Breach of Trust in Cambodia

PRIVATE SECTOR DISCUSSIONS
Number 23
BREACH OF TRUST
Its Improper Use and
Impact on the Cambodian
Economy
Table of Contents
Acknowledgements 5
Executive Summary 7
Chapter 1: Introduction 11
1. Purpose of Study 11
2. What is Breach of Trust 11
3. Why does Cambodia have a Breach of Trust Law 12
4. Why Application of the Breach of Trust Law is a Problem in Cambodia 13
Chapter 2: Criminal Breach of Trust 17

1. Elements of Criminal Breach of Trust 17
2. Physical Elements of Breach of Trust 18
3. The Mental Element – Intent to Commit the Crime 21
4. The New Criminal Code 22
Chapter 3: Misapplication of Breach of Trust in Cambodia 25

1. Misapplication of the Breach of Trust Law is a Problem 25
2. Misapplication of the Breach of Trust Law: Why and How? 26
Chapter 4: Breach of Trust Costing Millions in Lost Investment 33
Chapter 5: Recommendations & Conclusion 37
Appendix 1 – Research Methodology 43

Appendix 2 – Case Studies 47
Appendix 3 – Media Reports 53
Appendix 4 – Business Sentiment Survey Results 55
Appendix 5 – Technical Legal Analysis of Breach of Trust Law 59
Appendix 6 – Ministry of Justice Case Data 73
Appendix 7 – The Joint Instruction by the Minister of Justice
and the President of the Supreme Court on Criminal Breach of Trust 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. Private
Many business people participated in this work by cooperating with the research Sector
team through direct interviews and responding in writing to survey questions. Discussions
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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.

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;

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2. The accused must have promised to return the property to its owner or Sector
use it for a specific purpose; and Discussions
3. The accused must have disposed of or misappropriated the property No.23
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.
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
EXECUTIVE SUMMARY
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.
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 pre-
trial 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
Private of recovering the bail payment regardless of the outcome of the case.
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Discussions The Economic Impact on Cambodia
No.23
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
EXECUTIVE SUMMARY
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. Private
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Discussions
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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
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(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.
2. What is Breach of Trust
Breach of trust is defined in Article 46 of the Transitional Criminal Law. The

Private
crime of a breach of trust is comprised of three key physical elements and one Sector
mental element. The essential physical elements are: Discussions
No.23
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.
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. 11
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
UNTAC reported that Cambodia in 1992 lacked the basic legal institutions and
processes required of a legal system. The existing legal and institutional structures
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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
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national law.”(Honoring Human Rights – Alice H Henkin)
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Discussions The Transitional Criminal Law was viewed by UNTAC as a temporary measure,
No.23 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
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
12 December 2007)
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
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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 Private
risk of breach of trust, indicates a range of lost investment worth between $3 Sector
million and $12.1 million dollars for those seven individuals alone. 9 Discussions
No.23
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. 13
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
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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
Private
Sector
Discussions
No.23
14
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
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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 Private
in the current French Criminal Code. It is unclear why the law supported by Sector
UNTAC is so closely based on the language of the old French Penal Code, but it Discussions
would be beneficial to simplify the text to improve its clarity. Second, according No.23
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.
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.
17
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
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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.
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.
Private
Sector
Discussions Each element will be discussed below. This discussion is not intended to be a
No.23 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.
18
Breach of Trust
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.
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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
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made a promise to the owner that she will return it. This limits her rights to the
Sector
property. She cannot sell it or give it away. She must return it. Discussions
No.23
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
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)
19
addresses this issue in some detail.
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
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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
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one that was agreed on. So, for example, misappropriation might occur when
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someone who has borrowed a motorcycle from a friend sells that motorcycle to a
Discussions
No.23 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
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
20 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:
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• 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. Sector
One is a criminal; the other is the victim of bad luck. Yet both have committed Discussions
the physical elements of the crime of breach of trust. Both have been entrusted No.23
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
21
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
CHAPTER 2
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
Private
Sector same mental element. Essentially, the only change has been to remove some of
Discussions the language that has led to problems with the interpretation of Article 46. For
No.23 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.
13 See Keo Tam, complainant v. Chhun Nay Suor, accused (Supreme Court of Cambodia,
22 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
CHAPTER 3
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 Private
damages in excess of $100,000. Sector
Discussions
The Joint Instruction of the Minister of Justice and the President of the Supreme No.23
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 25

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
CHAPTER 3
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
Private
Sector All eleven respondents to the survey (see Appendix 4) stated that the Breach of
Discussions Trust Law is applied fairly either “almost never” or only “some of the time.”
No.23
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
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
26 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
Private
business.
Sector
Discussions
Case Study 3 also cannot be a breach of trust as the complainant had not No.23
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.
18 These case studies are based on the experiences of real people. However, the identifying
27
information in the stories has been changed to conceal the identities of the participants.
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.”
Why are complainants willing to pay to have people charged with crimes?
CHAPTER 3
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
Private
Cambodian law in order to elicit the largest possible amount of the allegedly
Sector
misappropriated money and settle the case prior to the accused appearing in
Discussions
No.23 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
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.”
28 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 pre-
trial 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
CHAPTER 3
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,
Private
were tens of thousands of dollars for each case. Several interviewees indicated
Sector
that once “bail” has been paid, the charges are usually either withdrawn by the Discussions
complainant or dismissed by the judge; in other cases, action on the case may No.23
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
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 29
during the appeals process.
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
CHAPTER 3
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,
Private
Sector which was probably unnecessary. However, her lawyer was able to secure her
Discussions release from jail without having to make a payment. Her lawyer was then able to
No.23 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.
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
CHAPTER 4
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 Private
can help in identifying the kinds of costs associated with improper breach of Sector
trust cases, and second, they can be used to estimate the costs for the individuals Discussions
and companies who were interviewed or surveyed. No.23
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
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
33
Cambodia.
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
CHAPTER 4
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
Private
to be the most cautious. Most of the commercial lawyers and business
Sector
consultants reported having counseled their clients to be selective in choosing
Discussions
No.23 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
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 How often have you What is the value of the
think it costs to be turned down investment investment opportunities you
sued for breach of opportunities because of have turned down because of
trust? the risk of breach of trust? the risk of breach of trust?
1 $5,000 - $50,000 Very Often $1-5 Million
CHAPTER 4
2 $5,000 - $50,000 Often $250,000 - $500,000
3 $5,000 - $50,000 Very Often No Answer
4 $5,000 - $50,000 Sometimes No Answer
5 $5,000 - $50,000 Never No Answer
6 Less Than $5,000 Sometimes Less Than $50,000
7 $5,000 - $50,000 Often $250,000 - $500,000
8 $5,000 - $50,000 Sometimes No Answer
9 $5,000 - $50,000 Very Often $1-5 Million
10 $5,000 - $50,000 Often $500,000 - $1 Million
11 No Answer No Answer 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.
Private
Sector
Discussions
No.23
35
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
CHAPTER 5
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 Private
breach of trust cases, the complainant will not have entrusted the accused with Sector
any property, and there will probably be no evidence of criminal intent. Indeed, Discussions
as Case Studies 1 and 3 demonstrate, there may even be evidence that the No.23
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
37
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
CHAPTER 5
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.
Private
Coordinate with Government, the Business Community, Civil Society, and
Sector
the Media to Closely Scrutinize Breach of Trust Cases
Discussions
No.23
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
38
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
CHAPTER 5
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
Private
where there is a genuine risk of the accused escaping.
Sector
Discussions
This recommendation could be implemented through written guidelines to No.23
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.
39
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.
CHAPTER 5
Private
Sector
Discussions
No.23
40
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 Private
Appendix 6. Unfortunately, while the Ministry of Justice endeavored to provide Sector
information where it could for this research, beyond the data provided, relatively Discussions
limited information is kept by the Ministry. Judgments on breach of trust cases No.23
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
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.
In addition to newspaper reports, partial information, on 20 breach of trust

APPENDIX 1
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.
Private
Sector
Discussions
No.23
44
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
APPENDIX 2
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. Private
Sector
Discussions
Mr. A has never been able to recover the $40,000 that he paid in bail, and has No.23
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.
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.
47
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
APPENDIX 2
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.
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.
Private Identifying information has been changed at the request of the interviewees.
Sector
Discussions
No.23
48
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
APPENDIX 2
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.
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.
Private
Sector
Discussions
No.23
49
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
APPENDIX 2
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.
Private
The facts of this case are taken from the Supreme Court’s decision in Keo Tam v.
Sector Chhun Nay Suor (Criminal Case Number 62, dated September 4, 2001, Verdict
Discussions Number 4, dated January 9, 2002).
No.23
50
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
APPENDIX 2
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.
The facts of this case are based on the Kompong Cham Provincial Court’s decision in Private
Mr. Khong Pheou v. Mr. Bun Srun (Criminal Dossier Number 47, dated January 25, Sector
1994, Judgment Number 41, dated May 12, 1994). Discussions
No.23
51
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 34

Cases where arrest warrant was issued 33
Percentage of cases where arrest warrant was issued 97%
APPENDIX 3
Number of cases where accused was arrested
Cases where information on arrest was available 34

Cases where accused was arrested 32
Percentage of cases where accused was arrested 94%
Number of cases where accused was placed in pre-trial detention
Cases where information on pre-trial detention was available 31

Cases where accused was placed in pre-trial detention 29
Percentage of cases where pre-trial detention was used 94% Private
Sector
Discussions
No.23
53
Appendix 4
Business Sentiment Survey Results
Analysis of Survey Results
Question 1: Do the courts fairly apply the breach of trust law?
Almost always 0
Most of the Time 0
APPENDIX 4
Some of the Time 5
Almost Never 6
Total Responses 11
Question 2: Are breach of trust cases filed improperly?
Almost always 2
Most of the Time 4
Some of the Time 3
Almost Never 1
Total Responses 10
Private
Sector
Question 3: Does bribery affect the outcome of breach of trust cases? Discussions
No.23
Almost always 8
Most of the Time 3
Some of the Time 0
Almost Never 0
Total Responses 11
55
Question 4: How much do the following risks concern you?
Loss of Money? Loss of Reputation? Time spent in Jail?

Very concerned 8 7 6
Concerned 2 1 0
Slightly concerned 0 0 1
Not concerned 0 1 1
Total Responses 10 9 8
Question 5: How much do you think it costs to be sued for breach of

trust?
Less than $5,000 1
APPENDIX 4
$5,000 - $50,000 9
$50,000 - $150,000 0
$150,000 - $500,000 0
More than $500,000 0
Total Responses 10
Question 6: How often have you turned down investment opportuni-

ties because of the risk of breach of trust?
Very often 3
Often 3
Sometimes 3
Private
Sector Never 1
Discussions Total Responses 10
No.23
56
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 2
$50,000 - $250,000 0
$250,000 - $500,000 2
$500,000 - $1,000,000 1
$1-5 million 2
More than $5 million 0
Total Responses 7
Question 8: In your opinion, how much would the following changes

improve the situation?
Create a special
APPENDIX 4
Make it more Eliminate
More More commercial
difficult to jail terms
training training court to hear
use pre-trial for breach
for police? for judges? breach of trust
detention? of trust?
cases?
Big Improvement 5 6 4 1 6
Moderate
2 2 2 2 2
Improvement
Slight
1 1 3 2 1
Improvement
No Improvement 1 0 0 3 0
Total Responses 9 9 9 8 9
Private
Sector
Discussions
No.23
57
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
APPENDIX 5
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.
B. Analysis of Sentence Structure and Terminology in Article

Private
46 Regarding Breach of Trust Sector
Discussions
Based on a comparison of Article 408 of the [former] French criminal code and No.23
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
59
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,
APPENDIX 5
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
Private
of, or manage the property (i.e. through sale or donation). With regard to the
Sector
terms used in the French text of the law, the term “mchas ti kanlaeng” (“owner
Discussions
No.23 of the place”) might have been translated from the French term “possesseurs”
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
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
or discharge’
60 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
APPENDIX 5
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,

Private
possessor or holder of:
Sector
a. property; Discussions
b. money; No.23
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
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.
61
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
APPENDIX 5
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.
C. Elements of Breach of Trust
C.1 Material Element (Objective)
Private A material element refers to an act of misappropriation. Such an act of

Sector
misappropriation occurs when the owner can no longer exercise rights over the
Discussions
property because it has been misappropriated by the person to whom it was
No.23
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;
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
62 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
Private
money entrusted to him by Mr. Veasna on the expectation that he will increase
Sector
Mr. Veasna’s money. Unfortunately, the debtor defaults and disappears. In this Discussions
case, it is unlikely that Mr. Chan has fraudulently intended to cause damage to his No.23
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
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. 63
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
APPENDIX 5
intent on the part of the accused.
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
Private from the French criminal code, it is necessary to examine the derivation of the
Sector term “troapsambat”. The term troapsambat in Article 46 was translated from the
Discussions word “biens” in French. One phrase in judicial order No. 6295, dated October
No.23 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.
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.
64 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
APPENDIX 5
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.
Private
D.2 Money and Goods
Sector
Discussions
In terms of Article 46, ‘money’ and ‘goods’ are property items which are most No.23
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.
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/UJI-
65
CR%205-21.HTM
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
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
APPENDIX 5
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?
Private
E. Contractual Relationship Between the Owner and the
Sector Recipient of the Property
Discussions
No.23 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;
66
Breach of Trust
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)
APPENDIX 5
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)

Private
In Section 6 of the Decree regarding Contract and Other Liabilities, there is
Sector
reference to a “bailment contract”. Article 89 defines a bailment as a “contract Discussions
whereby a person (“the bailee”) is given custody of the personal property of No.23
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.
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. 67
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.
Private
Sector
E.5 Labor Contract with Pay or without Pay
Discussions
No.23
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
68
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,
APPENDIX 5
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]. Private
Nonetheless, in an ordinary [civil] case of breach of contract, the use (or threat) Sector
of criminal sanctions may be regarded as improper, and both the creditor and Discussions
the police themselves risk being accused of illegally detaining the debtor in the No.23
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.
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. 69
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,
APPENDIX 5
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
Private
language, “disappointment” (in Khmer, “kar khoakchet”) “breach of trust”
Sector
are not synonymous. Disappointment is the state of mind of someone whose
Discussions
No.23 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.
70
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.
APPENDIX 5
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.
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 Private
right to such property, that is, no ownership is transferred from the owner to the Sector
receiver but the receiver has the right to control the property; (4) the deliveree Discussions
misappropriates the property in a manner that demonstrates criminal intent, or No.23
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.
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 71
property interest.
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/ Total By Percentage of
2002 2003 2004 2005
Municipality Province Total
Phnom Penh10 unknown unknown unknown unknown 861 71.6%
APPENDIX 6
Battambang 49 65 49 42 205 17.1%
Kompong Som 27 21 29 22 99 8.2%
Kompong Cham 3 4 13 17 37 3.1%
Total Breach of Trust Cases 1,202
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
Percentage of Total
Crimes Number of Cases
Number
Breach of Trust 1,136 8.2% Private
Fraud 1,167 8.5% Sector
Discussions
Theft 2,159 15.7%
No.23
Robbery 1,663 12.1%
Battery 2,566 18.6%
Total Number of Cases11 13,770
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, 73
including many categories of crimes that are not included in Table 2.
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/ Breach of Trust Total Number of Breach of Trust as

Municipality Cases Cases Percentage of Total
Phnom Penh 1,136 13,770 8.2%

Battambang 259 5,059 5.1%
Kompong Cham 58 3,368 1.7%
Source of Information: Documents prepared by the individual province/municipality and supplied by the Ministry of Justice
in April 2006.
APPENDIX 6
Private
Sector
Discussions
No.23
74
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
APPENDIX 7
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 Private
Sector
obligation and [disputes arising from actions that constitute the] elements of
Discussions
Breach of Trust remains an issue that needs to be clarified. No.23

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
77
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.
APPENDIX 7
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
Private
Sector consider failures to perform contractual obligations under civil contracts. These
Discussions include purchase-sale, loan for consumption (such as contracts involved in
No.23 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
78
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 H.E Ang Vong Vathana
[Seal and Signature] [Seal and Signature]

CC:
APPENDIX 7
- 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
79
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Breach of Trust in Cambodia

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Breach of Trust in Cambodia

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PRIVATE SECTOR DISCUSSIONS

Chapter 2: Criminal Breach of Trust 17

Chapter 3: Misapplication of Breach of Trust in Cambodia 25

Chapter 4: Breach of Trust Costing Millions in Lost Investment 33

Chapter 5: Recommendations & Conclusion 37

Appendix 1 – Research Methodology 43

This Discussion Paper on the improper application of the “Breach of Trust”

Elements of a Breach of Trust

Breach of trust is a criminal offence defined in Article 46 of the “Provisions

1. The property must have been entrusted to the accused;

Breach of Trust Cases in Cambodia

What Happens to People Charged With Breach of Trust

Summary of Report Recommendations

1. Pass the draft Penal Code provisions on breach of trust.

3. Coordinate the activities of the government, business community, civil

2. What is Breach of Trust

Breach of trust is defined in Article 46 of the Transitional Criminal Law. The

The required mental element of criminal breach of trust is a criminal intent.

3. Why does Cambodia have a Breach of Trust Law

Political control of the judiciary and unsatisfactory penal legislation prompted

3 See for example, http://www.un.org/Depts/dpko/dpko/co_mission/untac.htm (accessed 10

4. Why Application of the Breach of Trust Law is a

The inappropriate application of the Breach of Trust Law damages the

“The abuse of breach of trust has a negative impact on business. It discourages

Mr. Bretton G. Sciaroni,

1. Elements of Criminal Breach of Trust

Criminal breach of trust is defined in Article 46 of the Transitional Criminal

Unfortunately, Article 46 is not concise and is complex and difficult to

2. Physical Elements of Breach of Trust

1. Property (including intangible property) must have been entrusted to the

2.1 Property Must Have Been Entrusted to the Accused

2.2 The Accused Must Have Promised to Return the Property

This element is found in the language “having promised to return it or to offer it

2.3 The Accused Has Disposed of or Misappropriated the

There is also a requirement of harm to the owner in this element. It is not

3. The Mental Element – Intent to Commit the Crime

Criminal intent is a required element of the crime of breach of trust. The

4. The New Criminal Code

Breach of trust is committed when a person, to the prejudice of other

1. Misapplication of the Breach of Trust Law is a Problem

14 Data provided by the Ministry of Justice 25

2. Misapplication of the Breach of Trust Law: Why and How?

A. Contract Disputes Can Lead to Criminal Breach of Trust Charges

The distinctions between civil disputes arising from failures to perform

Moreover, the Joint Instruction explicitly emphasizes that criminal breach of

The business community and other stakeholders, however, have expressed

Even if a contract involving the entrustment of property does exist, the

B. Unofficial Payments Appear to Play a Significant Role in

If the accused refuses to pay, he or she will be brought before an investigating

in pre-trial detention varied greatly. According to the media database, some

C. The System Can Work Properly

While Breach of Trust Law often seems to be misapplied, cases involving

There appear to be a number of ways in which improper breach of trust cases

Lost Investment Opportunities Caused by Improper Breach of Trust

Reducing the Impact of Criminal Breach of Trust Cases on the

Pass the Draft Penal Code Provisions on Breach of Trust

Focus on the Elements of Entrustment and Criminal Intent

Issue a New Joint Instruction That Requires Breach of Trust Decisions to

Formal guidelines on how to write judicial opinions would help to ensure

Provide Training to the Judiciary on the Elements of Breach of Trust,

with the issuance of the new Joint Instruction suggested above.

Publish All Breach of Trust Decisions

Create a Mechanism for Anonymous Reporting of Persons who Solicit