Shortly	 after	 receiving	 the	 money	

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he	disappeared	and	took	the	money	with	him.		This	is	ample	evidence	that	he	 intended	to	commit	a	crime. Criminal	 intent	 is	 a	 required	 element	 of 	 the	 crime	 of 	 breach	 of 	 trust.	 	 The	 accused	 must	 deliberately	 intend	 her	 actions	 and	 must	 know	 that	 what	 she	 is	 doing	is	wrong.		It	cannot	simply	be	a	mistake	or	an	accident.		This	is	clear	from	 the	use	of 	the	word	“misappropriate”	in	the	text	of 	Article	46.		Misappropriate	 means	 to	 take	 something,	 but	 it	 also	 implies	 that	 the	 taking	 is	 done	 wrongly	 or	dishonestly.		In	their	Joint	Instruction	on	Breach	of 	Trust,	dated	August	8,	 2005,	the	Minister	of 	Justice	and	the	President	of 	the	Supreme	Court	came	to	 the	 same	 conclusion.	 	 While	 the	 text	 of 	 the	 Joint	 Instruction	 is	 confusing	 in	 places,	it	notes	that	the	accused	must	have	a	“wicked	will”	or	must	“embezzle	or	 misappropriate”	the	entrusted	property.		In	an	interview	with	staff 	from	Phnom	 Penh	 Municipal	 Court,	 a	 prosecutor	 cited	 criminal	 intent	 as	 one	 of 	 the	 key	 elements in his decision on whether or not to file criminal charges. The Supreme Court	has	also	recognized	criminal	intent	as	a	requisite	element	of 	the	crime.	In	 2002,	it	released	a	woman	from	pre-trial	detention	partly	because	evidence	of 	 criminal	intent	was	absent	from	her	case.	13

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4. The New Criminal Code
The	Transitional	Criminal	Law	will	be	replaced	by	a	new	Criminal	Code	sometime	 in	2008.		Article	46	will	be	abolished	and	a	new	breach	of 	trust	provision	will	take	 its	place.		The	new	breach	of 	trust	provision	(assuming	it	is	not	changed	before	 it	is	promulgated)	will	be	much	simpler	than	the	current	one: Breach	 of 	 trust	 is	 committed	 when	 a	 person,	 to	 the	 prejudice	 of 	 other	 persons,	misappropriates	funds,	valuables	or	any	property	that	was	handed	 over	 to	 him	 and	 that	 he	 accepted	 subject	 to	 the	 condition	 of 	 returning,	 redelivering or using them in a specific way. The	new	breach	of 	trust	provision	will	not	be	substantively	different	from	the	 existing	one.		It	will	focus	on	the	same	three	physical	elements	and	include	the	 same	mental	element.		Essentially,	the	only	change	has	been	to	remove	some	of 	 the	language	that	has	led	to	problems	with	the	interpretation	of 	Article	46.		For	 example, there is no longer any reference to the specific kind of contract that is created	by	one	person	entrusting	property	to	another,	or	to	whether	or	not	the	 complainant	is	the	owner,	possessor	or	holder	of 	the	property.		These	changes	 are beneficial and should make the law easier to understand and apply.

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13	See	Keo	Tam,	complainant	v.	Chhun	Nay	Suor,	accused	(Supreme	Court	of 	Cambodia,	 Criminal	Case	Number	62,	dated	September	4,	2001,	Verdict	Number	4,	dated	January	9,	2002).	 	

Misapplication of Breach of Trust in Cambodia
1. Misapplication of the Breach of Trust Law is a Problem
The	business	community	has	been	concerned	about	the	misapplication	of 	the	 Breach	of 	Trust	Law.	The	research	conducted	by	the	Ad	hoc	Committee	generally	 supports	 the	 position	 taken	 by	 the	 business	 community	 about	 the	 improper	 application	of 	Breach	of 	Trust	Law.	It	appears	that	the	problem	of 	improper	 breach of trust is a significant issue for the business community and while the statistics	below	are	not	representative,	they	highlight	the	kinds	of 	issues	and	costs	 associated	with	improper	breach	of 	trust	cases.	Not	only	is	there	an	unusually	 high	number	of 	breach	of 	trust	cases	in	Phnom	Penh,	but	the	statistical	data	 indicates	that	a	criminal	breach	of 	trust	charge	places	a	great	deal	of 	pressure	on	 the	accused	because	of 	the	high	possibility	of 	arrest	and	pre-trial	detention.14	 • 8.2%	of 	cases	in	Phnom	Penh	are	breach	of 	trust	cases	(see	Appendix	 6).	Even	though	it	is	impossible	to	determine	how	many	of 	these	are	 improper	breach	of 	trust	cases,	this	is	a	lot	when	one	considers	that	there	 were	almost	half 	as	many	breach	of 	trust	cases	as	thefts	or	batteries.	 A	warrant	was	issued	for	the	arrest	of 	the	accused	in	33	out	of 	34	(97%)	 of 	the	cases	in	the	media	database	for	which	information	on	the	use	of 	 arrest	warrants	was	available	(see	Appendix	3). The	 accused	 was	 placed	 in	 pre-trial	 detention	 in	 29	 out	 of 	 31	 (94%)	 of 	the	cases	in	the	media	database	for	which	information	on	pre-trial	 detention	was	available	(see	Appendix	3). In	13	out	of 	the	36	cases	reviewed	in	the	media,	the	complainant	claimed	 damages	in	excess	of 	$100,000.
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•

•

The	Joint	Instruction	of 	the	Minister	of 	Justice	and	the	President	of 	the	Supreme	 Court	acknowledged	that	the	application	of 	the	criminal	Breach	of 	Trust	Law	in	 courts	has	not	been	consistent	and	instructs	“all	provincial-municipal	courts	and	 prosecutors’ offices to pay attention and take into consideration the following legal	 concepts	 stipulated	 in	 Article	 46.”	 In	 particular,	 the	 Joint	 Instruction	 emphasizes	 that	 the	 distinction	 between	 civil	 disputes	 arising	 from	 failures	 to	 perform	contractual	obligations	and	disputes	arising	from	actions	that	constitute	 elements of breach of trust are still issues that need to be clarified. It	 appears	 that	 both	 the	 Government	 and	 the	 business	 community	 share	 the	 same	 concerns	 in	 relation	 to	 cases	 of 	 improper	 breach	 of 	 trust.	 While	 it	 is	
14	Data	provided	by	the	Ministry	of 	Justice

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currently difficult to ascertain the magnitude of the problem it is clear that both the government and the business community perceive it as a significant problem and	that	this	negatively	impacts	the	Cambodian	economy.

2. Misapplication of the Breach of Trust Law: Why and How?
A. Contract Disputes Can Lead to Criminal Breach of Trust Charges The	Joint	Instruction	issued	by	the	Minister	of 	Justice	and	the	President	of 	the	 Supreme	Court	recognizes	that	in	the	past	judicial	authorities	have	misapplied	 the	 criminal	 Breach	 of 	 Trust	 Law	 to	 contract	 and	 other	 civil	 disputes,	 which	 should	have	been	dealt	with	under	civil	rather	than	criminal	law. The	 distinctions	 between	 civil	 disputes	 arising	 from	 failures	 to	 perform	 contractual	obligations	and	[disputes	arising	from	actions	that	constitute]	 elements of breach of trust are still issues that needed to be clarified. 15	

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Moreover,	 the	 Joint	 Instruction	 explicitly	 emphasizes	 that	 criminal	 breach	 of 	 trust	provisions	should	not	be	used	in	the	case	of 	matters	where	the	requisite	 elements	of 	a	criminal	breach	of 	trust	are	not	present. Even if the receiver of property fails [to fulfill] his or her obligation, for	 whatever	 reason,	 [including	 a	 failure]	 to	 return	 it	 [property]	 to	 the	 giver	of 	the	property,	[such	failure]	is	not	an	act	of 	misappropriation	or	 embezzlement	that	constitutes	a	breach	of 	trust.	16	 The	 business	 community	 and	 other	 stakeholders,	 however,	 have	 expressed	 concern	that	the	Breach	of 	Trust	Law	has	not	always	been	applied	appropriately	 and	in	line	with	the	Joint	Instruction.	One	of 	the	most	consistent	complaints	 is	 that	 simple	 contract	 disputes	 are	 often	 treated	 as	 cases	 of 	 breach	 of 	 trust	 because	the	provisions	requiring	entrustment	and	criminal	intent	as	an	element	 of 	the	crime	of 	breach	of 	trust	are	not	implemented.	Almost	every	interviewee	 –	business	person	or	lawyer,	Cambodian	or	foreigner	–	raised	this	complaint.17	 All	eleven	respondents	to	the	survey	(see	Appendix	4)	stated	that	the	Breach	of 	 Trust	Law	is	applied	fairly	either	“almost	never”	or	only	“some	of 	the	time.”		 Most	contract	disputes	cannot	give	rise	to	a	breach	of 	trust	charge	because	most	 contract	disputes	do	not	contain	all	the	physical	elements	and	the	mental	element	

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15	Joint	Instruction	No.	2,	8	August	2005,	of 	the	Minister	of 	Justice	and	the	President	of 	the	 Supreme	Court. 16	Joint	Instruction	No.	2,	8	August	2005,	of 	the	Minister	of 	Justice	and	the	President	of 	the	 Supreme	Court. 17	In	addition	to	recognition	of 	this	problem	in	the	Joint	Instruction	on	breach	of 	trust,	 the	problem	has	also	been	recognized	by	Cambodian	legal	scholars,	such	as	Koy	Neam,	who	 devoted	an	entire	section	in	his	article	on	breach	of 	trust	to	explaining	why	the	failure	of 	a	 contract	or	contract	negotiations	is	not	automatically	a	breach	of 	trust	(see	Appendix	5).

Breach of Trust

of 	the	crime	of 	breach	of 	trust.		For	example,	breach	of 	trust	requires	that	the	 accused	be	entrusted	with	property	belonging	to	the	complainant	and	that	he	or	 she promises to return this property or use it for a specific purpose. Only a small number	of 	contracts	involve	one	party	entrusting	the	other	with	something	that	 must	be	returned.		The	most	common	form	of 	contract,	a	contract	for	the	sale	 of 	goods,	can	never	result	in	a	breach	of 	trust	because	neither	party	entrusts	the	 other	with	property	that	must	be	returned. Even	 if 	 a	 contract	 involving	 the	 entrustment	 of 	 property	 does	 exist,	 the	 failure	of 	one	party	to	perform	to	the	other	party’s	satisfaction	still	should	not	 automatically	result	 in	 criminal	 charges.	 	 The	 failure	 of 	 the	 contract	 may	 give	 rise	to	a	civil	complaint	for	damages,	but	it	should	not	give	rise	to	a	criminal	 breach	of 	trust	charge	unless	there	is	evidence	that	the	contract	failed	because	 of 	the	criminal	intent	of 	the	accused.		The	failure	of 	a	business	or	the	loss	of 	 the	entrusted	property	is	not	evidence,	on	its	own,	of 	criminal	intent.		There	 must	be	some	evidence	that	the	accused	took	the	property	intending	to	steal	or	 misappropriate	it.		

CHAPTER 3

Five	Case	Studies	have	been	composed	to	demonstrate	the	kinds	of 	problems	 which	concern	the	business	community	in	relation	to	criminal	breach	of 	trust	 (see	Appendix	2).		Case	Studies	1,	2	and	3	are	composites	based	on	interviews	 with	individuals	who	gave	accounts	of 	criminal	Breach	of 	Trust	cases	and	lawyers	 who	have	defended	people	in	such	cases.	Case	Studies	4	and	5	are	based	on	court	 decisions	in	cases	involving	criminal	breach	of 	trust. Case	Studies	1	and	3	are	examples	of 	how	simple	contract	disputes	have	resulted	 in	 breach	 of 	 trust	 charges.18	 	 	 In	 Case	 Study	 1,	 it	 is	 Mr.	 C	 who	 breaches	 the	 contract	by	failing	to	deliver	the	agreed	goods.		Yet,	Mr.	A	is	charged	with	breach	 of 	trust	when	he	refuses	to	pay	on	the	contract.		It	is	clear	that	this	cannot	be	 a	 breach	 of 	 trust	 case	 because	 Mr.	 C	 never	 entrusted	 anything	 to	 Mr.	 A,	 nor	 did	Mr.	A	misappropriate	anything	from	Mr.	C.		Instead,	it	appears	that	Mr.	C	 breached	a	contract	for	the	sale	of 	goods.		This	improper	breach	of 	trust	case	 cost Mr. A $60,000, several weeks in jail, and significant loss of reputation and business. Case	 Study	 3	 also	 cannot	 be	 a	 breach	 of 	 trust	 as	 the	 complainant	 had	 not	 entrusted	anything	to	Company	H,	nor	was	there	any	evidence	that	Company	H	 had	misappropriated	anything.		In	fact,	it	is	not	even	a	breach	of 	contract.		The	 contract	between	the	complainant	and	the	accused	was	a	contract	for	a	set	period	 of 	time,	and	it	expired	on	its	own	at	the	end	of 	that	period.		The	charges	seem	 to	 have	 arisen	 solely	 out	 of 	 the	 complainant’s	 desire	 to	 prevent	 Company	 H	 from	securing	another	distributor	for	its	computer	equipment.		The	complainant	 was	ultimately	successful,	as	Company	H	withdrew	from	the	Cambodian	market	 entirely.

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18	These	case	studies	are	based	on	the	experiences	of 	real	people.		However,	the	identifying	 information	in	the	stories	has	been	changed	to	conceal	the	identities	of 	the	participants.

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B.	Unofficial	Payments	Appear	to	Play	a	Significant	Role	in		 Improper Breach of Trust Cases

	

How	could	the	situations	in	Case	Studies	1	and	3,	which	do	not	involve	breach	 of 	trust,	have	resulted	in	criminal	proceedings?		Many	interview	subjects	blamed	 improper breach of trust cases on persons trying to elicit unofficial payments. Several	indicated	that	it	is	possible	to	pay	a	prosecutor	to	bring	a	criminal	breach	 of 	 trust	 case	 against	 a	 business	 partner	 or	 business	 rival.	 	 One	 interviewee,	 a	 Cambodian	 lawyer,	 said	 the	 payment	 could	 start	 from	 as	 little	 as	 $1,000	 for	 relatively	small	cases	and	go	much	higher	if 	a	lot	of 	money	was	at	stake.		Nine	out	 of ten survey respondents said that breach of trust charges are filed improperly “some	of 	the	time,”	“most	of 	the	time,”	or	“almost	always.”		Eight	out	of 	eleven	 survey respondents (see Appendix 4) said that unofficial payments “almost always”	affects	breach	of 	trust	cases,	while	the	remaining	three	respondents	said	 that unofficial payments affects breach of trust cases “most of the time.”

CHAPTER 3

Why	 are	 complainants	 willing	 to	 pay	 to	 have	 people	 charged	 with	 crimes?	 	 Improper	breach	of 	trust	charges	are	often	said	to	be	used	as	bargaining	chips	 to	force	the	settlement	of 	business	disputes.	While	recovering	money	through	 a	 civil	 lawsuit	 can	 be	 complicated	 and	 time	 consuming,	 a	 criminal	 breach	 of 	 trust	charge	immediately	places	tremendous	pressure	on	the	accused	to	settle	the	 underlying	dispute. In	almost	all	cases,	warrants	are	issued	for	the	arrest	of 	a	person	charged	with	 criminal	 breach	 of 	 trust.	 This	 conclusion	 is	 supported	 by	 the	 summary	 of 	 information	found	in	the	media	(see	Appendix	3).	An	interviewee	for	this	report	 said	that	it	is	common	practice	for	people	to	be	arrested	on	Friday	afternoons	and	 held	until	Tuesday	or	Wednesday	of 	the	following	week.		Furthermore,	pressure	 may	be	placed	on	the	accused	to	pay	the	allegedly	misappropriated	money	on	the	 spot.		For	example,	in	Case	Study	1,	Mr.	A	was	repeatedly	told	that	he	would	be	 released	if 	he	paid	the	$80,000	that	he	had	allegedly	misappropriated.	It	appears	 that	sometimes	accused	persons	may	be	detained	longer	than	is	permitted	under	 Cambodian	 law	 in	 order	 to	 elicit	 the	 largest	 possible	 amount	 of 	 the	 allegedly	 misappropriated	 money	 and	 settle	 the	 case	 prior	 to	 the	 accused	 appearing	 in	 court. If 	the	accused	refuses	to	pay,	he	or	she	will	be	brought	before	an	investigating	 judge and a preliminary charge of breach of trust will be confirmed. The interviewees	stated	that	in	almost	all	cases,	the	accused	will	be	placed	in	pre-trial	 detention.		The	media	database	summary	in	Appendix	3	is	consistent	with	this	 conclusion,	 with	 29	 out	 of 	 31	 (94%)	 of 	 the	 cases	 for	 which	 information	 was	 available	resulting	in	pre-trial	detention.19			The	length	of 	time	that	people	spent	

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19	In	contrast	to	the	information	provided	by	interviewees	and	the	media	database,	members	 of 	the	judiciary	stated	that	the	rate	of 	pre-trial	detention	in	breach	of 	trust	cases	is	“quite	low.”		 They	suggested	that	the	results	of 	the	media	database	could	be	explained	by	the	poor	quality	of 	 Cambodian	newspapers.

Breach of Trust

in	 pre-trial	 detention	 varied	 greatly.	 	 According	 to	 the	 media	 database,	 some	 people	spent	months	in	pre-trial	detention,	while	others	managed	to	arrange	bail	 in	a	matter	of 	days. Pre-trial	detention	is	the	chief 	source	of 	pressure	on	the	accused.		All	of 	the	 business	 people	 interviewed	 agreed	 that	 spending	 time	 in	 jail	 over	 a	 business	 dispute	is	something	they	would	try	to	avoid	at	all	costs.		In	Case	Study	1,	it	was	 the	prospect	of 	spending	weeks	or	months	in	pre-trial	detention	that	eventually	 led	Mr.	A	to	pay	$40,000.		Similarly,	in	Case	Study	3,	the	threat	of 	arrest	and	pretrial	detention	prevented	Company	H’s	employees	from	even	visiting	Cambodia.	 	 Six	of 	the	eight	survey	respondents	said	they	were	“very	concerned”	about	the	 prospect	of 	spending	time	in	jail	over	a	breach	of 	trust	case.		Most	interviewees,	 as	 well	 as	 the	 survey	 respondents,	 also	 agreed	 that	 they	 were	 very	 concerned	 about	the	potential	loss	of 	money,	business	and	reputation. After	being	placed	in	pre-trial	detention,	the	accused	has	the	right	to	petition	 the	investigating	judge	for	release.		If 	that	petition	is	refused,	the	accused	has	 the	right	to	appeal	the	decision	to	the	Appeals	Court.		However,	this	process	 can	be	slow	and	there	is	no	guarantee	that	the	accused	will	be	released.		In	the	 meantime,	the	accused	remains	in	jail.20			Several	interviewees	indicated	that	it	is	 possible	to	pay	money	to	get	out	of 	pre-trial	detention.		This	payment	may	be	 described as “bail,” but in reality it is an unofficial payment to be released from prison.		There	is	little	chance	of 	the	accused	ever	recovering	the	money,	even	if 	 he	or	she	eventually	succeeds	in	having	the	charges	dismissed. Most	 of 	 the	 interviewees	 agreed	 that	 the	 amount	 that	 it	 costs	 to	 be	 released	 from	 pre-trial	 detention	 varies	 depending	 on	 the	 amount	 of 	 money	 at	 issue	 in	 the	 lawsuit.	 	 The	 more	 money	 the	 complainant	 demands,	 the	 larger	 is	 the	 payment	necessary	to	be	released	from	jail.	One	interviewee	stated	that	it	costs	 a	minimum	of 	$20,000.		In	Case	Study	1,	Mr.	A	paid	$40,000,	or	half 	of 	the	 amount	alleged	to	have	been	misappropriated.		In	13	of 	the	36	cases	that	came	 from	 Cambodian	 newspapers,	 the	 complainant	 claimed	 damages	 in	 excess	 of 	 $100,000.		It	is	possible	that	bail	payments	in	these	cases,	if 	they	were	made,	 were	tens	of 	thousands	of 	dollars	for	each	case.	Several	interviewees	indicated	 that	once	“bail”	has	been	paid,	the	charges	are	usually	either	withdrawn	by	the	 complainant	or	dismissed	by	the	judge;	in	other	cases,	action	on	the	case	may	 simply	stop.		 Interviewees	indicated	that	the	majority	of 	improper	breach	of 	trust	cases	are	 settled	before	trial	through	some	sort	of 	payment	because	few,	if 	any,	wish	to	 take	the	risk	of 	being	found	guilty	and	sentenced	to	prison.		This	may	explain	 one	 apparent	 oddity	 concerning	 the	 information	 collected	 from	 Cambodian	 newspapers – there appear to be far more breach of trust cases being filed than

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20	For	example,	the	woman	in	Case	4	did	eventually	get	out	of 	pre-trial	detention,	after	 petitioning	all	the	way	to	the	Supreme	Court.		She	spent	eight	months	in	pre-trial	detention	 during	the	appeals	process.

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there	are	trials.		While	there	may	be	many	reasons	for	this	phenomenon,	including	 the	sample’s	non-representative	nature,	it	also	happens	to	be	consistent	with	the	 interviewees’	statements	that	most	breach	of 	trust	cases	are	settled	before	trial. On	August	5,	2005,	the	Minister	of 	Justice	and	the	President	of 	the	Supreme	 Court	issued	a	Joint	Instruction	on	how	to	interpret	Article	46	of 	the	Transitional	 Criminal	Law.		The	Joint	Instruction	highlighted	the	lack	of 	uniformity	in	the	 application	of 	Article	46	and	stressed	the	need	for	the	courts	to	distinguish	between	 breach	of 	contract	and	breach	of 	trust.		It	was	issued	partly	at	the	request	of 	the	 private	sector,	and	it	was	hoped	that	it	would	help	eliminate	improper	breach	of 	 trust	cases.		Most	of 	the	lawyers	who	were	interviewed	have	heard	of 	the	Joint	 Instruction,	and	two	of 	them	indicated	a	belief 	that	it	has	helped	the	situation.	 	 One	lawyer	said	that	he	felt	that	the	courts	were	now	more	careful	regarding	the	 application	of 	Article	46	due	to	their	perception	that	both	the	government	and	 the	private	sector	are	scrutinizing	breach	of 	trust	cases	more	carefully.		Another	 individual	acknowledged	that	the	Joint	Instruction	may	have	helped,	but	he	was	 concerned	that	any	positive	effect	would	fade	over	time	if 	its	message	was	not	 reinforced	periodically.	Both	judiciary	members	who	were	interviewed	for	this	 report	were	aware	of 	the	Joint	Instruction	and	stated	that	it	had	both:	1)	helped	 them	to	analyze	the	elements	of 	breach	of 	trust;	and	2)	alerted	them	to	be	more	 cautious	in	charging	people	with	breach	of 	trust.		 C. The System Can Work Properly While	 Breach	 of 	 Trust	 Law	 often	 seems	 to	 be	 misapplied,	 cases	 involving	 poor	 people	 where	 large	 sums	 of 	 money	 are	 not	 at	 issue	 appear	 to	 proceed	 more	 normally.	 	 For	 instance,	 Case	 Study	 2	 is	 an	 example	 of 	 how	 the	 system	 is	supposed	to	work.		The	case	started	out	somewhat	badly,	with	Mrs.	T	being	 incorrectly	charged	with	breach	of 	trust.	She	was	entrusted	with	property,	which	 she	promised	to	return,	and	which	she	failed	to	return.	However,	because	she	 lost	 the	 property	 unintentionally,	 and	 she	 did	 not	 pawn	 it,	 sell	 it	 or	 refuse	 to	 acknowledge	that	she	had	borrowed	it,	consequently	she	lacked	the	criminal	intent	 necessary	for	breach	of 	trust.		She	was	put	in	pre-trial	detention	for	two	months,	 which	was	probably	unnecessary.		However,	her	lawyer	was	able	to	secure	her	 release	from	jail	without	having	to	make	a	payment.	Her	lawyer	was	then	able	to	 successfully	argue	to	the	court	that	the	facts	of 	the	case	demonstrated	that	Mrs.	 T	had	not	had	any	criminal	intent.		The	investigating	judge	agreed	and	dismissed	 the	charges.		After	starting	out	poorly,	the	proper	result	was	achieved	without	 Mrs. T having to make any unofficial payments.

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30

Breach of Trust Costing Millions in Lost Investment

Statistics	on	breach	of 	trust	cases	are	not	publicly	available,	which	makes	it	hard	 to	 accurately	 calculate	 how	 many	 breach	 of 	 trust	 cases	 there	 are	 each	 year	 in	 Cambodia.	The	Ministry	of 	Justice	provided	data	to	the	Ad	Hoc	committee	for	 this	 report	 and	 it	 appears	 the	 total	 number	 of 	 breach	 of 	 trust	 cases	 per	 year	 is	probably	in	the	hundreds	(see	Table	1,	Appendix	6).21			There	is	no	way	to	 accurately	estimate	what	percentage	of 	these	cases	should	be	considered	improper.	 	 Nine out of ten survey respondents said that breach of trust charges are filed improperly	“some	of 	the	time,”	“most	of 	the	time,”	or	“almost	always,”	and	most	 of 	the	interviewees	agreed	that	improper	breach	of 	trust	cases	were	a	pervasive	 problem.		However,	since	the	survey	and	the	interviews	are	not	representative,	 this finding cannot be applied to all breach of trust cases. Nevertheless, it does seem	somewhat	surprising	that	8.2%	of 	the	cases	in	Phnom	Penh	are	breach	of 	 trust	cases.		There	were	almost	half 	as	many	breach	of 	trust	cases	as	thefts	or	 batteries	(see	Table	2	of 	Appendix	6).		Ultimately,	the	information	gathered	for	 this report suggests the problem is a significant issue for the business community, even	 if 	 there	 is	 no	 way	 to	 make	 an	 accurate	 estimate	 of 	 how	 many	 improper	 breach of trust cases are filed each year. The	information	collected	for	this	report	is	not	comprehensive.	Both	the	survey	 and	 the	 interviews	 were	 probably	 skewed	 by	 a	 self-selective	 bias	 among	 the	 respondents. Therefore, it is difficult to extrapolate an overall figure for the economic	impact	of 	breach	of 	trust	cases	on	Cambodia	from	the	interview	or	 the survey results. However, the findings can be useful in two ways. First, they can	help	in	identifying	the	kinds	of 	costs	associated	with	improper	breach	of 	 trust	cases,	and	second,	they	can	be	used	to	estimate	the	costs	for	the	individuals	 and	companies	who	were	interviewed	or	surveyed. There	appear	to	be	a	number	of 	ways	in	which	improper	breach	of 	trust	cases	 could	be	impacting	the	Cambodian	economy.		The	most	obvious	costs	are	the	 direct ones – the lawyers’ fees and unofficial payments associated with being sued for	breach	of 	trust.		Various	numbers	were	advanced	for	these	direct	costs.		One	 interviewee	 indicated	 that	 the	 cost	 of 	 being	 released	 from	 pre-trial	 detention	

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21	Phnom	Penh	Municipal	Court	is	averaging	more	than	200	breach	of 	trust	cases	a	year,	 although	it	appears	that	Phnom	Penh	is	also	the	largest	source	of 	breach	of 	trust	cases	in	 Cambodia.

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was	at	least	$20,000,	while	several	interviewees	said	that	the	cost	was	substantial	 but	depended	on	the	amount	of 	money	allegedly	at	stake.		In	Case	Study	1,	Mr.	 A	spent	$40,000	on	bail	and	another	$20,000	on	lawyers’	fees.		The	10	survey	 respondents	overwhelmingly	answered	that	the	costs	of 	being	sued	for	breach	 of 	trust	were	between	$5,000	and	$50,000	dollars.		While	it	is	not	possible	to	 calculate	the	average	costs	of 	improper	breach	of 	trust	cases	in	Cambodia	with	 any	certainty	from	this	data,	the	anecdotal	evidence	suggests	that	it	ranges	from	 thousands	to	tens	of 	thousands	of 	dollars	per	case.		 The	next	category	of 	costs	are	the	business	losses	caused	by	being	sued	for	breach	 of 	trust	–	loss	of 	business	resulting	from	time	spent	in	jail,	damage	to	reputation,	 etc.		Once	again,	it	is	impossible	to	put	a	concrete	value	on	this	amount.		The	 survey	did	not	ask	respondents	to	separate	direct	costs	from	the	business	losses	 caused by being sued, and none of the interviewees were willing to put a definitive number	on	business	losses,	other	than	to	say	it	was	“substantial.” A	third	category	of 	costs	relates	to	the	threat	that	a	breach	of 	trust	case	may	be	 filed. Several of the lawyers interviewed complained that other lawyers routinely threaten to file breach of trust cases when asking for money during negotiations or	contract	disputes.		These	are	understood	as	veiled	threats	to	have	the	recipient	 imprisoned	 if 	 he	 or	 she	 does	 not	 pay	 the	 money.	 	 The	 interviewees	 said	 that	 while	 there	 is	 almost	 always	 no	 basis	 for	 a	 breach	 of 	 trust	 claim	 to	 be	 made,	 the	incidence	of 	improper	breach	of 	trust	cases	is	common	enough	that	their	 clients	sometimes	pay	money	to	their	accusers	solely	to	avoid	the	risk	of 	being	 embroiled	in	such	cases.		It	is	not	possible	to	quantify	the	amount	of 	money	that	 changes	hands	each	year	because	of 	these	threats. The final, and probably the largest, category of costs is lost investment opportunities.		This	category	covers	business	deals	that	would	have	been	made	 if 	not	for	the	fear	of 	being	sued	for	breach	of 	trust.		Almost	all	of 	the	business	 people	 who	 were	 interviewed	 indicated	 that	 they	 had	 declined	 investment	 opportunities	that	were	presented	to	them	because	of 	their	fear	of 	breach	of 	 trust	charges.		Those	who	had	actually	been	sued	for	breach	of 	trust	appeared	 to	 be	 the	 most	 cautious.	 	 Most	 of 	 the	 commercial	 lawyers	 and	 business	 consultants	reported	having	counseled	their	clients	to	be	selective	in	choosing	 business	partners	because	of 	improper	breach	of 	trust	claims.		Of 	the	ten	survey	 respondents	(see	Appendix	4),	three	indicated	that	they	turned	down	investment	 opportunities	“very	often,”	three	said	they	did	so	“often,”	and	three	said	they	did	 so	“sometimes.”	Only	one	respondent	reported	never	having	turned	down	an	 investment	opportunity	because	of 	the	risk	of 	breach	of 	trust	charges. It is impossible to generalize from the interview and the survey results to a figure for	 overall	 lost	 investment	 opportunities	 in	 Cambodia.	 	 However,	 totaling	 the	 amounts	reported	by	the	respondents	to	the	question	“what	is	the	value	of 	the	 investment	opportunities	you	have	turned	down	because	of 	the	risk	of 	breach	 of 	 trust?”	 indicates	 a	 range	 of 	 lost	 investment	 between	 $3	 million	 and	 $12.1	 34

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Breach of Trust

million	dollars	for	the	seven	individuals	who	took	part	in	the	survey	alone.	The	 results	 are	 summarized	 in	 the	 table	 below.	 The	 interviewees	 were	 asked	 the	 same	question,	and	the	aggregate	amount	of 	declined	investment	opportunities	 reported	amongst	them	exceeded	$5	million	dollars	per	year.		Together,	these	 figures represent the lost investment opportunities among less than a dozen individuals	and	companies.		While	the	individuals	and	companies	may	represent	 those who have declined the most business, the findings still do indicate that improper	breach	of 	trust	cases	are	costing	Cambodia	millions,	and	possibly	tens	 of 	millions,	of 	dollars	per	year	in	lost	investment. Lost Investment Opportunities Caused by Improper Breach of Trust Cases
How	much	do	you	 think	it	costs	to	be	 sued	for	breach	of 	 trust? 1 2 3 4 5 6 7 8 9 10 11 $5,000	-	$50,000 $5,000	-	$50,000 $5,000	-	$50,000 $5,000	-	$50,000 $5,000	-	$50,000 Less	Than	$5,000 $5,000	-	$50,000 $5,000	-	$50,000 $5,000	-	$50,000 $5,000	-	$50,000 No	Answer How	often	have	you	 turned	down	investment	 opportunities	because	of 	 the	risk	of 	breach	of 	trust? Very	Often Often Very	Often Sometimes Never Sometimes Often Sometimes Very	Often Often No	Answer What	is	the	value	of 	the	 investment	opportunities	you	 have	turned	down	because	of 	 the	risk	of 	breach	of 	trust? $1-5	Million $250,000	-	$500,000 No	Answer No	Answer No	Answer Less	Than	$50,000 $250,000	-	$500,000 No	Answer $1-5	Million $500,000	-	$1	Million Less	Than	$50,000 Total = $3,000,000 - $12,100,000
The	information	in	this	table	was	obtained	from	a	non-random	survey	of 	Cambodian	businesses.

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Recommendations & Conclusion
Recommendations
Reducing the Impact of Criminal Breach of Trust Cases on the Cambodian Economy
Various	mechanisms	to	reduce	the	impact	of 	improper	breach	of 	trust	cases	were	 suggested	by,	and	discussed	with,	the	interviewees.		In	addition,	the	survey	asked	 respondents	to	provide	their	opinion	on	the	effectiveness	of 	a	number	of 	possible	 reforms.		The	survey	also	had	two	blanks	where	the	respondents	could	write	in	 their	own	recommendations,	which	several	respondents	did.		These	suggestions	 and	discussions	were	evaluated	in	light	of 	the	all	the	information	gathered	for	this	 report,	and	resulted	in	the	following	recommendations	for	reducing	the	impact	 of 	improper	criminal	breach	of 	trust	cases	on	the	Cambodian	economy. Pass the Draft Penal Code Provisions on Breach of Trust The	 draft	 Penal	 Code	 provision	 that	 relates	 to	 breach	 of 	 trust	 is	 much	 better	 than	the	existing	law.		It	retains	the	same	core	elements	but	uses	much	simpler	 language	and	would	probably	cause	less	confusion.		It	should	be	adopted	as	soon	 as	possible	with	its	present	language. Focus on the Elements of Entrustment and Criminal Intent One	way	to	decrease	the	impact	of 	criminal	breach	of 	trust	cases	can	be	to	focus	 attention	on	the	elements	of 	entrustment	and	criminal	intent.		In	most	improper	 breach	of 	trust	cases,	the	complainant	will	not	have	entrusted	the	accused	with	 any	property,	and	there	will	probably	be	no	evidence	of 	criminal	intent.		Indeed,	 as	 Case	 Studies	 1	 and	 3	 demonstrate,	 there	 may	 even	 be	 evidence	 that	 the	 complainant	is	the	one	who	has	failed	in	his	or	her	obligations.		Consequently,	by	 requiring	strict	proof 	of 	entrustment	and	criminal	intent,	it	may	become	easier	 to	identify	and	avoid	improper	breach	of 	trust	cases.	 Issue a New Joint Instruction That Requires Breach of Trust Decisions to Discuss the Evidence Supporting Each Element of the Crime Separately Formal	 guidelines	 on	 how	 to	 write	 judicial	 opinions	 would	 help	 to	 ensure	 consistency	 and	 clarity	 in	 breach	 of 	 trust	 cases,	 and	 help	 to	 ensure	 that	 each	 3
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Mekong Private Sector Development Facility

of 	the	elements	of 	the	crime	are	separately	and	properly	addressed	by	judicial	 officers prior to a guilty finding in breach of trust cases. Such judicial guidelines need	to	specify	that	all	judicial	decisions	are	to	contain	separate	discussions	of 	 the	evidence	supporting	each	of 	the	elements	of 	breach	of 	trust.		This	would	 then	 make	 it	 more	 obvious	 if 	 evidence	 for	 one	 or	 more	 of 	 the	 elements	 was	 lacking.		A	clear	discussion	of 	the	evidence	supporting	each	element	of 	the	crime	 in	the	trial	court’s	written	opinion	would	also	help	narrow	the	issues	on	appeal	 and	reduce	the	burden	on	the	higher	courts.		 Provide Training to the Judiciary on the Elements of Breach of Trust, Particularly Entrustment and Criminal Intent A	 majority	 of 	 the	 survey	 respondents	 believed	 that	 providing	 training	 for	 the	 police	and	judges	on	breach	of 	trust	cases	would	result	in	a	“big	improvement”	 in	 the	 situation.	 	 The	 wording	 of 	 the	 Breach	 of 	 Trust	 Law	 is	 confusing,	 and	 additional training may provide some benefits. If such training is conducted, it	 should	 focus	 on	 the	 need	 for	 proof 	 of 	 each	 of 	 the	 elements	 of 	 the	 crime,	 particularly	entrustment	and	criminal	intent,	and	could	be	given	in	conjunction	 with	the	issuance	of 	the	new	Joint	Instruction	suggested	above. Publish All Breach of Trust Decisions Publication	 of 	 breach	 of 	 trust	 decisions	 would	 help	 keep	 the	 focus	 on	 the	 elements	of 	entrustment	and	criminal	intent	because	it	would	allow	for	scrutiny	 of 	the	reasoning	behind	the	rulings.		The	lack	of 	access	to	judicial	decisions	in	 Cambodia makes it difficult to monitor whether cases involve sufficient evidence on	each	of 	the	elements	of 	the	crime.		 The	Legal	and	Judicial	Reform	Council	has	recommended	that	cases	in	which	 Article	46	is	applied	be	published.	This	is	a	positive	recommendation	and	it	is	 hoped	that	its	implementation	would	shed	light	on	the	manner	in	which	Article	 46	is	applied.
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CHAPTER 5

Coordinate with Government, the Business Community, Civil Society, and the Media to Closely Scrutinize Breach of Trust Cases This	recommendation	arose	out	of 	comments	made	by	interviewees	about	the	 August	2005	Joint	Instruction	on	breach	of 	trust	issued	by	the	Minister	of 	Justice	 and	the	President	of 	the	Supreme	Court.		One	interviewee,	a	Cambodian	lawyer,	 said	that	he	felt	the	situation	had	improved	since	the	Joint	Instruction’s	issuance	 because	court	personnel	believed	that	their	actions	were	being	evaluated	by	the	 government.		This	makes	sense,	and	suggests	that	closer	scrutiny	of 	breach	of 	 trust	cases	would	be	helpful.		There	are	a	number	of 	ways	this	could	be	done,	 including	closer	tracking	of 	breach	of 	trust	cases	by	the	Ministry	of 	Justice	or	

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Breach of Trust

the	Supreme	Council	of 	Magistracy.		Civil	society	and	the	media	could	also	play	a	 role	in	highlighting	and	bringing	attention	to	potentially	improper	cases.		There	is	 a	need	for	better	cooperation	between	the	private	sector,	civil	society,	the	media	 and	the	government	to	do	this. Recognizing	 the	 need	 for	 scrutiny	 of 	 breach	 of 	 trust	 cases,	 the	 Minister	 of 	 Justice	issued	an	instructional	letter	to	the	courts	and	prosecutors	on	2	October	 2006	stating	that	the	Breach	of 	Trust	Law	had	not	been	implemented	correctly	 and	that	from	that	time	forward,	the	Ministry	of 	Justice	had	to	be	informed	of 	 cases	involving	breach	of 	trust	against	investors. Create a Mechanism for Anonymous Reporting of Persons who Solicit Unofficial	Payments This	recommendation	is	related	to	the	idea	of 	closer	scrutiny	of 	breach	of 	trust	 cases	 in	 general.	 	 Individuals	 in	 power	 would	 probably	 be	 less	likely	to	 solicit	 unofficial payments if they knew that the accused could report them to someone who	 would	 investigate	 the	 allegation.	 	 Therefore,	 it	 would	 be	 helpful	 if 	 there	 was	an	anonymous	and	independent	mechanism	for	individuals	or	companies	to	 report	individuals	who	act	improperly.		One	thing	that	is	clear	from	this	report	is	 that	individuals	will	not	report	improper	cases	to	anyone	unless	they	are	assured	 of 	complete	anonymity.		 Restrict the Use of Pre-Trial Detention By Issuing Formal Guidelines That Describe When Pre-Trial Detention Is Appropriate Most	of 	the	interviewees	and	all	of 	the	survey	respondents	believe	that	restricting	 the	use	of 	pre-trial	detention	in	breach	of 	trust	cases	would	be	an	improvement.	 	 The	survey	respondents	were	fairly	evenly	split	about	whether	it	would	be	a	slight,	 moderate	 or	 big	 improvement.	 	 The	 threat	 of 	 pre-trial	 detention	 is	 the	 main	 source	of 	pressure	on	business	people	to	make	payments	in	improper	breach	of 	 trust	cases.		Therefore,	it	makes	sense	that	restricting	the	use	of 	pre-trial	detention	 would	reduce	the	impact	of 	improper	cases.		It	would	also	be	consistent	with	the	 Transitional	Criminal	Law,	which	states	that	pre-trial	detention	is	to	be	used	only	 where	there	is	a	genuine	risk	of 	the	accused	escaping. This	 recommendation	 could	 be	 implemented	 through	 written	 guidelines	 to	 the	judiciary	that	explain	in	detail	what	factors	it	should	evaluate	to	determine	 whether an accused person is a flight risk. For example, those with extensive ties to	Cambodia	(immediate	family,	property,	businesses,	etc.)	could	be	exempted	 from	pre-trial	detention	in	breach	of 	trust	cases.		Assuming	the	accused	is	found	 to be a flight risk, the guidelines should describe when bail is appropriate, specify how	the	amount	of 	bail	is	to	be	calculated,	and	establish	a	mechanism	through	 which	the	accused	can	recover	bail	payments.

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Conclusion
It	 is	 hoped	 that	 the	 recommendations	 presented	 in	 this	 report	 will	 contribute	 to	the	reduction	of 	the	costly	impact	of 	improper	breach	of 	trust	cases	on	the	 Cambodian	 economy.	 The	 study	 undertaken	 by	 the	 Ad	 Hoc	 Sub	 Committee	 has confirmed that inappropriate application of criminal Breach of Trust Law hurts	the	development	of 	the	national	economy	and	damages	public	and	investor	 confidence in the Cambodian judicial system and laws. The research indicates that	 there	 is	 a	 general	 perception	 among	 stakeholders,	 both	 Cambodian	 and	 foreign,	that	the	criminal	Breach	of 	Trust	Law	is	often	misapplied	and	that	this	 causes	serious	damage	to	the	Cambodian	economy.		Improper	breach	of 	trust	 cases	 are	 costing	 Cambodia	 millions,	 and	 possibly	 tens	 of 	 millions,	 of 	 dollars	 per	 year	 in	 lost	 investment.	 With	 both	 the	 government	 and	 the	 private	 sector	 concerned	about	the	costly	damage	done	to	the	economy	by	cases	of 	improper	 breach	of 	trust,	now	is	the	perfect	time	to	ensure	that	the	provisions	of 	Article	 46	are	appropriately	implemented	and	that	the	Cambodian	economy	is	allowed	 to	prosper.

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Appendix 1

Research Methodology
1. Introduction
This	report	is	based	on	information	from	four	sources:	 • • • • interviews	with	stakeholders;	 information	provided	by	the	Ministry	of 	Justice;	 a	 review	 of 	 publicly	 available	 information	 about	 breach	 of 	 trust	 cases;	 and a	survey	of 	business	sentiment.	

APPENDIX 1

2. Stakeholder Interviews
Eighteen	interviews	were	conducted	with	a	wide	variety	of 	stakeholders,	both	 Cambodian	and	foreign,	including:	businesspeople,	commercial	lawyers,	criminal	 defense	 lawyers,	 business	 consultants,	 human	 rights	 advocates,	 civil	 society	 organizations,	 researchers,	 and	 members	 of 	 the	 judiciary.	 	 The	 interviewees	 included	individuals	who	had	been	involved	in	breach	of 	trust	cases,	lawyers	who	 had	defended	people	accused	of 	criminal	breach	of 	trust,	and	businesspeople	 who	were	concerned	by	how	the	criminal	Breach	of 	Trust	Law	is	applied.		

3. Review of the Information Provided by the Ministry of Justice
The	 Ministry	 of 	 Justice	 provided	 the	 Ad	 Hoc	 Sub	 Committee	 with	 data	 on	 the	total	number	of 	breach	of 	trust	cases.	This	information	is	summarized	in	 Appendix	6.		Unfortunately,	while	the	Ministry	of 	Justice	endeavored	to	provide	 information	where	it	could	for	this	research,	beyond	the	data	provided,	relatively	 limited	information	is	kept	by	the	Ministry.		Judgments	on	breach	of 	trust	cases	 are	 currently	 not	 published	 by	 the	 courts	 and	 there	 is	 no	 publicly	 available	 information on the number of criminal breach of trust cases that are filed each year,	 the	 frequency	 of 	 pre-trial	 detention,	 the	 percentage	 of 	 cases	 that	 result	 in	convictions,	the	average	length	of 	a	prison	sentence,	or	the	amount	of 	the	 average	damages	award.		 Copies	of 	a	small	number	of 	judgments,	while	not	available	via	the	Ministry	of 	 Justice, were provided confidentially from other sources, notably by lawyers who had	records	from	cases	in	which	they	were	involved. 43
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4. Review of Press Reports and Other Publicly Available Information
Although	there	is	little	publicly	available	information	about	breach	of 	trust	cases,	 the	 research	 team	 conducted	 a	 thorough	 review	 of 	 a	 number	 of 	 Cambodia’s	 major	 newspapers	 over	 a	 four-year	 period	 in	 order	 to	 compile	 media	 reports	 about	 breach	 of 	 trust	 cases.	 The	 newspapers	 reviewed	 were:	 	 the	 Phnom	 Penh	 Post,	 The	Business	Press,	 the	Mirror,	 Development	Weekly,	 and	 Rasmei	 Kampuchea.	Each	paper	was	searched	for	the	period	2002	to	2005.	The	media	 data	is	summarized	in	Appendix	3.	This	represents	only	a	fraction	of 	the	total	 number	of 	breach	of 	trust	cases	that	have	occurred.			The	cases	that	made	it	into	 the	papers	were	undoubtedly	chosen	because	they	were	viewed	as	newsworthy.	 	 Consequently,	they	cannot	be	considered	a	random	sample	of 	breach	of 	trust	 cases	in	Cambodia.		Nonetheless,	the	media	database	represents	an	insight	into	 how	the	courts	treat	breach	of 	trust	cases.		

APPENDIX 1

In	 addition	 to	 newspaper	 reports,	 partial	 information,	 on	 20	 breach	 of 	 trust	 cases	was	provided	by	the	Center	for	Social	Development,	which	gathered	the	 information	 while	 monitoring	 trials	 in	 the	 Cambodian	 courts	 as	 part	 of 	 its	 Court	 Watch	 Project.	 	 This	 information	 was	 also	 incorporated	 into	 the	 media	 database.

5. Business Sentiment Survey
In	 addition	 to	 the	 above	 sources	 of 	 information,	 a	 non-random	 business	 sentiment	survey	was	conducted	in	which	businesspeople	were	asked	to	respond	 to	questions	related	to	their	perceptions	of 	the	criminal	Breach	of 	Trust	Law.		

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Appendix 2

Case Studies

Case Study 1
Mr.	A,	a	Khmer	businessman,	entered	into	a	contract	with	Mr.	C	in	2000.		The	 contract	was	for	the	purchase	of 	$80,000	worth	of 	construction	equipment	and	 materials.		Mr.	C	delivered	some	goods,	but	they	were	not	what	he	was	obligated	to	 deliver	under	the	contract,	so	Mr.	A	refused	the	goods	and	canceled	the	contract.	 	 Mr.	C	demanded	payment	under	the	contract,	but	Mr.	A	refused. A	few	weeks	later,	Mr.	A	was	asked	to	come	to	the	police	station	and	was	arrested	 and	held	at	the	police	station	for	72	hours.		He	was	accused	of 	breach	of 	trust	 because	of 	his	alleged	failure	to	pay	Mr.	C	under	the	contract.		He	was	repeatedly	 told	that	he	would	be	let	go	if 	he	paid	the	police	$80,000	(the	alleged	amount	of 	 his	“breach	of 	trust”	with	Mr.	C).		He	refused. He	 was	 taken	 to	 court	 on	 the	 following	 Monday,	 where	 he	 was	 charged	 with	 breach	 of 	 trust	 and	 sent	 to	 pre-trial	 detention	 at	 Prey	 Sar	 jail.	 	 He	 remained	 in	 Prey	 Say	 jail	 for	 several	 weeks	 while	 his	 lawyer	 attempted	 to	 bail	 him	 out.	 	 Eventually,	he	was	able	to	secure	bail	from	prison	in	return	for	paying	$40,000	 to	the	court. At	trial,	neither	Mr.	C	nor	his	lawyer	appeared.		Mr.	A’s	lawyer	presented	witnesses	 and documents that showed that Mr. C had not fulfilled his part of the contract and	that	the	contract	had	been	properly	canceled.		Despite	the	evidence,	he	was	 found	guilty	of 	breach	of 	trust	by	the	trial	court	and	given	a	three-year	suspended	 sentence.		He	appealed	the	verdict	to	the	Appeals	Court,	which	overturned	the	 lower	court’s	decision	and	dismissed	the	charges. Mr.	A	has	never	been	able	to	recover	the	$40,000	that	he	paid	in	bail,	and	has	 spent another $20,000 on lawyers’ fees. He also suffered a significant loss of reputation	and	his	business	was	damaged	during	the	time	he	spent	in	pre-trial	 detention.		He	is	now	very	cautious	about	signing	contracts	and	has	foregone	 many	investment	opportunities	because	of 	the	risk	of 	breach	of 	trust.

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APPENDIX 2

This case study is a composite based on interviews with several individuals who gave similar accounts of having been charged with breach of trust due to a contract dispute. Identifying information has been altered at the request of the interviewees.

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Case Study 2
In	2000,	Mrs.	T	borrowed	a	gold	necklace	from	her	neighbor,	Mrs.	K,	so	that	she	 could	wear	it	to	a	relative’s	wedding.		At	the	wedding,	the	clasp	on	the	necklace	 broke	and	it	fell	off.		Mrs.	T	did	not	notice	that	the	clasp	had	broken	until	after	 the wedding was over. She went back to look for it but could not find it. When Mrs. K asked for the necklace back, Mrs. T asked for more time to find it.		After	a	week	or	two,	Mrs.	K	asked	for	it	again.		This	time,	Mrs.	T	admitted	 that	it	was	lost	and	asked	for	time	to	repay	the	value	of 	the	necklace,	which	was	 $100. However, Mrs. T was too poor and could not find the $100 to pay Mrs. K.		Finally,	Mrs.	K	lost	patience	and	brought	a	suit	against	Mrs.	T	for	breach	of 	 trust. Mrs.	 T	 was	 arrested,	 brought	 to	 Phnom	 Penh	 Municipal	 Court,	 charged	 with	 breach	of 	trust	and	then	put	in	pre-trial	detention.		She	was	assigned	a	lawyer	 from	an	NGO	who	sought	bail	for	her.		The	investigating	judge	denied	the	bail	 motion.	 	 Her	 lawyer	 appealed	 the	 denial	 of 	 bail	 to	 the	 Appeals	 Court,	 which	 granted	it.		She	was	not	required	to	pay	any	money	to	receive	bail.		Mrs.	T	was	in	 jail	for	about	two	months	before	the	Appeals	Court	granted	her	bail. After	bail	was	granted,	her	lawyer	tried	to	get	the	criminal	charges	dropped.		He	 submitted	a	motion	to	the	investigating	judge	explaining	that	Mrs.	T	could	not	 be	guilty	of 	breach	of 	trust	because	she	did	not	have	any	criminal	intent.		She	 did	not	misappropriate	the	necklace;	she	lost	it.		Moreover,	she	was	not	trying	to	 avoid	her	obligations	to	Mrs.	K;	she	was	just	too	poor	to	pay	for	the	lost	necklace.	 	 Neither	the	prosecutor	nor	Mrs.	K	opposed	the	motion,	which	was	eventually	 granted	without	a	hearing.		After	the	criminal	charges	were	dropped,	Mrs.	K	and	 Mrs.	T	settled	the	civil	case	out	of 	court.

APPENDIX 2

Private Sector Discussions No.23

This case study is a composite based on interviews with Cambodian lawyers who have defended people accused of borrowing and then failing to return various pieces of property. Identifying information has been changed at the request of the interviewees.

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Breach of Trust

Case Study 3
In	 2001,	 Company	 H,	 a	 Singaporean	 company,	 entered	 into	 a	 contract	 with	 Company	D,	a	Cambodian	company,	to	import	computer	equipment.		Company	 D	agreed	to	purchase	the	equipment	and	sell	it	in	Cambodia.		The	contract	was	 for a one-year period. At the end of the first year, Company H was unhappy with Company	D’s	performance.		Company	D	had	failed	to	import	as	much	computer	 equipment	 as	 the	 Singaporean	 company	 had	 expected.	 	 Company	 H	 decided	 not	to	renew	the	contract,	preferring	instead	to	search	for	another	company	to	 import	its	computer	equipment. When	Company	 H	informed	Company	 D	that	it	did	 not	intend	to	renew	the	 contract,	 Company	 D	 brought	 suit	 against	 Company	 H	 for	 alleged	 criminal	 breach	 of 	 trust.	 	 It	 also	 brought	 suit	 against	 several	 individual	 employees	 of 	 Company	 H,	 including	 its	 general	 manager,	 who	 was	 Singaporean.	 	 An	 arrest	 warrant	was	issued	for	the	general	manager,	but	he	was	not	arrested	because	he	 was	out	of 	the	country.		However,	the	warrant	effectively	prevented	him	from	 visiting Cambodia. The arrest warrants also prevented the company from finding another	company	to	sell	its	computer	equipment	in	Cambodia.		Rather	than	suffer	 the	risk	of 	jail	time	for	its	executives	and	the	loss	of 	its	reputation,	Company	H	 made	a	payment	to	Company	D	so	that	it	would	drop	the	charges.		The	payment	 was	made	before	the	trial	was	held,	and	the	charges	were	eventually	dismissed.	 	 Nevertheless,	Company	H	withdrew	entirely	from	Cambodia	and	no	longer	does	 any	business	here.		Before	its	departure,	it	had	been	doing	business	worth	several	 hundred	thousand	US	dollars	a	year.

APPENDIX 2

This case study is a composite based on interviews with several individuals who gave similar accounts of breach of trust cases arising from failed distribution agreements. Identifying information has been altered at the request of the interviewees.

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Case Study 4
Mr.	 Keo	 Tam	 purchased	 a	 plot	 of 	 land	 in	 Phnom	 Penh.	 	 He	 asked	 a	 woman	 named	Mrs.	Chhun	Nay	Suor	to	guard	his	land.		In	March	2001,	he	learned	that	 she	had	rented	the	land	to	a	vehicle	engine	seller	without	asking	his	permission.	 	 He	 brought	 a	 complaint	 of 	 breach	 of 	 trust	 against	 Mrs.	 Chhun,	 and	 she	 was	 arrested	on	May	25,	2001	and	placed	in	pre-trial	detention. Mrs.	 Chhun	 requested	 release	 from	 pre-trial	 detention	 so	 she	 could	 care	 for	 her	 three	 young	 children,	 but	 the	 investigating	 judge	 denied	 her	 request.	 	 She	 appealed	the	decision	to	the	Appeals	Court,	which	also	denied	her	request	for	 release.		She	subsequently	appealed	her	pre-trial	detention	to	the	Supreme	Court,	 which	received	the	case	in	September	2001. During	the	appeal,	the	Supreme	Court	received	statements	from	both	the	accused	 and	 the	 complainant.	 	 Mrs.	 Chhun,	 the	accused,	argued	 that	 she	 believed	 that	 Mr.	Keo	Tam	had	given	her	the	property	and	that	since	it	was	hers,	she	had	the	 right	to	rent	it	out.		She	admitted	to	having	made	a	mistake,	but	she	said	she	had	 not	intended	to	take	anything	from	Mr.	Keo	Tam.		Consequently,	she	did	not	 have	the	criminal	intent	necessary	for	a	breach	of 	trust	charge.		She	requested	 release	 from	 pre-trial	 detention	 so	 that	 she	 could	 care	 for	 her	 children.	 	 The	 Supreme	Court	also	heard	a	report	from	the	reporting	judge	and	listened	to	the	 recommendations of the representative from the prosecution office. The	Supreme	Court	concluded	on	January	9,	2002	that	the	property	did	belong	 to	Mr.	Keo	Tam,	but	that	Mrs.	Chhun	should	be	released	from	pre-trial	detention	 for	two	reasons:		1)	she	did	not	appear	to	have	criminal	intent	because	she	had	 believed	the	property	was	hers;	and	2)	she	had	already	been	held	in	detention	too	 long	(by	this	time,	she	had	been	in	detention	for	eight	months).		The	Supreme	 Court	then	sent	the	action	back	to	the	Phnom	Penh	Municipal	Court	so	that	it	 could	rule	on	the	merits	of 	the	case.

APPENDIX 2

Private Sector Discussions No.23

The facts of this case are taken from the Supreme Court’s decision in Keo Tam v. Chhun Nay Suor (Criminal Case Number 62, dated September 4, 2001, Verdict Number 4, dated January 9, 2002).

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Breach of Trust

Case Study 5
In	April	1992,	Mr.	Bun	Srun	entered	into	a	partnership	with	Mr.	Khong	Pheou	 to	install	an	electric	generator	in	a	village	in	Kompong	Cham	Province.		They	 each	 invested	 an	 equal	 amount	 of 	 money	 to	 buy	 the	 generator	 and	 they	 built	 a	 structure	 to	 house	 it.	 	 Each	 partner	 had	 a	 key	 to	 the	 structure.	 	 After	 three	 months,	the	partners	had	a	disagreement.		Mr.	Khong	Pheou	wished	to	sell	his	 share	of 	the	generator	to	a	third	party,	but	Mr.	Bun	Srun	did	not	want	him	to	 sell	his	share.		They	could	not	agree,	and	eventually	they	decided	to	shut	down	 the	generator	and	not	to	use	it.		However,	Mr.	Bun	continued	to	use	it	secretly	to	 make a profit for himself. Sometime later, Mr. Bun had his wife ask Mr. Khong’s wife	if 	she	could	borrow	the	key	to	the	generator	building.		This	left	Mr.	Bun	 with	 both	 keys	 and	 Mr.	 Khong	 without	 one.	 	 Mr.	 Bun	 then	 secretly	 sold	 the	 generator	to	a	third	party. Mr.	Khong	sued,	and	Mr.	Bun	was	charged	with	breach	of 	trust	in	March	1994.	 	 Mr.	Bun,	who	had	a	lawyer,	argued	that	he	was	not	guilty	because	the	sale	of 	the	 generator	had	been	part	of 	an	agreement	he	and	Mr.	Khong	had	about	dissolving	 their	business;	through	this	agreement,	Mr.	Bun	received	the	generator	and	Mr.	 Khong	 received	 the	 generator	 building	 and	 the	 land	 on	 which	 it	 was	 situated.	 	 Based	on	the	evidence	presented	at	the	trial,	the	court	rejected	Mr.	Bun’s	version	 of 	events. The court concluded that there was sufficient evidence that Mr. Bun had committed	breach	of 	trust.		In	particular,	the	court	noted	that:	1)	he	had	used	 his	wife	to	obtain	Mr.	Khong’s	key	so	that	he	would	have	sole	control	over	the	 generator;	 and	 2)	 he	 had	 secretly	 sold	 the	 generator	 to	 a	 third	 party	 without	 notifying	Mr.	Khong.		The	court	concluded	that	Mr.	Bun	had	“acted	knowingly”	 when	he	misappropriated	the	generator.		He	was	sentenced	to	one	year	in	prison,	 received	 a	 two-year	 suspended	 sentence,	 and	 was	 ordered	 to	 compensate	 Mr.	 Khong	for	the	loss	of 	his	share	of 	the	generator.

APPENDIX 2

The facts of this case are based on the Kompong Cham Provincial Court’s decision in Mr. Khong Pheou v. Mr. Bun Srun (Criminal Dossier Number 47, dated January 25, 1994, Judgment Number 41, dated May 12, 1994).

Private Sector Discussions No.23

1

Appendix 3

Media Reports

Analysis	of 	Media	Database

Number of cases where an arrest warrant was issued
Cases	where	information	on	arrest	warrant	was	available Cases	where	arrest	warrant	was	issued Percentage	of 	cases	where	arrest	warrant	was	issued 34 33 97%

APPENDIX 3

Number of cases where accused was arrested
Cases	where	information	on	arrest	was	available Cases	where	accused	was	arrested Percentage	of 	cases	where	accused	was	arrested 34 32 94%

Number of cases where accused was placed in pre-trial detention
Cases	where	information	on	pre-trial	detention	was	available Cases	where	accused	was	placed	in	pre-trial	detention Percentage	of 	cases	where	pre-trial	detention	was	used 31 29 94%

Private Sector Discussions No.23

3

Appendix 4

Business Sentiment Survey Results

Analysis	of 	Survey	Results

Question 1: Do the courts fairly apply the breach of trust law?
Almost	always Most	of 	the	Time Some	of 	the	Time Almost	Never Total	Responses 0 0

APPENDIX 4

5 6 11

Question	2:		Are	breach	of 	trust	cases	filed	improperly?
Almost	always Most	of 	the	Time Some	of 	the	Time Almost	Never Total	Responses 2 4 3 1 10

Question 3: Does bribery affect the outcome of breach of trust cases?
Almost	always Most	of 	the	Time Some	of 	the	Time Almost	Never Total	Responses 8 3 0 0 11

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Question 4: How much do the following risks concern you?
Loss	of 	Money? Very	concerned Concerned Slightly	concerned Not	concerned Total	Responses 8 2 0 0 10 Loss	of 	Reputation? 7 1 0 1 9 Time	spent	in	Jail? 6 0 1 1 8

Question 5: How much do you think it costs to be sued for breach of trust?
Less	than	$5,000 1 9 0 0 0 10

APPENDIX 4

$5,000	-	$50,000 $50,000	-	$150,000 $150,000	-	$500,000 More	than	$500,000 Total	Responses

Question 6: How often have you turned down investment opportunities because of the risk of breach of trust?
Very	often Often 3 3 3 1 10

Private Sector Discussions No.23

Sometimes Never Total	Responses

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Breach of Trust

Question 7: What is the value of the investment opportunities you have turned down because of the risk of breach of trust?
Less	than	$50,000 $50,000	-	$250,000 $250,000	-	$500,000 $500,000	-	$1,000,000 $1-5	million More	than	$5	million Total	Responses 2 0 2 1 2 0 7

Question 8: In your opinion, how much would the following changes improve the situation?
More	 More	 training	 training	 for	police? for	judges? Big	Improvement Moderate	 Improvement Slight	 Improvement No	Improvement Total	Responses 5 2 1 1 9 6 2 1 0 9 Make	it	more	 Eliminate	 difficult to jail	terms	 use	pre-trial	 for	breach	 detention? of 	trust? 4 2 3 0 9 1 2 2 3 8 Create	a	special	 commercial	 court	to	hear	 breach	of 	trust	 cases? 6 2 1 0 9

Private Sector Discussions No.23

APPENDIX 4


Appendix 5

Technical Legal Analysis of Breach of Trust Law
BREACH OF TRUST By Koy Neam
A. Introduction
Breach	of 	trust,	like	the	crime	of 	theft,	is	an	offense	against	property.		The	main	 feature	of 	theft	is	taking	away	property	belonging	to	another	person,	with	the	 intention	of 	permanently	depriving	that	person	of 	it.		The	difference	between	 breach	of 	trust	and	theft	is	that	in	theft,	the	offender	has	no	lawful	possession	 of 	the	property,	whereas	in	breach	of 	trust,	the	owner	has	entrusted	the	property	 to	 the	 offender.	 The	 offender	 violates	 this	 agreement	 (the	 entrustment)	 by	 fraudulently	 taking	 the	 property	 away	 from	 the	 owner	 with	 the	 intention	 of 	 keeping	the	property	or	transferring	it	to	another	person.		In	simple	terms,	the	 two	 offenses	 are	 similar	 in	 nature	 because	 the	 commission	 of 	 either	 theft	 or	 breach	of 	trust	has	the	same	intent	–	that	is,	to	deprive	a	person	of 	his	or	her	 property. Breach	of 	trust	combines	the	terms	“breach”	and	“trust.”	In	real	life,	people	often	 think that when a debtor causes “dismay” or “loss of confidence” by failing to repay	a	debt,	a	“breach	of 	trust”	has	been	committed.		Simply	speaking,	however,	 such	a	case	is	a	breach	of 	contract	–	not	a	breach	of 	trust.		Breach	of 	trust	is	 instead	most	similar	to	the	crime	of 	theft.

APPENDIX 5

B. Analysis of Sentence Structure and Terminology in Article 46 Regarding Breach of Trust
Based	on	a	comparison	of 	Article	408	of 	the	[former]	French	criminal	code	and	 Article	46	of 	the	[current]	Cambodian	transitional	criminal	code,	it	is	apparent	 that	almost	all	Cambodian	legal	concepts	related	to	breach	of 	trust	have	been	 borrowed	from	the	French	criminal	code.	The	current	transitional	criminal	code	 was	drafted	by	a	French	legal	consultant	in	1992.	Recently	a	French	legal	expert	 has	 again	 helped	 to	 draft	 a	 criminal	 code	 for	 the	 Kingdom	 of 	 Cambodia	 and	 article	404	(on	breach	of 	trust)	in	the	current	draft	Cambodian	criminal	code	has	 again	been	copied	from	the	French	criminal	code	(Article	314-1	of 	the	[current]	 French	criminal	code,	adopted	in	1994).	 Translation	 of 	 foreign	 text	 into	 the	 Khmer	 language	 often	 causes	 problems	

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because	of 	vocabulary	and	syntax.		For	example,	in	Article	46	of 	the	Cambodian	 transitional	 criminal	 code,	 the	 French	 term	 “représenter”	 was	 translated	 as	 “domnang”	(or	“represent”)	in	Khmer.		In	fact,	in	a	legal	context,	in	order	to	 match	its	legal	meaning,	the	term	should	be	translated	into	Khmer	as	“bonghanh”	 (“to show”). In addition, it is hard to find a Khmer term to match the meaning of some	French	terms,	such	as	“possesseur”	and	“détenteur.”		Because	Khmer	does	 not	use	a	comma1	,	typing	errors,	including	spacing	errors,	can	cause	confusion	 when	 interpreting	 the	 meaning	 of 	 a	 phrase	 such	 as	 is	 illustrated	 below,	 in	 the	 context	of 	Article	46	of 	Cambodian	transitional	criminal	code,	as	it	is	currently	 written	(translated	literally	from	the	Khmer): Article 46: Breach of Trust Any	 person	 who	 misappropriates,	 against	 the	 interest	 of 	 the	 owner	 [of 	 a	 property],	 owner	 of 	 a	 place	 or	 the	 holder	 of 	 property,	 money,	 goods,	 or	 existing	 documents	 or	 documents	 which	 stipulate	 an	 obligation	 or	 discharge,	 which	 was	 entrusted	 to	 the	 person	 in	 the	 form	 of 	 a	 rent	 [agreement],	deposit,	mandate2,	loan	for	use	or	for	paid	or	unpaid	work,	 with	the	responsibility	to	return	it	or	to	represent	(sic)	or	for	use	or	for	a	 specific purpose, is criminally guilty of breach of trust and shall be liable to a punishment of a term of imprisonment of from one to five years. [Ed. Note: commas added to English translation for ease of understanding; not present in Khmer text. See also author’s footnote 2 below.] It	can	be	seen	that	the	failure	to	space,	preposition	to	separate	between	“holder”	 and	property”	lead	the	reader	to	misunderstand	that	the	fraud	or	misappropriation	 damaged the benefit of the owner, owner of a place, or holder of property3.	 	 In	fact,	this	Article	is	intended	to	mean	to	misappropriate property, money, goods, or	documents4,	and	is	not	intended	to	mean	misappropriate	the	owner	or	holder	 of 	property5.		The	person	who	suffers	from	the	misappropriation	is	either	the	 owner	 of 	 property,	 the	 owner	 of 	 the	 place,	 or	 the	 holder.	 	 The	 term	 “mchas	 kamsith”	(“owner	of 	property”)	is	equivalent	to	the	French	term	“propriétaire”	 which	means	a	person	who	enjoys	lawful	ownership	rights	to	use,	enjoy	the	fruits	 of,	or	manage	the	property	(i.e.	through	sale	or	donation).	With	regard	to	the	 terms	used	in	the	French	text	of 	the	law,	the	term	“mchas	ti	kanlaeng”	(“owner	 of 	the	place”)	might	have	been	translated	from	the	French	term	“possesseurs”	

Private Sector Discussions No.23

APPENDIX 5

meaning	in	Khmer	law	and	language.		This	is	discussed	further	below.		 3	If 	a	preposition	“ney	=	of ”	is	otherwise	used	in	between	the	term	“holder”	and	“goods”,	it	 may	be	easier	for	the	reader	to	understand	that	the	property,	money,	etc.	are	the	object	of 	the	 verb	“misappropriates”	and	not	the	object	of 	the	noun	“holder.”	 4	‘Documents’ in terms of Article 46 specifically meaning ‘documents specifying an obligation

1	Nevertheless,	a	comma	was	frequently	used	in	the	Cambodian	criminal	code	of 	1959.	For	 example,	see	Article	366,	et	al.			 2	Ed. Note: The Khmer text of Article 46 uses the word ‘mandate’, which has a specific

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or	discharge’	 5	Ed.	Note:	That	is,	the	crime	of 	breach	of 	trust	focuses	on	the	misappropriation	of 	property,	 rather	than	the	fact	that	damage	has	been	suffered	by	a	person	[eg	the	property	owner].		

Breach of Trust

and	“neak	kankab”	(“holder”	from	“détenteur”)	in	the	order	they	were	written	 in	French,	namely	propriétaires,	possesseurs,	and	détenteurs.		 In	ordinary	Khmer,	the	terms,	“possesseurs”	and	“détenteurs,”	have	nearly	the	 same	 meaning	 as	 “neak	 kankab”	 (“holder”)	 but	 in	 a	 legal	 context	 have	 quite	 a	different	meaning6.		The	term	“mchas	kamsith”	(“owner”	or	“propriétaire”)	 refers,	for	example,	to	the	owner	of 	a	vehicle,	who	has	lawful	title	to	the	vehicle.	 	 “Possesseur”	includes	a	person	who	has	legal	possession	of 	a	vehicle	or	property,	 but	has	not	yet	registered	her	or	himself 	as	the	owner.		The	term	“detenteurs”	 includes	a	person	who	is	a	tenant	leasing	a	house	or	who	receives	a	deposit	for	[the	 purchase	of]	property	or	is	a	consignee,	etc.		In	order	to	simplify	understanding	 of 	this	text,	from	this	point	forward	“owner	of 	goods	or	property”	is	taken	to	 refer	to	one	of 	the	three	types	of 	persons	–	the	propriétaire,	the	possesseur,	or	 the	détenteur.	 The	next	question	to	ask	is	how	was	the	transfer	made	to	the	person	accused	 of 	 breach	 of 	 trust?	 The	 likely	 answer	 is	 that	 the	 property,	 money,	 goods,	 or	 documents	was	transferred	or	entrusted	to	the	accused	through	a	lease,	deposit,	 mandate,	loan	for	use,	or	delivery	for	the	purpose	of 	undertaking	some	work	 (whether	paid	or	unpaid). Finally,	the	person	accused	of 	the	offense	of 	breach	of 	trust	must	either	return	 the	property	to	its	owner,	or	use	it	according	to	the	owner’s	instructions.		We	also	 find use of the term “thvoeu chie domnang” (“to represent”). The meaning of this	term	will	be	examined	later. To	 make	 it	 easier	 to	 read	 and	 understand,	 the	 current	 wording	 of 	 Article	 46	 (see	previous	page)	has	been	duplicated	but	reformatted	and	separated	into	its	 component	parts	below:	 Article 46: Breach of Trust 	 1. Any	 person	 who	 misappropriates,	 against	 the	 interest	 of 	 an	 owner,	 possessor	or	holder	of: a. property;	 b. money;	 c. merchandise;	or	 d. a	document,	where	that	document	either	contains	or	stipulates	either i. an	obligation,	or	a	 ii. discharge 2. and	which	[items	(a)	to	(d)	above]	were	entrusted	to	the	person,	 a. in	the	form	of 	a	

Private Sector Discussions No.23

APPENDIX 5

6	The	term	“possesseurs”	refers	to	a	person	who	has	physical	possession	and	“détenteurs”	 refers	to	a	person	who	has	physical	detention	of 	a	property.	The	concepts	behind	possession	 and	detention	are	too	comprehensive	and	cannot	be	addressed	here;	however,	the	reader	may	 find these legal concepts in the law concerning property, in particularly, corpus and animus.	

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i. rental/lease,	or	a ii. deposit,	or	a	 iii. ‘mandate’,	or	a	 iv. loan	for	use	for b. paid	or	unpaid	work 3. with	the	responsibility	to	return	it,	or	‘re-present’	it7	or	to	use	it,	or	to	put	 it	to	the	agreed	purpose	 4. is	guilty	of 	breach	of 	trust	and	shall	be	liable	to	a	punishment	of 	a	term	of 	 imprisonment of from one to five years. Based	on	this	break	down	of 	Article	46,	it	appears	that	the	article	contains	the	 following	components: 1. The	act	of 	misappropriation	and	causation	of 	such	an	act	(a	detriment	to	 the	owner	suffered	by	the	act	of 	misappropriation); 2. Things	or	objects	that	are	misappropriated	(i.e.	property,	money	etc.); 3. The	entrustment	of 	the	thing	or	objects	with	the	accused,	and	the	terms	 and	 conditions	 on	 which	 those	 things	 or	 objects	 were	 entrusted	 (i.e.	 entrustment	in	the	form	of 	a	lease,	deposit,	or	loan,	etc.); 4. A	condition	that	stipulates	that	the	owner	has	no	intention	of 	giving	up	or	 abandoning	ownership	or	interest	in	the	entrusted	things	or	objects.		Such	 a	condition	could	be	that	the	things	or	objects	entrusted	must	be	returned	 or	shown	to	the	owner	at	a	pre-determined	time	or	when	the	owner	wants	 them	back	or	when	the	owner	wants	to	check	the	availability	or	condition	 of 	the	objects. 5. The	last	part	of 	this	article	concerns	punishment	for	a	person	who	is	guilty	 of 	breach	of 	trust.

APPENDIX 5

C. Elements of Breach of Trust
C.1	Material	Element	(Objective)
Private Sector Discussions No.23

A	 material	 element	 refers	 to	 an	 act	 of 	 misappropriation.	 	 Such	 an	 act	 of 	 misappropriation	occurs	when	the	owner	can	no	longer	exercise	rights	over	the	 property	 because	 it	 has	 been	 misappropriated	 by	 the	 person	 to	 whom	 it	 was	 entrusted.	 Misappropriation	in	breach	of 	trust	is	different	from	theft.		In	theft,	the	owner	 has	not	given	custody	of 	his	property	to	the	thief,	whereas	in	breach	of 	trust,	 the	 owner	 has	 given	 custody	 of 	 his	 property	 to	 the	 accused,	 with	 the	 mutual	 agreement	of 	the	owner	and	the	accused.		This	agreement	constitutes	a	contract;	

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7	In	Article	46,	‘represent’	in	fact	means	‘to	re-present’	(eg	to	re-present	a	cheque	at	a	bank).		 However	when	translated	from	the	original	French	text	‘represent’	was	translated	as	‘domnang’	 (meaning	to	represent	as	a	lawyer	might	represent	a	client).	A	better	Khmer	term	would	have	 been	‘boung	hanh	leung	vinh’,	which	means	literally,	“to	show	it	back”,	as	it	better	encapsulates	 the	meaning	of 	‘re-present’.

Breach of Trust

for	example,	a	contract	to	rent	a	truck	to	a	customer	who	uses	it	to	transport	 goods.	The	contract	creates	a	relationship	between	the	owner	and	the	receiver	 of the things or property, in which the receiver has a fiduciary duty, namely “karaneikech bampenh tumnukchet” (“fiduciary duty”). The receiver is obligated to fulfill his or her duty in good faith, as trusted by the owner, and to be strictly honest	with	the	owner.	Misappropriation	occurs	when	the	receiver	violates	this	 duty. Thus,	 when	 someone	 wants	 to	 understand	 the	 meaning	 of 	 breach	 of 	 trust,	 the first question to ask is whether both parties have established a contractual relationship. The article concerning breach of trust describes five contracts/ relationships,	 including	 a	 lease,	 a	 bailment	 contract	(deposit),	a	 ‘mandate’	(see	 explanation	 at	 E.3	 below),	 a	 loan	 for	 use,	 and	 an	 employment	 contract8.	 The	 reason	for	not	considering	a	mandate	as	a	contract	is	that	a	mandate	may	arise	 from	a	contract,	by	judicial	order,	or	by	law.	This	issue	will	be	discussed	later	in	 this	text.		

APPENDIX 5

C.2		Mental	Element	(Subjective) Breach	of 	trust,	much	the	same	as	other	crimes,	requires	an	intent	to	commit	a	 crime.		For	breach	of 	trust,	such	intent	refers	to	fraudulent	intent.	Fraudulent	 intent	is	presumed	to	arise	as	a	result	of 	dishonesty.	For	example,	a	client	gives	 gold	to	a	goldsmith	in	order	to	make	a	gold	necklace.	However,	the	goldsmith	 steals	a	portion	of 	the	gold	and	replaces	it	with	another	metal	so	it	weighs	the	 same.	If 	the	goldsmith	has	no	reason	to	do	this,	other	than	to	misappropriate	a	 portion	of 	the	gold,	a	fraudulent	act	has	occurred. However	an	act	does	not	constitute	breach	of 	trust	if 	fraud	by	the	accused	cannot	 be	proven.	For	example,	a	Phnom	Penh	resident,	Mr.	Chan	receives	some	money	 from	his	friend,	Mr.	Veasna,	who	lives	in	Battambang	province,	in	order	to	pay	 tuition	fees	for	Mr.	Veasna’s	son	in	Phnom	Penh.	Mr.	Veasna	agrees	to	pay	Mr.	 Chan	5%	of 	the	money	for	his	help.	However,	another	person	asks	Mr.	Chan	for	 a	loan	and	offers	to	pay	Mr.	Chan	a	high	interest	rate.	Mr.	Chan	agrees	to	loan	the	 money	entrusted	to	him	by	Mr.	Veasna	on	the	expectation	that	he	will	increase	 Mr.	Veasna’s	money.	Unfortunately,	the	debtor	defaults	and	disappears.		In	this	 case,	it	is	unlikely	that	Mr.	Chan	has	fraudulently	intended	to	cause	damage	to	his	 friend.		However,	Mr.	Chan	would	remain	liable	for	civil	damages	arising	out	of 	 breach	of 	contract	as	he	was	required	to	use	the	money	only	for	the	purpose	of 	 paying	Mr	Veasna’s	son’s	tuition	fees. On	the	other	hand,	if 	Mr.	Chan	were	to	lose	all	of 	Mr.	Veasna’s	money	gambling	 at	a	casino	and	could	not	afford	to	pay	the	tuition	fees	for	Mr.	Veasna’s	son,	it	 would	be	more	likely	that	Mr.	Chan	would	be	regarded	as	having	had	the	necessary	

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8	A	new	French	criminal	code	and	a	draft	of 	the	new	Cambodian	criminal	code	failed	to	 describe	the	type	of 	contracts	which	are	subject	to	the	Law	on	Breach	of 	Trust.

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fraudulent	intent	required	to	constitute	breach	of 	trust.	It	is	foreseeable	that	the	 risk	of 	loss	in	gambling	is	almost	100%	for	an	ordinary	gambler.	Bad	faith	on	 the	part	of 	an	accused	is	more	likely	to	be	presumed	to	arise	from	acts	which	a	 reasonable	person	could	anticipate	would	be	detrimental	to	the	owner	[such	as	 gambling	entrusted	money].	 C.3		Detriment	is	suffered	by	the	owner	of 	the	property	 If 	 the	 owner	 of 	 the	 property	 suffers	 no	 detriment	 as	 a	 result	 of 	 the	 alleged	 misappropriation	by	the	person	accused	of 	breach	of 	trust,	it	can	be	argued	that	 no	breach	of 	trust	has	occurred.	A	detriment	can	be	said	to	have	occurred	when	 an	owner	has	suffered	a	loss.		For	example,	the	owner	loses	his	rights,	or	cannot	 exercise	those	rights,	in	property	that	was	entrusted	to	the	accused.	 However,	if 	the	accused	fails	to	return	property	to	its	owner	on	a	date	previously	 specified, this does not mean that the accused has committed breach of trust. The deprivation	or	loss	of 	an	owner’s	property	must	occur	as	a	result	of 	fraudulent	 intent	on	the	part	of 	the	accused.

APPENDIX 5

D. Object or Subject Matter [of the Offense of Breach of Trust]
The	crime	of 	breach	of 	trust	applies	to	those	objects/items	described	in	Article	46	 of 	the	Transitional	Code,	including	property,	money,	merchandise,	or	documents	 which	contain	or	stipulate	an	obligation	or	discharge9	(see	the	translation	on	page	 2	or	the	list	of 	items	in	the	breakdown	of 	the	breach	of 	trust	law	on	page	4	under	 points	(1)	(a)	–	(d).	 D.1		Property	–	[Movable	or	only	Immovable	Property] It	 is	 not	 clear	 whether	 the	 term	 “troapsambat”	 (“property”)	 in	 Article	 46	 includes	 both	 movable	 and	 immovable	 property.	 As	 the	 law	 was	 originally	 copied	 from	the	French	criminal	code,	it	is	necessary	to	examine	the	derivation	of 	the	 term	“troapsambat”.	The	term	troapsambat	in	Article	46	was	translated	from	the	 word	“biens”	in	French.	One	phrase	in	judicial	order	No.	6295,	dated	October	 10,	2001	of 	the	French	Trial	Tribunal,	states	that	“a breach of trust only relates to funds, valuables, or other property,	with	the	exception	of 	immovable	property”.	In	the	 last	part	of 	its	judicial	order,	the	Tribunal	continues	to	stress	that	“the appellate court which convicts an accused over failure to deliver the key to immovable property, lacks understanding of the meaning and scope of the law referred to above”10.

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9	A	new	French	criminal	code	and	a	draft	of 	new	Cambodian	criminal	code	failed	to	describe	 the	types	of 	contracts	which	are	subject	to	the	Law	on	Breach	of 	Trust	and	it	merely	included	 “funds,	valuables,	or	other	properties”.	See	Article	314-1	of 	the	French	criminal	code	and	 Article	404	of 	the	draft	Cambodian	criminal	code. 10	http://lexinter.net/JPTXT/bien_quelconque.htm,	May	9,	2003.

Breach of Trust

In	France,	the	reason	why	breach	of 	trust	does	not	apply	to	immovable	property	 is	that	the	owner	may	repossess	the	property	based	on	droit de suite11	(the	right	 attached	to	property	that	allows	the	owner	to	repossess	or	enjoy	the	proceeds	 thereof).	This	may	be	reasonable	in	France	where	an	ownership	registration	system	 and a proper and specific method of recording the transfer or conveyance of ownership	means	the	right	to	immovable	property	is	stable	and	protected	under	 a	strict	mechanism	that	makes	misappropriation	or	transfer	without	the	consent	 of 	the	owner	impossible.		However,	such	protection	does	not	exist	for	movable	 property,	except	in	cases	where	the	owner	has	an	ownership	title	as	evidence.	 In	the	USA,	some	states,	such	as	Oklahoma,	have	interpreted	the	term	“property	 rights”	 under	 state	 criminal	 law	 as	 [referring	 only	 to]	 movable	 property,	 even	 though the law has not defined it as movable property. In other states, some courts	and	legal	writers	think	that	the	concept	of 	breach	of 	trust	may	also	apply	 to	immovable	property.		The	appellate	criminal	court	of 	Oklahoma	concluded	 that	breach	of 	trust	originated	from	theft.		Theft	covers	only	movable	property	 and	contains	one	main	element	called	“taking	away”	“the	property	over	which	the	 accused	has	no	lawful	possession”,	and	as	such,	the	law	on	theft	may	not	apply	 to	misappropriation	of 	property	over	which	the	accused	has	lawful	possession.	 Thus, breach of trust is an offense formulated to fill the loophole in the law concerning	theft	by	adding	the	element	of 	“taking	away	the	property	of 	another	 person	which	is	possessed	by	the	offender”12. If the above justification and rule is applied in Cambodia, the law on breach of trust	would	punish	only	an	act	against	movable	property,	rather	than	immovable	 property.	 As	 a	 result,	 Cambodia	 might	 encounter	 numerous	 disadvantages	 as	 most	people	who	own	immovable	property	do	not	have	a	title	deed	to	justify	 their	lawful	ownership,	and	there	is	no	reliable	registry/record.	This	may	make	 it	 easy	 for	 misappropriation	 or	 conveyance	 of 	 ownership	 to	 another	 person.	 	 Examples	of 	such	properties	include	an	automobile	delivered	to	a	mechanic	for	 repair,	jewelry	that	has	been	pledged	[as	collateral	for	a	loan],	vehicles	parked	at	 a	market	etc. D.2		Money	and	Goods In	terms	of 	Article	46,	‘money’	and	‘goods’	are	property	items	which	are	most	 easily defined. For example, money under the control of a company accountant, or	 money	 left	 with	 an	 individual	 for	 safekeeping,	 or	 goods	 that	 are	 being	 transported	 by	 a	 shipping	 company,	 or	 goods	 that	 are	 stored	 in	 a	 warehouse,	 et	cetera,	are	all	examples	of 	property	which	may	give	rise	to	a	breach	of 	trust	 offence.

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APPENDIX 5

11 François SIBAUD, De L’Abus de Confiance; <http://lexilis.free.fr/notesjur/note55.htm> 12 Committee Comments, www.okcca.net/datafiles/legal/oklahoma/ouji/criminal/UJICR%205-21.HTM	

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Breach	of 	trust	occurs	when	the	accused	person	takes	money	which	was	entrusted	 to him or her for a specific purpose, with the intent to keep the money as his or	her	own.	For	example,	a	company	accountant	has	misappropriated	money	in	 terms	of 	the	crime	of 	breach	of 	trust	if 	it	is	his	duty	to	manage	a	company’s	 money,	but	he	instead	takes	it	to	spend	on	himself.		Similarly,	a	truck	driver	who	 misappropriates	goods	for	himself 	that	were	entrusted	to	him	to	be	delivered	by	 the	owner	could	be	said	to	have	misappropriated	goods	in	terms	of 	the	crime	of 	 breach	of 	trust. 	 D.3	 Existing	Documents	or	Document	Stipulating	an	Obligation	or		 	 Discharge

APPENDIX 5

In	 general,	 a	 document	 which	 contains	 an	 obligation	 is	 a	 contract.	 However,	 other	documents	such	as	wills	also	contain	obligations.	The	description	in	the	 [former]	French	Criminal	Code	states	that	misappropriation	will	be	penalized	as	 a	breach	of 	trust	only	if 	there	is	a	fraudulent	act	against	a	physical document itself 	 and	not	just	against	its	terms	(i.e.	an	abuse	in	the	enforcement	of 	the	terms	of 	 a	contract).		The	act	of 	misappropriating	or	destroying	a	document	entrusted	to	 someone	for	his	or	her	proper	maintenance,	with	intent	to	cause	detriment	to	the	 beneficiary of such a document, shall constitute misappropriation in the context of 	breach	of 	trust. One	problem	that	should	be	considered	is	whether	a	document	which	contains	 no	obligation,	but	has	contents	that	should	not	be	revealed	can	be	subject	to	a	 breach	of 	trust	action.	For	example,	an	internal	company	document	such	as	a	 business	plan	or	which	describes	a	proprietary	company	innovation.	In	such	a	 case,	the	question	arises	as	to	whether	a	breach	of 	trust	has	occurred	when	an	 employee	makes	a	copy	of 	this	document	and	reveals	it	to	another	company	and,	 as	a	result	of 	such	disclosure,	causes	damage	to	his	employer.		In	the	absence	of 	 obligation	required	by	law,	does	abusive	use	of 	a	document	in	this	way	constitute	 breach	of 	trust?	 	

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E. Contractual Relationship Between the Owner and the Recipient of the Property

Article	 46	 concerning	 breach	 of 	 trust,	 covers	 only	 certain	 types	 of 	 contracts,	 including	a	lease,	bailment,	mandate,	loan	for	use,	and	an	employment	contract.	 Before	considering	whether	there	is	a	breach	of 	trust,	it	is	necessary	to	determine	 whether	 a	 contractual	 relationship	 exists	 between	 the	 owner	 and	 the	 recipient	 because	a	breach	of 	trust	arises	out	of 	a	violation	of 	the	contracts	mentioned	 earlier	in	this	section.	 A	question	arises	when	a	contract	is	invalid	(null	and	void):	Can	a	court	continue	 criminal	proceedings	for	breach	of 	trust	if 	the	contract	on	which	the	breach	of 	 trust	was	based	was	itself 	null	and	void?	Under	French	law,	this	is	not	possible;	

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the	invalidity	of 	a	contract	is	not	grounds	for	a	stay	of 	criminal	proceedings	in	a	 breach	of 	trust	case.	For	example,	in	a	contract	for	bailment	in	which	one	party	 is	 a	 minor,	 and	 the	 adult	 party	 has	 fraudulently	 taken	 the	 entrusted	 property,	 the	 adult	 party	 may	 not	 assert,	 as	 the	 defense,	 that	 there	 was	 no	 contractual	 relationship	because	the	contract	was	invalid	[null	and	void]	as	the	other	party	 was	a	minor.	In	such	cases,	criminal	proceedings	are	entitled	to	proceed	whether	 or	 not	 the	 contract	 is	 valid.	 In	 terms	 of 	 breach	 of 	 trust,	 what	 is	 essential	 to	 determine	is	whether	the	terms	of 	a	contract	specify	delivery	of 	property,	how	 the	property	will	be	managed,	and	when	the	property	is	expected	to	be	returned.	 These	are	terms	that	create	an	obligation	owed	by	the	deliveree	[the	accused]	 to	 the	 owner.	 Illegality13	 	 of 	 a	 contract	 provides	 a	 basis	 for	 refutation	 of 	 the	 contractual relationship	 [rather	 than	 refutation	 of 	 the	 crime	 of 	 breach	 of 	 trust],	 provided	that	the	liability	of 	the	accused	towards	the	owner	does	not	itself 	arise	 out	of 	a	breach	of 	contract	and	otherwise	result	from	a	commission	of 	a	criminal	 act (breach of trust) where sufficient elements are present for the case. E.1		Lease	Agreement	(Louage) Article	101	of 	Decree	#38,	concerning	‘Contract	and	Other	Liabilities’,	states	 that	“a	lease	is	a	contract	wherein	a	lessor	promises	to	lease	his	or	her	property	 for a fee to a lessee to use temporarily”. Under this definition of a lease, the lessor	(i.e.	owner	of 	the	property)	reserves	his	or	her	right	in	the	property	and	 the	lessee	(renter)	only	enjoys	the	right	to	use	the	property.	In	this	case,	there	is	 no	transfer	of 	ownership	from	the	owner	to	the	lessee.	The	duration	of 	the	lease,	 and	the	date	the	property	is	to	be	returned	to	the	owner,	shall	be	determined	in	 the	lease	contract;	however,	if 	no	duration	or	date	is	set	for	the	lessee	(renter)	 to	return	the	property,	the	law	states	it	is	deemed	that	it	shall	be	returned	no	 later	than	one	year	[from	the	date	the	lease	was	signed]	(Article	101	of 	Decree	 #38).	The	property	to	be	leased	may	be	either	real	property14	(i.e.	‘immovable	 property’)	or	personal	property	(‘movable’	property). E.2		Bailment	Contract	(Dépôt) In	 Section	 6	 of 	 the	 Decree	 regarding	 Contract	 and	 Other	 Liabilities,	 there	 is	 reference to a “bailment contract”. Article 89 defines a bailment as a “contract whereby	 a	 person	 (“the	bailee”)	 is	 given	 custody	of 	 the	 personal	 property	 of 	 another	person	(“the	bailor”),	either	gratuitously	or	for	a	fee,	and	is	obligated	to	 return	the	property	to	the	bailor	or	the	person	clearly	designated	by	the	bailor,	at	 a specified time, or at the time when the property is demanded back”. The bailor has	no	right	to	use	or	manage	the	bailed	property,	but	must	keep	it	in	good	order	 for	the	owner.	Examples	of 	bailment	contracts	include	bailment	of 	a	vehicle	at	 a	market	or	a	school,	bailment	of 	jewelry	with	a	bank,	bailment	of 	merchandise	 in	a	market	etc.
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APPENDIX 5

13				i.e.	an	invalid	contract	that	would	be	void	because	it	is	not	in	compliance	with	the	contract	 	 14			‘Real’	property,	in	law	refers	to	land.

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E.3		Mandate	(Mandat) There are two types of ‘mandates’. The first type of mandate is created by a contract	and	the	second	is	created	by	law	or	court	order.		The	Law	on	Contract	 and	 other	 Liabilities	 does	 not	 include	 mandate	 as	 being	 a	 type	 of 	 contract.	 However,	 the	 draft	 civil	 code	 does	 include	 mandate	 as	 a	 contract.	 Article	 634	 of the draft code defined mandate as being “any contract whereby one party (“the	mandator”)	delegates	his	or	her	rights	to	another	party	(“the	mandatee”)	 to	 act	 on	 behalf 	 of 	 the	 mandator.	 	 Under	 the	 above	 article,	 a	 company	 sales	 representative	would	usually	be	considered	a	mandatee.		A	mandatee	may	act	for	 a	fee	or	gratuitously,	based	on	the	contract	between	the	mandator	and	mandatee.	 Article	367	of 	the	draft	establishes	“a	duty	of 	diligent	mandatory	management	 in	a	capacity	as	manager	in	good	faith	by	virtue	of 	a	mandate.”	Any	breach	of 	 this	good	faith	duty	by	means	of 	misappropriating	any	operating	equipment	or	 funding	will	lead	to	a	breach	of 	trust.

APPENDIX 5

Another	type	of 	mandate	is	created	by	a	court	order	or	by	law.	A	mandate	created	 by	a	court	order	includes	the	power	given	to	a	judgment	executor.	A	judgment	 executor who fraudulently takes a property seized for the benefit of a creditor is	 an	 example	 of 	 a	 mandate	 created	 by	 court	 order	 as	 it	 is	 the	 court	 that	 has	 designated	him	or	her	to	execute	its	judgment. E.4		Loan	for	Use	(Prêt	á	usage)	 Current Cambodian contract law defines a loan for use as “a loan without any interest	 or	 fee.	 A	 person	 who	 lends	 property	 to	 someone	 else	 for	 use	 retains	 ownership	 of 	 the	 property”.	 	 Article	 96	 requires	 a	 borrower	 to	 preserve	 the	 property as if he or she were the owner. If no time is specified in the contract, the lender	may	demand	a	return	of 	the	loaned	property	at	any	time.	Therefore,	the	 borrower	must	be	ready	to	return	the	property	to	the	owner.	The	only	difference	 between	a	loan	contract	and	bailment	is	that	a	loan	contract	allows	the	borrower	 to	use	the	property	under	the	terms	of 	an	agreement. E.5		Labor	Contract	with	Pay	or	without	Pay	 Labor	contracts	–	either	with	or	without	pay	-	include	employment	contracts	under	 the	Labor	Law,	as	well	as	enterprise	contracts	under	current	Cambodian	contract	 law.	Employment	contracts	under	the	Labor	Law	refer	to	the	[contractual]	working	 relationship	 between	 the	 employer	 and	 the	 employee.	 However,	 an	 enterprise	 contract	 applies	 to	 the	 work	 that	 one	 person	 performs	 for	 another	 individual	 (Article	72).	Both	types	of 	contracts	described	above	are	for	remuneration.	The	 provision	of 	Article	46	regarding	breach	of 	trust	also	covers	a	non-remuneration	 contract	[i.e.	a	contract	without	pay].	The	accused	may	not	use	the	argument	that	 he	is	employed	under	a	non-remuneration	contract	as	a	defense	against	liability	 for	breach	of 	trust	if 	he	has	actually	committed	a	fraud	against	property	entrusted	

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Breach of Trust

to the accused for a specific purpose [under the terms of the non-remunerated employment	contract].	Typical	examples	of 	such	contracts	might	include	delivery	 of 	gold	to	a	goldsmith	to	make	a	necklace,	an	employee	whose	job	it	is	to	take	 care	of 	a	warehouse,	or	contracts	for	the	repair	of 	a	car	at	a	garage.	

F. Application of Law on Breach of Trust to Certain Cases in the Current Cambodian Court System
F.1		Failure	to	Make	Payment	on	a	Loan	Covered	by	a	Contract	 A	 loan	 agreement	 is	 a	 contract	 whereby	 the	 right	 to	 the	 loaned	 money	 is	 	 transferred	from	a	creditor	to	a	debtor.	The	debtor	has	an	in rem	right	over	the	 cash,	and	the	creditor	has	an in personum	right	against	the	debtor,	but	not	an in rem	right	to	the	cash.	An	example	would	be	if 	a	creditor	lends	Riel	5	million	to	 a debtor as financing for the debtor’s business. When the cash is transferred to the	debtor’s	custody,	it	becomes	his	money	to	use.	That	is,	the	debtor	has	a	full	 right	[subject	to	any	contractual	covenants]	to	use	the	cash	as	he	wishes;	such	as,	 for	example,	the	purchase	of 	equipment	for	the	business.	The	creditor	usually	 has	no	rights	over	the	cash	but	has	the	right	to	force	the	debtor	to	repay	the	debt	 as	obligated.	Since	the	debtor	becomes	the	owner	of 	the	loaned	cash,	he	cannot	 be	accused	of 	breach	of 	trust	if 	the	cash	is	wastefully	spent	or	lost	through	the	 business.	 However,	 if 	 the	 debtor	 fails	 to	 make	 payment	 by	 the	 due	 date,	 the	 debtor	may	sue	for	breach	of 	the	loan	contract.	In	such	cases,	failure	to	comply	 with	loan	conditions	is	a	breach	of 	contract	only,	and	is	therefore	purely	a	civil	 matter.	 In	an	ordinary	breach	of 	contract,	the	creditor	may	seek	remedy	(usually	in	the	 form	 of 	 damages)	 under	 civil	 proceedings.15	 Of 	 course,	 in	 practice	 a	 creditor	 who	suffers	loss	will	wish	to	use	all	possible	means	to	force	a	debtor	to	repay	 a	loan	-	including	by	making	a	request	to	the	police	that	the	debtor	should	be	 arrested	for	breach	of 	trust.		In	such	cases,	the	purpose	of 	such	a	request	is	to	 threaten	the	defaulting	debtor	[given	that	the	criminal	sanctions	for	breach	of 	 trust	are	considerably	stronger	than	the	civil	sanctions	for	breach	of 	contract].	 Nonetheless,	in	an	ordinary	[civil]	case	of 	breach	of 	contract,	the	use	(or	threat)	 of 	criminal	sanctions	may	be	regarded	as	improper,	and	both	the	creditor	and	 the	police	themselves	risk	being	accused	of 	illegally	detaining	the	debtor	in	the	 event	that	he	or	she	is	imprisoned.	In	cases	where	a	debtor	has	been	improperly	 imprisoned,	the	court	and	the	prosecutor	may	themselves	be	sued	by	the	debtor	 in	 the	 Supreme	 Council	 of 	 Magistracy.	 Should	 this	 happen,	 it	 would	 then	 become	the	responsibility	of 	the	Supreme	Council	of 	Magistracy	to	examine	the	 propriety	of 	the	actions	and	intent	of 	the	judges	and	the	prosecutor	implicated	 in the detention of an individual without proper legal justification.

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APPENDIX 5

15				It	should	also	be	noted	that	in	circumstances	where	a	debtor	has	used	deceit	or	fraud	 to	negotiate	a	loan	contract	with	a	creditor,	then	the	debtor	may	be	accused	of 	fraud,	but	not	 breach	of 	trust.	It	is,	however,	necessary	to	further	consider	the	element	of 	fraud in	order	to	 determine	this.

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There	are	many	reasons	why	a	debtor	may	default	under	her	or	his	contractual	 obligations	 to	 repay	 a	 loan	 to	 a	 creditor.	 	 Common	 reasons	 for	 such	 failure	 include	 bankruptcy,	 losses	 resulting	 from	 an	 incidental	 disaster,	 an	 improper	 business	plan,	or	other	matters.	However,	the	obligation	to	manage	the	risk	of 	 a	 debtor	 defaulting	 lies	 not	 with	 the	 debtor	 but	 with	 the	 creditor.	 Therefore,	 before	providing	a	loan,	the	creditor	should	assess	the	debtor’s	capacity	to	repay	 the	debt.	 In	a	free	market	economy,	the	law	protects	the	right	[of 	debtors	and	creditors]	 to	freely	contract	as	this	is	important	to	ensure	the	economy	functions	smoothly.	 If 	a	state	should	interfere	in	freedom	of 	contract	by,	for	example,	the	abusive	or	 improper	enforcement	of 	the	breach	of 	trust	law	(by	for	example	imprisoning	 defaulting	debtors),	then	it	creates	uncertainty	and	unpredictability	in	contract	 formation.	The	risk	 is	that	it	may	make	investors	fearful	they	could	lose	their	 freedom	and	be	imprisoned	under	criminal	law	[for	a	breach	of 	contract].	As	a	 result,	parties	may	become	reluctant	to	seek	or	give	credit	for	business	ventures,	 as a failure to fulfill contractual obligations may lead to criminal proceedings. The purpose	of 	the	Law	on	Breach	of 	Trust	is	to	protect	property	from	fraudulent	 intent,	not	to	hinder	the	formation	of 	contracts	in	daily	life.	A	party	entering	into	 a	contract	has	voluntarily	assumed	the	usual	risks	involved	in	general	business	 operations. F.2		Failure	of 	Contract	Negotiation	 Before	reaching	an	agreement	and	signing	a	contract,	parties	usually	negotiate	the	 terms	and	conditions	that	are	to	be	incorporated	into	their	contract.	However,	 not	 all	 negotiations	 are	 successful.	 At	 some	 point,	 one	 or	 both	 parties	 may	 withdraw	their	intention	to	enter	into	a	contract	should	it	prove	impossible	to	 reach	mutual	agreement	on	the	proposed	terms	and	conditions	of 	the	contract.	 In	such	cases,	no	contract	has	been	formed.	Although	one	of 	the	parties	may	be	 “disappointed”	by	this	failure	of 	the	negotiation	process	to	produce	a	satisfactory	 contract,	it	does	not	give	rise	to	a	breach	of 	trust.		Both	in	ordinary	and	legal	 language,	 “disappointment”	 (in	 Khmer,	 “kar	 khoakchet”)	 “breach	 of 	 trust”	 are	not	synonymous.	Disappointment	is	the	state	of 	mind	of 	someone	whose	 expectations	 are	 not	 met.	 “Breach	 of 	 trust”	 applies	 when	 a	 person	 has	 been	 entrusted	with	the	property	of 	another	person	and	has	acted	against	the	interests	 of 	the	owner	in	a	manner	that	is	damaging	to	the	owner.	 If 	it	were	anticipated	that	contract	negotiations	could	bring	harm	to	one	of 	the	 parties	through	adverse	consequences,	then	it	is	unlikely	that	people	would	enter	 contract	negotiations.		If 	this	were	the	case,	it	would	make	business	operations	 impossible	as	an	accusation	of 	breach	of 	trust	would	create	“high	risk”	for	the	 negotiating partners. The principle of a free market economy, codified in, and promoted	by	the	Cambodian	constitution,	is	to	encourage	freedom	of 	contract	 without	deterrence	or	threat	of 	any	kind. 0

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APPENDIX 5

Breach of Trust

F.3		Leases	for	the	rental	of 	land	(real	property)			 The	 law	 on	 breach	 of 	 trust	 applies	 to	 property	 leases	 in	 much	 the	 same	 way	 as	it	does	to	other	types	of 	property.	A	lease	is,	in	essence,	simply	a	contract,	 albeit	a	contract	relating	to	the	use	of 	real	property.	In	a	lease	the	lessor	(the	 property	owner)	agrees	to	lease	out	his	or	her	premises	to	another	person	(the	 lessee, or renter), in exchange for a rental fee. In Cambodia, most parties fix the duration	of 	the	lease	and	require	payment	of 	a	security	deposit	to	ensure	that	 if the lessee terminates the lease before its specified term, that the lessor can keep	the	security	deposit	to	cover	any	rent	that	is	due.16	In	the	lease	of 	premises	 discussed	here,	the	lessee	causes	no	damage	to	the	lessor	but	merely	terminates	 the	contract	before	its	term.		Although	the	lessee	may	have	caused	the	lessor	 “disappointment” when s/he did not find someone to take over the lease, the lessee	may	not	be	accused	of 	breach	of 	trust	because	the	lessor’s	property	rights	 were	not	impaired.	The	lessee	may	have	breached	the	contract;	however,	such	a	 breach	is	solely	a	contract	dispute	that	needs	to	be	resolved	by	compensation	for	 damages	arising,	and	in	no	case	may	the	lessee	be	punished	for	breach	of 	trust. Sometimes	 the	 lessee	 causes	 damage	 to	 the	 premises.	 Such	 damage	 does	 not,	 however,	constitute	one	of 	the	elements	of 	breach	of 	trust.		Rather,	such	damage	 is	a	non-contractual	or	tortious	liability	for	which	the	lessor	may	be	compensated	 in	a	civil	action.

APPENDIX 5

G. Conclusion
Improper	 enforcement	 of 	 the	 law	 not	 only	 affects	 the	 rights	 and	 freedom	 of 	citizens	but	may	also	cause	damage	to	the	national	economy	as	the	public	 will not have confidence in the legal system if it does not protect its interests. The	purpose	of 	the	law	on	breach	of 	trust	is	to	protect	property	from	being	 fraudulently	taken	by	a	dishonest	person.		The	main	features	of 	this	law	are:	(1)	 the	owner	gives	custody	of 	the	property	to	another	person;	(2)	the	terms	are	 those of any of the five contracts discussed above; (3) the owner reserves the right	to	such	property,	that	is,	no	ownership	is	transferred	from	the	owner	to	the	 receiver	but	the	receiver	has	the	right	to	control	the	property;	(4)	the	deliveree	 misappropriates	the	property	in	a	manner	that	demonstrates	criminal	intent,	or	 uses	the	property	in	violation	of 	the	terms	of 	an	agreement	in	the	contract;	(5)	 that	which	causes	damage	to	the	owner.		On	the	other	hand,	not	all	breaches	of 	 contract	are	“breaches	of 	trust”.		The	elements	of 	such	an	offense	should	be	 thoroughly	examined.

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16				Please	note	a	property	lease	is	different	from	a	rental	contract	such	as	that	given	in	the	 example	in	E.1,	above.	The	‘lease’	[i.e.	rental	contract]	in	section	E.1	refers	to	circumstances	 where	one	party	leases	personal	property	(such	as	an	automobile)	from	another	party,	and	the	 lessee	[i.e.	the	accused]	fraudulently	takes	away	the	automobile,	causing	damage	to	the	owner’s	 property	interest.

1

Appendix 6

Ministry of Justice Case Data

Analysis	of 	Information	Provided	by	Ministry	of 	Justice Table 1:	Number	of 	Breach	of 	Trust	Cases	in	Three	Provinces	(Battambang,	 Kompong	Som	and	Kompong	Cham)	and	the	Municipality	of 	Phnom	Penh	for	 the	Years	2002-2005
Province/ Municipality Phnom	Penh10 Battambang Kompong	Som Kompong	Cham Total	Breach	of 	Trust	Cases 2002 2003 2004 2005 Total	By	 Percentage	of 	 Province Total 861 205 99 37 1,202 71.6% 17.1% 8.2% 3.1%

unknown unknown 49 27 3 65 21 4

unknown unknown 49 29 13 42 22 17

APPENDIX 6

Source of Information: Documents prepared by the individual provinces/municipality and supplied by the Ministry of Justice in April 2006.

Table 2:	Comparison	of 	Breach	of 	Trust	Cases	to	Certain	Other	Crimes	in	the	 Municipality	of 	Phnom	Penh	for	the	Years	2000-2005
Crimes Breach	of 	Trust Fraud Theft Robbery Battery Total	Number	of 	Cases11 Number	of 	Cases 1,136 1,167 2,159 1,663 2,566 13,770 Percentage	of 	Total	 Number 8.2% 8.5% 15.7% 12.1% 18.6%

Private Sector Discussions No.23

Source of Information: Documents prepared by the municipality of Phnom Penh and supplied by the Ministry of Justice in April 2006.

10	Phnom	Penh	reported	only	an	aggregate	total	for	2002-2005	and	an	aggregate	total	for	 2000-2005.		Table	1	uses	the	aggregate	total	for	2002-2005,	while	Tables	2	and	3	use	the	 aggregate	total	for	2000-2005.		This	decision	was	dictated	by	the	information	available	from	the	 other	provinces,	each	of 	which	reported	different	data	in	a	different	form.		 11	This	represents	the	total	number	of 	criminal	cases	in	Phnom	Penh	between	2000	and	2005,	 including	many	categories	of 	crimes	that	are	not	included	in	Table	2.

3

Mekong Private Sector Development Facility

Table	3:	Comparison	of 	Breach	of 	Trust	Cases	as	a	Percentage	of 	Total	Cases	 in	Phnom	Penh,	Kompong	Cham	and	Battambang	for	the	Years	2000-2005.
Province/ Municipality Phnom	Penh Battambang Kompong	Cham Breach	of 	Trust	 Total	Number	of 	 Cases Cases 1,136 259 58 13,770 5,059 3,368 Breach	of 	Trust	as	 Percentage	of 	Total 8.2% 5.1% 1.7%

Source of Information: Documents prepared by the individual province/municipality and supplied by the Ministry of Justice in April 2006.

Private Sector Discussions No.23

APPENDIX 6
4

Appendix 7

The Joint Instruction by the Minister of Justice and the President of the Supreme Court on Criminal Breach of Trust

KINGDOM OF CAMBODIA Nation Religion King Ministry of Justice No.	02	 	 	 	 	 	 Phnom	Penh	08th	August	2005

Joint Instruction MINISTER OF THE MINISTRY OF JUSTICE AND PRESIDENT OF THE SUPREME COURT To: - President, Vice-President and Judges in all Provincial-Municipal Courts - Prosecutors, Deputy-Prosecutors of the Provincial-Municipal Courts Subject:	 Instruction	 on	 the	 implementation	 of 	 Article	 46	 of 	 the	 Transitional	 Criminal	Law	(1992). 	 The	 Ministry	 of 	 Justice	 and	 the	 Supreme	 Court	 have	 found	 that	 the	 application	of 	Article	46	concerning	“Breach	of 	Trust”	of 	the	1992	Transitional	 Criminal	 Law	 in	 courts	 throughout	 the	 country	 has	 not	 been	 consistent.	 Furthermore,	[The	Ministry	of 	Justice	and	the	Supreme	Court	have	found	that]	 the	distinction	between	civil	disputes	arising	from	failure	to	perform	a	contractual	 obligation	 and	 [disputes	 arising	 from	 actions	 that	 constitute	 the]	 elements	 of 	 Breach of Trust remains an issue that needs to be clarified. 	 Breach	of 	Trust	is	an	act	of 	embezzlement,	[or]	misappropriation	of 	-	or	taking	 possession	in	partial	or	full	violation	of 	another’s	rights	–	in	property	entrusted	 by	the	owner	or	possessor	and	which	the	owner	[either]	expects	to	get	back,	or	 expects	results	of 	any	work	from	the	person	so	entrusted. 	 To	provide	a	basis	for	prosecuting	and	rendering	judgments,	and	for	distinguishing	 [the	differences]	between	civil	disputes	and	Breach	of 	Trust	offenses,	the	Ministry	 of 	Justice	and	the	Supreme	Court	hereby	instruct	all	provincial-municipal	courts	

Private Sector Discussions No.23

APPENDIX 7


Mekong Private Sector Development Facility

and prosecutors’ offices to pay attention and take into consideration the following legal	concepts	stipulated	in	Article	46	of 	the	UNTAC	Law: Elements of the offence of Breach of Trust are: 1. [The	Breach	of 	Trust	offense]	is	stipulated	in	the	law.	That	is,	Article	46	 of 	the	UNTAC	Law. 2. The	offender	has	the	intention	to	embezzle	or	misappropriate	property	 entrusted	by	another	party	—	that	is,	there	is	a	clear	intention	not	to	 return	 or	 show	 the	 property	 or	 results	 of 	 [contracted]	 work	 [to	 the	 owner]—and	[such	act	of 	embezzlement	or	misappropriation]	was	not	 caused	by	a	[mitigating]		incident	[or]	impediment;	and	there	shall	also	 be	 [an	 actual	 act	 of]	 embezzlement	 or	 misappropriation	 done	 by	 the	 person to whom the property is entrusted and is reflected by a failure to	return	property,	or	the	misappropriation	of 	the	returned	property	in	 terms	of 	quantity	and	quality. 3. The	substance	or	target	of 	the	Breach	of 	Trust	provisions	include:	 4. Property,	 cash,	 merchandise,	 any	 document	 containing	 or	 stating	 an	 obligation	 or	 discharge	 entrusted	 in	 the	 form	 of 	 lease,	 bailment,	 mandate,	 loan,	 or	 loan	 for	 payable	 or	 non-payable	 work,	 which	 is	 to	 be	returned,	represented,	or	utilized	as	designated	by	the	owner	to	the	 entrusted	person	who	lawfully	receives	the	property	under	the	following	 six	types	of 	contracts:	[i]	lease,	[ii]	bailment,	[iii]	mortgage,	[iv]	loan,	[v]	 mandate,	and	[vi]	work	contract	between	workers	or	employees	or	not	 between	employers	and	workers	or	employees. 5. There	are	damages	to	the	interests	of 	the	owner,	owner	of 	the	place,	or	 possessor	who	entrusted	the	property. Other	than	the	aforementioned	six	 types	of 	 contracts,	the	Ministry	of 	 Justice	 and	the	Supreme	Court	would	like	to	remind	and	request	all	judges	to	carefully	 consider	failures	to	perform	contractual	obligations	under	civil	contracts.		These	 include	 purchase-sale,	 loan	 for	 consumption	 (such	 as	 contracts	 involved	 in	 the	 loan	 of 	 cash),	 gift	 contracts	 to	 which	 an	 obligation	 is	 attached	 …	 [Under	 these	 contracts],	 even	 if 	 the	 receiver	 of 	 the	 property	 fails	 his/her	 obligation,	 for	whatever	reason,	to	return	it	to	the	giver	of 	the	property,	it	is	not	an	act	of 	 misappropriation	or	embezzlement	that	constitutes	a	Breach	of 	Trust.			 Damages	to	the	interests	of 	the	owner	of 	a	property	that	does	not	constitute	a	 Breach	of 	Trust	may	be	considered	as	another	type	of 	crime	if 	so	stipulated	in	 the	law. The	Ministry	of 	Justice	and	the	Supreme	Court	will	take	measures	in	accordance	 

Private Sector Discussions No.23

APPENDIX 7

Breach of Trust

with	the	law	[to	deal	with]	any	non-compliance	with	this	provision	of 	the	law. The	Ministry	of 	Justice	and	the	Supreme	Court	hope	that	all	judges	will	be	vigilant	 in	appropriately	 implementing	the	provision	 of 	Article	46	of 	the	Transitional	 Criminal	Law	to	protect	the	rights	of 	the	citizen	[to	enable	them	to	take]	part	 in	 the	 development	 of 	 the	 national	 economy	 and	 to	 increase	 the	 public	 and	 investors’ confidence in the Cambodian judicial system and laws. 	 The	President	of 	the	Supreme	Court	 Minister	 of 	 the	 Ministry	 of 	 Justice 	 	 	 	 	 	 	 	 	 H.E	Dith	Munty	 [Seal	and	Signature]	 H.E	Ang	Vong	Vathana [Seal	and	Signature]

CC: -	Council	of 	Ministers -	Supreme	Council	of 	Magistracy -	Prosecutor	General	attached	to	the	Supreme	Court -	Court	of 	Appeal	and	Persecutor	 -	File	and	Chronology

Private Sector Discussions No.23

APPENDIX 7


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The International Finance Corporation (IFC), the private sector arm the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. In the Mekong region, IFC manages the Mekong Private Sector Development Facility (MPDF), an advisory services program covering Lao PDR, Vietnam and Cambodia. IFC MPDF’s donors are Australia, Canada, the European Union, Finland, IFC, Ireland, Japan, New Zealand, the Netherlands, Norway, Sweden, and Switzerland.

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