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Switzerland prepares a new law on blocking and returning stolen assets, reports Alliance Sud, the Swiss Alliance of Development Organizations. The new law on returning assets when legal support from the source country is inadequate should be more widely applicable than its predecessor. At the moment the law applies only to states that have no functioning governance. Processes lasting years or even decades should also be sped up by legislation.
April 23, 2013 | Mark herkenrath, Alliance Sud
How Switzerland disposes of stolen assets
Switzerland has made some headway in recent years when it comes to freezing and returning foreign stolen assets. But there are still serious shortcomings. A look at past and present cases shows where the new law currently in preparation should begin.
Switzerland prides itself on having particularly effective measures to prevent the influx of stolen assets from abroad. The facts portray a somewhat different picture. In the aftermath of the «Arab spring», substantial deposits of suspect funds were discovered yet again in Swiss bank accounts. They were being held by dictators Ben Ali, Mubarak and Gaddafi, their relatives and close business associates. They amount to almost one billion francs in total: some 700 million come from Egypt, 60 million from Tunisia and 100 million from Libya. If they are in fact ill-gotten assets, the funds should never have been able to enter Switzerland in the first place. Despite the obvious lacunae, the National Council last winter rejected several initiatives to tighten the Anti-Money Laundering Act.
Switzerland has nonetheless made undeniable progress in the blocking and restitution of stolen assets. It was the first country in the world to take the precaution of freezing suspect assets pertaining to the overthrown North African dictators. In addition it is supporting the countries of origin in the complex legal assistance procedures meant to lead to confiscation and restitution to the population from whom the funds were stolen.
In provisionally blocking funds from Egypt and Tunisia however, the Swiss Government had to rely on an article in the Federal Constitution on emergency legislation. A new law is consequently being prepared to provide a better legal basis for current practice in blocking and repatriating stolen assets. It is also to be more broadly applicable than the 2011 «Lex Duvalier», which applies only to certain countries.
From the problematic Mobutu case to «Lex Duvalier»
The case of the Mobutu funds was particularly instructive for Switzerland. Restitution to the Congolese people failed woefully after a protracted back-and-forth. When the new Congolese Government submitted a somewhat flawed request for legal assistance in 1997, Switzerland froze just under 9 million francs in suspect assets. In 2009, however, it had to return the money to the dictator's clan, and the fleeced population went empty-handed. The reason was that the Mobutu clan still controlled much of the Congolese State apparatus and was unwilling to pursue the legal assistance procedure any further. Switzerland's hands were therefore tied as well. Despite this, the release of the funds garnered negative headlines across the world.
Switzerland was keen to draw lessons from this case when it came to the case of the Duvalier funds from Haiti. In 2010 the Parliament adopted a new «Law on the restitution of unlawfully acquired assets», commonly called Lex Duvalier. Under that law, Switzerland can also confiscate stolen assets and allocate them to development projects for the benefit of the population concerned if a judicial assistance procedure breaks down mid-stream. The reversal of the burden of proof applies in such a case. The only way the dictator and his clan can prevent confiscation and restitution is by proving that they earned the funds legitimately. Previously, the country of origin or Switzerland had to prove illegitimacy by means of complex investigations.
Yet even Lex Duvalier has shortcomings. Its scope of application is much too limited. It can be applied only to countries that have no functioning State structures, in other words those regarded as «failed States». Neither Tunisia nor Egypt falls into this category.
Legal proceedings may also fail for other reasons. In the case of Egypt, for example, judicial assistance becomes difficult because, in the view of the Federal Criminal Court, the inadequacy of human rights standards currently renders judicial cooperation impossible. The successor legislation to Lex Duvalier should therefore provide for the confiscation of stolen assets and reversal of the burden of proof not only in the case of «failed States», but in all instances where legal cooperation does not work.
Accelerated procedures
The new law should also speed up the often protracted legal assistance and restitution procedures. The shortest procedure to date has been that concerning the Abacha funds from Nigeria. But there too, all of five years went by following the overthrow of the dictator (1999) before the first monies were returned (see Box). In the case of the Philippines and the Marcos funds, 700 million dollars were transferred to an escrow account in Manila twelve years after the fall of the dictator in 1986. But release of the funds was tied to various conditions. First, disbursement had to be preceded by a court ruling in the country itself, and second, some of the funds should go directly to benefit victims of human rights violations. These two conditions were fulfilled only in February of this year – 27 years after the fall of the dictator!
To accelerate judicial assistance procedures, Switzerland has for some time now been providing support to the countries concerned by way of technical advice. Moreover, since 2001 it has been regularly organizing meetings of experts with specialists from those countries. This is a useful practice and should be enshrined in the new law on stolen assets. It would also make sense if Switzerland could spontaneously provide countries of origin with additional information when they file only a partly substantiated request for legal assistance. No legal basis has so far existed for this. Up to now, «spontaneous judicial assistance» by Switzerland has been possible only if the country concerned has not submitted its own request for judicial assistance.
