Frozen in Switzerland
 
 

When it comes to the economy, everything is on hold until political stability returns to Egypt: tourism, investment, the stock market, and — as we have just learned — even the repatriation of former President Hosni Mubarak’s stolen funds.

The stagnation caused by political turmoil and malfunctioning state institutions has extended to bilateral cooperation regarding legal proceedings on asset-recovery cases, as a group of Egyptian journalists visiting Switzerland in early December learned.

On Wednesday, Switzerland decided to extend the freeze on 760 million Swiss francs of assets belonging to former regime members of Egypt and Tunisia.

The three-year freeze, in place since the 2011 uprisings, was due to expire this coming February, and was up for review by the Swiss government. But now a seven-member Federal Council, including the Swiss president and six ministers, has extended the asset freeze for three more years.

Of the total 760 million Swiss francs, 700 million are held by Mubarak, his family and former regime officials. The remaining amount is linked to Tunisia’s former president, Zine al-Abedine Ben Ali.

“Taking [into] account the political transition in the two countries,” the Federal Council said in its statement, “the aim of this extension is to provide more time for criminal investigations in Tunisia and Egypt into the origin of these assets.”

On Monday, Switzerland’s Attorney General Michael Lauber visited Cairo to meet with Egypt’s Prosecutor General Hisham Barakat.

He affirmed the readiness of Swiss authorities to help Egypt recover the funds, obtained illicitly and transferred outside the country by the former president and 30 family members and associates, many of whom have faced charges of corruption since the January 2011 uprising.

Had the extension of the asset freeze been rejected, Mubarak’s Swiss funds could have been unlocked. His lawyers continue to challenge the freeze, despite the Swiss commitment to trace the illicit nature of the money.

While progress has been made in determining the origin of the assets, the Federal Council asserts that neither Egyptian nor Tunisian “investigations [have] made sufficient progress for the preventive freezing of assets to have achieved its purpose” — this being the eventual recovery of the assets by the home countries after legal due process.

Lack of progress to this end has been partly attributed to a lack of capacity of the legal authorities to draw the necessary links between corrupt practices by “politically exposed persons” (i.e., the illicit nature in which the former president obtained specific funds) and the location of those assets in specific bank accounts.

Meanwhile, Wednesday’s three-year extension serves as an uncomfortable wake-up call, showing how little has been done in the last three years, which have gone by all too quickly. Three more years of institutional instability and failure to convert charges into actual convictions, could very well mean the end of Egyptians’ hopes of recovering the millions in stolen assets.

Grounds for suspension

Stagnation in the mutual legal assistance (MLA) process with Switzerland was brought about by ongoing political turmoil in Egypt.

In December 2012, the Swiss Federal Court denied its Egyptian counterparts the right to access criminal files that could be used to pursue further investigations against the Mubaraks and their associates. In turn, the MLA process was suspended.

The decision was a reflection of institutional failure on Egypt’s part to guarantee that authorities would be able to protect the confidentiality of the information provided in the MLA exchange.

The MLA process hit this particular snag in December 2012, after former President Mohamed Morsi passed a controversial constitutional declaration, throwing Egypt’s political process off an already bumpy track and spurring violent protests.

The declaration that safeguarded Morsi’s decisions from judicial review also removed the prosecutor general.

“When Morsi toppled the prosecutor general, from our perspective, it looked like a coup [on the judiciary],” Ambassador Valentin Zellweger, director of the Task Force Asset Recovery, told a delegation of Egyptian journalists visiting Switzerland in early December.

The ambassador’s task force falls under the Swiss Federal Department of Foreign Affairs’ Directorate of International Law.

Zellweger explained that Morsi’s maneuver made the Swiss “uncertain of the separation of powers” in Egypt.

This uncertainty could not have come at a worst time: legal procedures had reached a critical phase and Egyptian authorities had requested to see the files prepared by the Swiss criminal prosecution.

The Swiss Attorney General’s office had granted Egypt access to the files of the criminal proceedings, but on December 18, 2012, the Swiss Federal Criminal Court denied this access, citing the “unstable institutional situation in Egypt.”

Meanwhile, the lawyers defending Mubarak and company repeatedly lodged objections to Egyptian requests for evidence from the Swiss, making any faulty legal decision or misuse of information that much more hazardous. It would have given the lawyers justifiable cause to win an appeal and unlock the funds.

“We could not be sure that what we tell the prosecutor will not go to the government … [and] we faced the threat that Mubarak’s lawyers will challenge us in court,” Zellweger said.

In turn, Swiss authorities decided against sharing evidence with their Egyptian counterparts, and determined that suspending the process until further deliberation was the best course of action. 

A report published by the Egyptian Initiative for Personal Rights (EPIR), which closely follows cases related to asset recovery, noted that Tunisia was given the right to access the information, “since it enjoys a better institutional environment.”

A “political freeze”

Eager to explain its side of the long and complex legal process, the Swiss government invited a group of Egyptian journalists in early December to meet and hear from the various authorities overseeing the cases.

On February 11, 2011, the night Mubarak was ousted from power after an 18-day uprising, Switzerland froze millions of francs belonging to the former president, his family, and a coterie of businessmen and officials.

The list comprised 17 names and their funds, sitting in Swiss banks, amounted to 407 million francs. In September 2012, the list grew to 31 names, with assets worth more than 700 million francs.

It was what Switzerland calls a “political freeze.” According to the country’s constitution, a decision can be made immediately by the Federal Council, as opposed to a judicial freezing and restitution of funds, which rely on the completion of a lengthy and tedious legal process.

The initial list, drafted by Swiss authorities, was composed from names mentioned in the Egyptian press, and in heated discussions about corruption that intensified over the 18-day uprising.

The Swiss assets were frozen even before Egypt made formal MLA requests, and since then, cooperation between Egyptian authorities and their Swiss counterparts has been ongoing.

“When Mubarak fell, the Swiss wanted to send an immediate sign of solidarity to Egyptians by blocking his funds,” said Ambassador Zellweger of the Task Force Asset Recovery.

It took other countries, such as the UK, a few weeks longer to freeze the assets and begin the legal process. This is due to the fact that the Egypt file in other countries is dealt with by the Justice Ministry. In Switzerland, however, there are two types of fund freezes: The government, through the Ministry of Foreign Affairs, can implement a political freeze as a safeguard until a judicial freeze is put in place, which usually takes weeks.

The judicial freeze coincided with the start of legal proceedings by the federal prosecutor and the Justice Ministry over money laundering accusations against Mubarak and his associates, as well as ensuing MLA requests.

“The Swiss government wanted to make sure that he [Mubarak] would not be in a position to take the money out of Switzerland,” Zellweger added. “If you wait, there is a threat that the funds will be moved.”

It is with this same mindset that the Swiss Federal Council has decided to extend the asset freeze for another three years. More time gives authorities on both sides, namely Egypt’s prosecution and judiciary, the chance to pursue corruption charges and provide the necessary links to Swiss bank accounts. 

Susanne Kuster, vice director of the Division of International Legal Assistance, which falls under the Federal Office of Justice, explained the four phases of asset recovery: Financial investigations by the country of origin are followed by a judicial freezing, then the confiscation or restitution of assets, and finally the handing over of assets.

During the investigation stage, she explains, Swiss authorities cannot obtain information on the mere assumption that a person holds a Swiss bank account. More information is needed regarding the location of the assets.

Then the assets are frozen based on evidence from criminal proceedings. The further burden of proof, in this case, lies on the Egyptian authorities, which could prove to be the biggest challenge in the process, given the capacity of prosecution and judicial authorities.

As it stands, the state of play regarding Egypt’s MLA is that it remains suspended. Switzerland provisionally froze the assets and gathered the related bank documentation, but has not yet issued a conclusive decree ordering the disclosure of these documents to their Egyptian colleagues.

The Swiss Federal Criminal Court denied Egypt access to the information due to institutional instability in December 2012. The month after, the Office of Justice decided to suspend the MLA request.

“If appeals are lodged against conclusive decrees, there is a risk that the Federal Criminal Court will rule in favor of the account holders,” Kuster says. This could result in a win for Mubarak’s lawyers. However, a suspension puts this possibility on hold. 

“We have to wait and see how the situation in Egypt develops,” Kuster says. “We hope it is getting more stable and institutions more independent,” she adds.

Challenges ahead

Saher Hamza, Egypt’s ambassador to Switzerland since September 2012, told reporters during their visit that the overlapping authorities of Egyptian institutions makes it more difficult for the Swiss to navigate the legal labyrinth and determine where the money actually is.

“Several entities have investigated and sent [similar] documents to the Swiss side several times,” he says, besides that fact that Egypt’s court verdicts are lengthy and tedious.

Gretta Fenner, who works with the International Center for Asset Recovery, says that during capacity building provided to Egyptian authorities, she has noticed a “lack of trust between Egyptian institutions,” to the point that sometimes they do not even want to train in the same room. She adds that prosecutors and judges have a problem of hierarchy.

Hamza argues, “The Swiss have to be assured that the information they provide will be used constructively, not as a tool in political disagreements.”

It is as much in the interest of the Swiss to see the case concluded as it is for Egyptian authorities. “It is to the benefit of the Swiss to prove that there are no illicit gains for its banks,” Hamza says, and if there are, it is in the country’s interest to give the money back.

Egypt has to do its part first, however, in linking the money and location with the crime.

Despite the mutual interest, he says, turbulent political transitions have slowed the process, which is already taking much longer than many people expected.

Zellweger says that the upcoming referendum on the constitution and subsequent parliamentary and presidential elections will be “indicators as to whether we can send evidence to Egypt and not be challenged by Mubarak’s lawyers.”

It is a challenging but not impossible feat. Switzerland has sent back a total of US$1.8 billion to countries of origin in the past 15 years, including Nigeria, Mexico, Peru and the Philippines. 

Switzerland is currently drafting a new law, due to be submitted to the government next spring, regulating political freezes using legislation, instead of solely relying on one clause in the constitution. Zellweger says this law “has been heavily influenced by the Egypt experience.”

It would entail the automatic freezing of funds when a government leaves power by a coup or as a result of a revolution. The law would also stipulate what Swiss authorities can do to assist governments of origin in retrieving funds. It also foresees the possibility that countries of origin may not be able to prosecute those accused if institutions are weak or if there is no political will to do so.

In a critique of the proposed law, EIPR says, “After 30 years in power, it is unrealistic and daunting for any authority to enclose all cases of corruption and provide evidence for them.”

It adds that this is especially true when “an ousted regime leaves behind dysfunctional and worn-out institutions that lack the ability and the independence that enables them to conduct an unprejudiced investigation during times of political turbulence and violence.”

The lack of transitional justice measures in post-January 2011 Egypt means that corruption trials against Mubarak and company “still rely on laws that date back to his era and are overseen by institutions and a bureaucracy of his own making.” EIPR adds, “Mubarak’s criminal network still controls a large part of Egypt’s bureaucratic body.”

Olivier Longchamp of the Swiss Berne Declaration had similar concerns.

This is in addition to the fact that some Swiss financial intermediaries did not disclose the full amounts of assets in their accounts, evidenced by the doubling of figures months after the Swiss government brought new evidence to this end, and the list of names grew to 31 people.

Longchamp says he is “not confident that it will be possible to prove this money is illicit, therefore, a judicial seizure of the assets may not be possible.”

Unlike Tunisia, he says, asset recovery does not seem to be high on the agenda for Egypt’s civil society. His organization is looking for more NGOs to work with, in order to create the necessary pressure to ensure the process moves forward properly.

While the political will exists in Switzerland, Longchamp maintains that legally, it will be difficult to conclude the case.

Fenner says she “doubts that the stolen funds are actually in the name of Mubarak.”

Still, the key to moving forward with MLA proceedings, she says, is to “find a good time, when Egypt is at a level of stability, so that [Mubarak’s] defense cannot win.” 

The question of when this time will come, however, is one that was left unanswered.

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Amira Salah-Ahmed 
 
 

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