Swiss banks have always been a prime destination for people who move big sums of money but want to keep a low profile. Consequently, Switzerland had the dubious honor to have been involved in multiple asset recovery attempts in past years. Foreign governments from Nigeria to the Philippines to Peru have all recuperated money parked in Swiss bank accounts by their former rulers.
Thus the discovery of potentially illicit assets, worth hundreds of millions of Swiss francs linked to Libya, Egypt and Tunisia’s former rulers and their associates, is not surprising. The recent passing of a Swiss law that will ease asset recovery of corrupt politically exposed persons raised hopes within the newly established governments in Tunis, Tripoli and Cairo.
This new law, commonly known as lex Duvalier – after the former Haitian strongmen – was initially portrayed as a blessing for Arab countries. However, the law is not likely to simplify asset recovery for Tunisia, Libya or Egypt.
Swiss authorities hastily drafted the “Federal Act on the Restitution of Assets of Politically Exposed Persons obtained by Unlawful Means” (lex Duvalier), which came into effect in February 2011. The law was passed to correct what had been called a PR-disaster for Switzerland: on January 12, 2010 the Swiss Supreme Court decided that more than $5 million had to be returned to Jean-Claude Duvalier and not to the people of Haiti because of the lack of cooperation from Haitian authorities. Hours after this decision the dramatic earthquake struck the Caribbean island nation killing more than 200,000 people and leaving Haiti more than ever in need of assistance.
The lex Duvalier allows for the return of the money to the Haitians through a pioneering legal framework. First, the law reverses the burden of proof. Normally, the burden to prove the illegality of the assets to be recovered lies on the plaintiff. Under the lex Duvalier, however, people who held prominent public positions and their entourage have to prove that their assets were acquired by legal means. This presumption of illegality applies if the assets grow extraordinarily while the person holds office and if the country or person is known to be corrupt.
The other feature that makes this new Swiss law groundbreaking is that it waives the victim’s state’s requirement to full formal cooperation in the process of asset recovery. It renounces often thorny issues such as criminal conviction of the alleged perpetrator in the home country. This has proven to be especially problematic in countries where allegedly corrupt elites still exercise significant influence over society or where the judicial system does not function properly.
However, two key requirements must be met before the lex Duvalier can be applied. First, the demanding state must have asked the Swiss authorities for a preliminary freezing of the assets. Second, the demanding state must be incapable of cooperating fully in the asset recovery process, due to the collapse or non-availability of the judicial system. However weakened by the political transition, Libya, Tunisia and Egypt’s legal systems hardly qualify as failed or ‘unwilling’ judicial systems. At best, doubts could arise concerning the state of the Libyan judiciary but even there the recent successes such as the recovery of assets linked to the Gadhafi-family in London or the cautious start of processes against former regime members indicate otherwise.
These countries are victims of their own success. As they kept their state institutions functioning notwithstanding the period of fundamental changes they went through, they don’t qualify for the preferred treatment of the lex Duvalier. Instead, countries like Tunisia, Egypt or Libya will have to adhere to the traditional processes of asset recovery which are full of legal and political complications and do not have a very promising track record. The World Bank calculates that only around $5 billion out of the hundreds of billions that developing countries lost because of corruption during the last 15 years have been recovered.
Swiss authorities should broaden the applicability of the lex Duvalier and dismiss the requirement of institutional failure. If the Alpine financial centre really wants to prevent the inflow of money stemming from corrupt foreign elites then there is no reason to keep the narrow scope of application of the lex Duvalier. The lex Duvalier should rather become a ‘lex kleptocrat’. As long as this is not the case Middle Eastern countries will have to prepare for a lengthy process to recover assets from Switzerland. This will include extended mandates for forensic accountants, financial investigators, translators and attorneys, all to be paid by the demanding countries.
The writer is a Research Associate at Right to Nonviolence, an international NGO that works on justice in transition, including assets recovery for the victims.
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