Recharacterisation

Recharacterisation in law (and sometimes in accountancy) means the treatment of a certain course of conduct in a different manner to which the participants describe it.

The term is most important in the penal law of Continental legal systems. In some civil law countries, judges are empowered to "recharacterise the facts" of a case to make the charges more closely align with the evidence. In these systems, the legal charges contained in the indictment are only suggestions from the public prosecutor to the court.[1] The judge may, if it becomes clear that the facts actually support different or additional charges, change the legal characterisation of those facts.

When the recharacterisation of the facts results in additional charges, or charges which carry a greater penalty, the defense council is usually given an opportunity to be heard concerning the recharacterisation and may request a suspension of the trial to study the recharacterisation.[2] In others, this right to suspend the trial is only implicated if the recharacterisation results in more serious charges.[3]

In some legal systems, the court may not recharacterise the facts if it will result in more serious charges.[4]

However, the application of recharacterization is also a general principle of the law of most countries, and may be applied to an artificial arrangement which seeks to artificially overcome a certain law or regulation. For example, in Street v Mountford [1985] 1 AC 809 the House of Lords confirmed that an agreement described as a license for non-exclusive occupation of a property should, in fact, be treated as a lease for the purposes of determining the licensees' (or tenants') rights, although Lord Templeman did not actually use the phrase "recharacterisation" in his speech. Similar, in many jurisdictions, tax authorities have power recharacterize transactions that are "shams", or which otherwise have no commercial substance except to mitigate tax liability.

References

  1. German Code of Criminal Procedure (Strafprozeßordnung ["StPO"]), § 206
  2. See e.g.: France, Code of Criminal Procedure Art. § 118
  3. See e.g.: Malta, Criminal Code § 597(3)
  4. See e.g.: Russian Federation, Code of Criminal Procedure art. 252(2)
  5. For example, in England, most grants of a security interest must be registered within 21 days at Companies House
  6. WDA v Export Finance Co [1992] BCLC 148, CA
  7. Michael Simkovic, "Secret Liens and the Financial Crisis of 2008", American Bankruptcy Law Journal 2009
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