Paul GullyHart

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      THE COMMONWEALTH SECRETARIAT CHATHAM
HOUSE ANTI-CORRUPTION CONFERENCE   Chatham
House 24-25 APRIL 2006    THE UN CONVENTION
AGAINST CORRUPTION IMPLEMENTATION ENFORCEMENT
MEETING THE CHALLENGES
Paul Gully-Hart
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CONTENTS

• Introduction
• Applicable instruments in Switzerland
• Cases
• Legal issues and practical difficulties
• Different options for restitution
• Conclusions

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INTRODUCTION
4
INTRODUCTION

• International position of Switzerland
• Experience in seizing and returning ill-gotten
  assets of PEPs located in Switzerland

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APPLICABLE INSTRUMENTS IN SWITZERLAND
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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Article 322septies of the Swiss Penal Code
• European Convention on Laundering, Search,
  Seizure and Confiscation of Proceeds of Crime
• United Nations Convention against Corruption
• Federal Act on International Mutual Assistance in
  Criminal Matters (IMAC)

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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Article 74a IMAC Handing over of property for
  the purpose of forfeiture or return to the person
  entitled.
• 1. Upon request, the objects or assets subject to
  a precautionary seizure may be handed over to the
  competent foreign authority after conclusion of
  the mutual assistance proceeding (art. 80d) for
  the purpose of forfeiture or return to the person
  entitled.

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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Article 74a IMAC Handing over of property for
  the purpose of forfeiture or return to the person
  entitled.
• 2. The objects or assets referred to in paragraph
  1 include
• instruments of an offence
• proceeds or profits of an offence, their
  replacement value and any unlawful benefit
• gifts and other gratifications to induce or
  reward the offender, as well as their replacement
  value.

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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Article 74a IMAC Handing over of property for
  the purpose of forfeiture or return to the person
  entitled.
• 3. The handing over may intervene at any stage of
  the foreign proceeding, as a rule based on a
  final and enforceable order of the requesting
  State.
• 4. However, the objects or assets may be retained
  in Switzerland if
• the victim has his habitual residence in
  Switzerland and they have to be returned to him
• a public authority asserts rights over them

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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Article 74a IMAC Handing over of property for
  the purpose of forfeiture or return to the person
  entitled.
• 4. However, the objects or assets may be retained
  in Switzerland if
• a person not involved in the offence and whose
  claims are not guaranteed by the requesting State
  shows probable cause that he has acquired rights
  over these objects and assets in good faith in
  Switzerland, or if he has his habitual residence
  in Switzerland, in a foreign country or
• the objects or assets are necessary for a pending
  criminal proceeding in Switzerland or appear,
  because of their nature, to be subject to
  forfeiture in Switzerland.

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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Article 74a IMAC Handing over of property for
  the purpose of forfeiture or return to the person
  entitled.
• 5. Whenever somebody claims to have rights over
  the objects or assets under paragraph 4, its
  handing over to the requesting State shall be
  suspended until the legal situation is clear. The
  objects or assets claimed may be handed over to
  the person entitled if
• the requesting State agrees
• in case of paragraph 4, letter b, the public
  authority gives its consent or
• the claim has been recognized by a Swiss court.
• 6. Article 60 shall apply to fiscal liens.

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APPLICABLE INSTRUMENTS IN SWITZERLAND

• Federal Act on the Sharing of Confiscated Assets
• Federal Act on Prevention of Money Laundering in
  the Financial Sector
• Money Laundering Ordinance of the Swiss Federal
  Banking Commission

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CASES IN SWITZERLAND
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CASES IN SWITZERLAND
Ferdinand Marcos

• 1986 the Swiss Federal Council ordered bank
  accounts to be frozen.
• 21/12/90 the Swiss Federal Supreme Court
  approved the handover to the Philippines of bank
  documents relating to the Marcos family, but
  ruled that the return of assets would be
  conditional upon a final judgment by a Philippine
  court consistent with due process rights under
  the UN Covenant.

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CASES IN SWITZERLAND
Ferdinand Marcos

• 1997 the Swiss Federal Supreme Court determined
  that most of the Marcos assets worth some
  USD 683 million could be of criminal origin and
  allowed their transfer to a escrow account in
  Manila under the two following conditions
• Assurances by the Philippines that the
  confiscation / restitution of the assets would
  comply with the UN Covenant on Civil and
  Political Rights.
• Undertaking by the Philippines to regularly brief
  the Swiss authorities on the confiscation
  proceedings and on the procedures to compensate
  the victims of human rights violations under the
  Marcos regime.

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CASES IN SWITZERLAND
Ferdinand Marcos

• 2003 confiscation ruling of the Philippine
  Supreme Court with regard to the criminal origin
  of the monies seized allowing the Philippine
  government to dispose of the assets.

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CASES IN SWITZERLAND
Sani Abacha

• 1999 the Federal Office for Police Matters (now
  the Federal Office of Justice) froze accounts
  under a Temporary Restraining Order (TRO).
• 2000 in its preliminary ruling, the Federal
  Office for Police Matters agrees to execute a
  Request for mutual assistance, confirms the TRO,
  and orders disclosure of bank records and witness
  statements.

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CASES IN SWITZERLAND
Sani Abacha

• January 2002 the Federal Office of Justice
  issues nine orders for the handover to Nigeria of
  the bank documents and witness statements.
• April 2002 announcement of an out-of-court
  settlement between the Nigerian authorities and
  the defendants in the Abacha case.

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CASES IN SWITZERLAND
Sani Abacha

• September 2002 legal assistance proceedings are
  resumed after the settlement fails.
• April 2003 the Swiss Federal Supreme Court
  approves legal assistance to Nigeria including
  the transfer of bank documents and witness
  statements.

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CASES IN SWITZERLAND
Sani Abacha

• December 2003 an order issued by the public
  prosecutor's office in Canton Geneva resulted in
  around USD 85 million being transferred to the
  Bank for International Settlements (BIS) in
  favour of Nigeria.
• April 2004 as a result of an out-of-court
  settlement with one of the individuals involved
  in the Abacha case, USD 50 million of the Abacha
  funds frozen in Switzerland have been transferred
  to the BIS for the benefit of Nigeria.

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CASES IN SWITZERLAND
Sani Abacha

• February 2005 the Swiss Federal Tribunal agreed
  to hand over to Nigeria USD 458 million out of
  the remaining Abacha assets of USD 505 million.
• The Swiss Federal Tribunal concluded that there
  is sufficient evidence that these assets are the
  proceeds of crime and could therefore be returned
  to Nigeria without waiting for a final
  confiscation order.

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CASES IN SWITZERLAND
Sani Abacha

• September 2005 The Governments of Nigeria and
  Switzerland agreed on a process to return to
  Nigeria the sum of USD 458 million.
• The Nigerian Government and the World Bank agreed
  to proceed with a Public Expenditure Management
  and Financial Accountability Review (PEMFAR).

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CASES IN SWITZERLAND
Sani Abacha

• The aim of the PEMFAR is to support the Nigerian
  Governments efforts at reforming and
  strengthening its expenditure system and ensure
  that it reflects its poverty reduction program.
• It should ensure that additional resources,
  including these and other repatriated funds, are
  channelled to support key sectors, such as
  education, health, HIV/AIDS and basic
  infrastructure.
• To this end, the Swiss Government is providing
  support for carrying out the review through a
  grant accorded to the World Bank to help finance
  the study.

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CASES IN SWITZERLAND
Sani Abacha

• April 2006 Out of the USD 700 mio. located in
  Swiss banks, Switzerland has now returned 99 to
  Nigeria.
• A remaining amount of USD 7 mio. is still the
  object of proceedings in Switzerland.

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CASES IN SWITZERLAND
Vladimiro Montesinos

• 2000 assets amounting to approximately USD 70
  million are blocked in the context of a criminal
  investigation opened against Montesinos.
• 2001 further assets to the tune of approx. USD
  35 million were frozen in Switzerland.

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CASES IN SWITZERLAND
Vladimiro Montesinos

• 2002 an amount of USD 77.5 million was
  transferred to the State of Peru consisting of
  the frozen assets of Montesinos and the former
  Peruvian general, Nicolas de Bari Hermoza Rios.

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CASES IN SWITZERLAND
Tamirat Layne

• 1996 former Ethiopian Prime and Defence
  Minister Tamirat Layne was dismissed from his
  position and arrested.
• 1998 USD 8 million frozen in Geneva bank
  accounts following a 1997 judicial assistance
  request from Addis Ababa. The former government
  official is accused of having embezzled the money
  from state coffers.

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CASES IN SWITZERLAND
Tamirat Layne

• 2000 the Supreme Court of Ethiopia handed down
  a long term of imprisonment to Layne. The Court
  also ordered the confiscation of the blocked
  accounts in Geneva
• 2003 The Swiss Federal Tribunal confirmed the
  decision of the FoJ to reject the letter of
  request from the Republic of Ethiopia asking for
  the repatriation of frozen assets

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CASES IN SWITZERLAND
Tamirat Layne

• 2003 Reasoning of the Swiss Federal Tribunal to
  confirm the non-repatriation of frozen assets
• Lack of nexus between the frozen assets and the
  criminal conduct for which the return of assets
  was requested.
• Unjustified privilege granted to the State of
  Ethiopia by the Ethiopian Judiciary.
• Legal protection of third party.

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CASES IN SWITZERLAND
Sese Seko Mobutu

• May 1997 Mobutu's assets (CHF 6 mio) and his
  property in Switzerland were blocked by the Swiss
  Federal Council further to a Congolese request
  for judicial assistance.
• The decision was based on art. 184 par. 3 of the
  Swiss Federal Constitution concerning foreign
  relations, which stipulates When the safeguard
  of the interests of the country so require, the
  Federal Government may issue ordinances and
  orders. Ordinances must be limited in time.

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CASES IN SWITZERLAND
Sese Seko Mobutu

• December 2003 the Swiss government ruled that
  the assets (CHF 10.8 million) were to remain
  blocked for a further three years.
• Because the Democratic Republic of Congo failed
  to provide clarification on the ownership of the
  funds and to initiate a proceeding for the
  confiscation of these assets, Switzerland
  resolved to discontinue legal assistance.
• A solution needs to be found through negotiation
  between the parties involved.

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CASES IN SWITZERLAND
Jean-Claude Duvalier

• 1986 legal assistance is initiated in
  Switzerland but is later discontinued due to a
  lack of cooperation on the part of Haiti.
• 14 June 2002 the Swiss Federal Council decided
  to block the assets (CHF 7.5 million) of Duvalier
  and his entourage.
• The decision was based on the same art. 184 par.
  3 of the Swiss Federal Constitution previously
  used in the Mobutu and in the Marcos cases.

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CASES IN SWITZERLAND
Jean-Claude Duvalier

• 3 June 2005 The Swiss federal Council decided
  to extended the freezing order for another term
  of 2 years. A settlement is currently being
  discussed between the Swiss authorities, the
  Haitian authorities and the Duvalier family.

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CASES IN SWITZERLAND
Angola Restructing of Public Debt

• November 1, 2005 Pursuant to a bilateral
  agreement signed between the two countries,
  Switzerland will return Angolan funds that were
  frozen in Switzerland in the frame of criminal
  proceedings.
• The criminal proceedings initiated by the Geneva
  judicial authorities were done so in connection
  with the restructuring of the Angolan debt to the
  Russian Federation. The case was closed in
  December 2004 after it was established that no
  irregularities occurred in the settlement of this
  debt.
• To enable the bilateral agreement to be
  implemented, the Geneva judicial authorities lift
  the blocking order on four accounts in
  Switzerland containing a total of approximately
  USD 21 million.

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CASES IN SWITZERLAND
Angola Restructing of Public Debt

• According to the bilateral agreement the funds
  shall be used for projects that will benefit the
  most vulnerable sections of Angolan society, such
  as reconstruction, the establishment of hospital
  infrastructure, basic professional training,
  water supply and local capacity building, notably
  in the re-integration of displaced persons.
• The parties to the agreement will jointly
  coordinate the programme and will nominate
  representatives who will approve projects,
  project budgets and the utilization of funds.
• The SDC (Swiss Agency for Development and
  Cooperation) will establish an executive
  secretariat that will be in charge of the
  administrative and financial implementation of
  the programme.

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LEGAL ISSUES AND PRACTICAL DIFFICULTIES
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LEGAL ISSUES AND PRACTICAL DIFFICULTIES

• Immunity
• Lack of cooperation in matters of mutual
  assistance
• The Letter of Request fails to meet Swiss legal
  requirements
• Corruption is widespread within the country
  concerned
• Legitimate entitlements of third parties

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LEGAL ISSUES AND PRACTICAL DIFFICULTIES

• Immunity
• International law has progressively imposed
  personal responsibility on high-ranking officials
  (including Heads of State) for universal crimes.
• Heads of State are still immune from accusations
  such as corruption, misappropriation of State
  funds, etc.
• Immunity ceases to apply if the State concerned,
  acting through its competent authorities,
  declares its intent to lift immunity in a
  specific case.

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LEGAL ISSUES AND PRACTICAL DIFFICULTIES

• Lack of cooperation in matters of mutual
  assistance
• Repatriation of assets will be hampered if the
  State concerned by the wrongdoing fails to
  initiate domestic proceedings or is unable to
  conclude them.
• It may be difficult for the Requesting State to
  collect enough evidence against a former Head of
  State regarding breaches of his public duties
  during his term of office.
• In some cases, the Swiss Government determined
  that it was not in Switzerlands interests to
  return assets to the Requesting State without an
  agreement having been reached between the parties
  involved (e.g. Mobutu, Duvalier).

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LEGAL ISSUES AND PRACTICAL DIFFICULTIES

• The Letter of Request fails to meet Swiss legal
  requirements
• Swiss domestic legislation (IMAC) provides for
  minimum constitutional standards for mutual
  assistance proceedings, i.e. internationally
  recognised fair trial rights.
• The Letter of Request must comply with the dual
  criminality standard.
• Facts disclosed in the Letter of Request must
  show that there is a reasonable likelihood that
  the restrained assets are the proceeds of crime.
• Swiss authorities also ensure that a foreign
  State must not embark on a so-called fishing
  expedition.

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LEGAL ISSUES AND PRACTICAL DIFFICULTIES

• Corruption is widespread within the country
  concerned
• In the presence of widespread corruption and lack
  of good governance in the country concerned,
  there is a substantial risk that the returned
  assets will be misappropriated again.
• Legitimate entitlements of third parties
• Innocent third party claims over the assets as
  well as claims for compensation brought by
  victims (including victims of human rights
  violations) may stand in the way of restitution
  to the Requesting State.

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DIFFERENT OPTIONS FOR RESTITUTION
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DIFFERENT OPTIONS FOR RESTITUTION

• No standard procedure
• no treaty-based mechanism for the allocation or
  the monitoring of the returned assets
• Switzerland will consider the political
  organisation of the country concerned
• Use of confiscated assets to settle public debts
• Use of assets for development projects
• Engagement of a mediator
• Setting up a country specific trust fund (in
  connection with international institutions such
  as the World Bank, the EBRD, UN programmes or
  regional development banks)

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CONCLUSIONS
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CONCLUSIONS

• Comprehensive range of domestic legal instruments
  for identifying, seizing and eventually returning
  ill-gotten assets of PEPs
• Number of initiatives to promote a more coherent
  approach at an international level
• Alternatives to direct restitution
• The legal political repercussions of the
  restitution process

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Contacts

• Paul Gully-Hart
• paul.gully-hart_at_swlegal.ch