In “post Arab Spring” countries, challenges are numerous, and expectations are high. In most cases, free elections were held for the first time in decades, after the overthrow of authoritarian regimes. Unsurprisingly, the celebrated revolutions have given way to an era of economic, social and political uncertainties, as is virtually always the case when major changes disrupt the traditional order. 

Indeed, the young democracies –Tunisia and Egypt celebrate the second anniversaries of their revolutions in January 2013, and Libya will do so in February 2013- are still experiencing turbulence. In Tunisia, for instance, fierce protests over unemployment and economic difficulties erupted in the end of November 2012, and were met with violent –and much criticized— government response. More recently, in the end of January 2013, clashes between police and citizens demanding concrete projects to revive the economy and reduce unemployment were witnessed again. In Egypt, a delicate political climate tarnished the anniversary of the uprising; President Morsi imposed emergency rule and a curfew on three Suez Canal cities (Port Said, Ismailia and Suez), while being increasingly contested by its opponents on the grounds that he is drifting towards authoritarianism.

In short, stability is still frail everywhere. But among the long-term tasks that the new governments face, asset recovery is one of the most arduous.

The ex-leaders of Tunisia, Egypt and Libya had been in power for years when the protests began. They had accumulated fortunes, which they often stashed in foreign accounts in the United States (US), Switzerland or in the United Kingdom (UK). They were not democratically elected and tended to use public money as their own, making millions through juicy contracts with (or commissions from) foreign companies, accompanied by corruption involving bribery and nepotism.

Now that they have been replaced, many people hope for the return of huge amounts of illegally acquired wealth. And the money is much needed. As the Regional Anti-Corruption Initiative[1] explains, “stolen asset recovery serves three distinct purposes: recovering monies to fund governments programs and initiatives that help their people, providing a semblance of justice for victims while often challenging a political culture of impunity, and deterring officials from engaging in future corruption.” The recuperation of those assets is thus a crucial part of any fight for global justice, and against corruption.

But as experts in the UK and Switzerland say, and as many past cases show, this is not an easy mission. Often the money was concealed through the use of fake names and/or shell companies, and was deposited offshore in countries with strong banking secrecy provisions. Tracking down the wealth hidden is thus extremely difficult, and can take years of efforts. The number of states involved and the current ambiguity of legislation –particularly international laws – on asset recovery only complicate the matter. The following analysis looks at the challenges facing Tunisia, Libya and Egypt.

 

Tunisia

On January 14, 2011, then-president of Tunisia, Ben Ali, fled to Saudi Arabia. Only a few days afterwards, the Swiss government, which praises itself for its rapidity and efficiency in dealing with this case and similar ones, froze his assets —thought to be worth $68 million.

Generally, political authorities order banks and financial institutions to freeze dubious accounts, thus effectively blocking any flow of money to or from those accounts. However, this is just the first step of the process, which gets trickier when new leaders endeavor to recuperate the money illegitimately acquired.

Roughly two years after the Swiss Justice Ministry agreed to begin confiscating Ben Ali’s capital frozen in Swiss banks, the government of Tunisia is still struggling to get all the assets back.

The lack of concrete results in that case can be partly explained by the recent passing of a law in Switzerland, Leonard Ghione[2] explains. The “Federal Act on the Restitution of Assets of Politically Exposed Persons obtained by Unlawful Means” (known as lex Duvalier) came into effect in February 2011 –less than a month after Switzerland froze Ben Ali’s assets. Although the new legislation seemed a promising step forward at first glance, a particular requirement specified in the law turns out to be an impediment for the quest of Arab Spring countries.

Indeed, for this particular law to be used, the demanding state must be unable to cooperate fully in the asset recovery process, due a failed or deficient judicial system. The institutions of Tunisia, Libya and Egypt have been undeniably weakened by the transitions, but clearly their judicial systems are neither failed nor unwilling. As a result, those countries do not qualify for the new law, and have to follow the traditional, lengthy and complicated process of asset recovery[3].

Despite this disappointment, a conference devoted to the “National Day for the Recovery of Stolen Assets” took place in Tunis on July 2012, where Interim Prime Minister Hamadi Jebali and Minister of Justice Nourreddine Bhiri reaffirmed their commitment to reacquiring stolen assets.

“We have already recovered an airplane, and a villa in Canada and proceedings are in motion for the recovery of 28 million dollars from a bank account in Beirut which used to belong to Leila Ben Ali [the President’s wife],” Hamadi Jebali said at the end of the conference, confirming that some progress had been made.

Those successes were darkened by reports of flaws in international legislation and the lack of cooperation from foreign governments. “International law mechanisms are weak, ineffective and do not guarantee justice. The main problem is that they do not have enough power to override national laws,” Neyla Chaaban, a Tunis law professor and member of the National Commission for the Recovery of Illegally Procured Assets Situated Abroad, said, referring to Swiss and Canadian laws that protect the banking sector.

Mohamed Askri, another member of the Commission, agreed: “National laws in the countries where the funds are located are huge hindrances obstructing justice. Even a UN delegation we’ve worked with has stated that there was no political will from these countries. In addition, criminals enlist the help of skilled companies and lawyers specialized in concealing illicit funds.”

A national Seminar on Asset Recovery was held in Tunis on 14-15 December 2012, leading to the establishment of a national coordination committee on recovering stolen assets.

 

Egypt

In Egypt, where the revolution overthrew then President Hosni Mubarak nearly two years ago, the quest is the same, and the obstacles, similar.

After Mubarak stepped down from power in February 2011, the UK froze £85 million (($133 million) worth of assets, bank accounts and properties owned by the fallen president and his relatives.

However, the UK was criticized for failing to do so quickly enough, as opposed to Switzerland, which was the fastest in taking action concerning the assets of fallen Arab rulers. It was not until March 21st, after the EU had issued regulations on the matter, that the UK froze Mubarak’s assets.

Moreover, in early 2012, the Egyptian Ministry of Justice decided to sue the UK Treasury for refusing to reveal information indispensable for the retrieving of those assets. According to Egyptian officials, Britain is not respecting the United Nations Convention against Corruption. But Britain, a party to the UN Convention, has refused to disclose the data on the grounds that such an action would breach national laws that ensure banking secrecy and the confidentiality of information. Article 56 of the Convention, which ambiguously reads that a state should forward helpful information “without prejudice to its domestic law,” reflects this tension between national and international rules.

However, according to Steven Harwoods, a lawyer with experience in asset recovery (and currently negotiating with UK authorities on behalf of the Egyptian government), banking secrecy is not absolute. It could be overcome if, following the lawsuit, the UK’s High Administrative Court issued a judicial order forcing the Asset Freezing Unit to provide the information.

But the problem is far from being a mere legislative dispute. Economic interests are also at stake, since London is eager to be considered a safe haven for prosperous Arab families.

« Passing information about frozen assets to Egyptians in order to use it as evidence in judicial assistance applications with the purpose of recovering assets would give the wrong message to other foreign businessmen and members of ruling Arab families who inject billions into the UK economy, » a British financial expert told Ahram Online.

It is indeed no secret that London is one of the most attractive European financial centres regarding fiscal optimization[4].

That criticism was also voiced by Andy Slaughter, Labour MP and shadow minister for justice, as the matter reached the UK’s domestic sphere in January 2013. Labour opposition reproached the Tory-Liberal Democrats coalition in power its lack of effective action towards the repatriation of stolen assets.

Perhaps as a response, the British Asset Recovery Taskforce (set up in September 2012) held a press conference[5] in Cairo on January 14th, 2013. Jeremy Browne, the British minister of state for crime prevention and head of the task force, expressed Britain’s commitment to returning illicit funds stolen by the Mubarak regime to the Egyptian people as quickly as possible, but warned Egyptians  that the process would take time.

For its part, the Egyptian justice ministry proposed in January 2013 a new draft law[6] aiming at facilitating the recovery of stolen assets stowed abroad. The Egyptian Illicit Gains Department (IGD), a body investigating criminal cases against former regime officials, had tried to issue such a law since August 2011. However, as Ahram Online points out, both the Asset Recovery Judicial Committee (ARJC) and the IGD have so far failed to recover any funds from abroad.

 

Libya

With regard to the repatriation of Muammar Gaddafi’s money, Libya does not seem to be in a much better position than its neighbors. Gaddafi, the dictator of Libya until his death in October 2011, is believed to have possessed around $168 billion in assets abroad, including roughly $30 billion in the US alone. Part of it has been frozen by the United Nations and by individual countries since Gaddafi was killed, but many hurdles remain.

First, large sums are likely to have been squirreled away in secret numbered accounts, or deposit boxes hiding currency, precious metals and an expensive art collection. Other possessions that are difficult to locate and identify could consist of “indirect holdings of shares and stakes in businesses and property held under assumed names or controlled by trusted associates,” according to the press agency Reuters.

Secondly, it is, again, the process of getting the funds back that proves to be the most challenging. According to the World Bank – UN Stolen Asset Recovery Initiative (StAR)[7], all asset recovery operations concerning Muammar Gaddafi and related entities and individuals are still ongoing[8].

Kevin Stephenson, a World Bank Senior Financial Sector Specialist, notes that there are “many obstacles to asset recovery. Not only is it a specialized legal process filled with delays and uncertainty, but there are also language barriers and a lack of trust when working with other countries. In jurisdictions that do not prioritize these cases, practitioners do not develop the necessary expertise and agencies are not adequately resourced.”

StAR has thus produced a report (Barriers to Asset Recovery[9], June 2011), which advocates more international cooperation and recommends legislative reforms that would enable quicker confiscation of stolen assets. The report also emphasizes the need for more effective implementation of anti-money laundering measures.

The G8, for its part, released in May 2012 an Asset Recovery Action Plan[10], which also calls for more communication between countries, in order to facilitate mutual legal assistance procedures.  The G8’s action plan further recommends the setting up of Asset Recovery Task Forces which would receive special training and coordinate the repatriation efforts. As mentioned earlier, the UK has created such an Asset Recovery Taskforce.

While the Intergovernmental Working Group on Asset Recovery[11], part of the United Nations Convention against Corruption, assembled for the sixth time in Vienna in August 2012 and discussed the issue on a global scale, the G8 organized a more specific Arab Forum on Asset Recovery in September 2012. Over 200 senior officials and experts from 36 countries met in Doha on this occasion. The Forum is described as a “coordinating framework mechanism for follow-up on the Asset Recovery Action Plan, providing a network of expertise to facilitate stolen asset recovery”[12]. The US provided $1 million to the Stolen Asset Recovery Initiative, notably to support training and mentoring.

Thus it seems clear that the issue of stolen asset recovery is high on the international agenda, and is currently of primary importance to restore trust in the Western world and help heal the damaged economies of countries that have recently done away with their authoritarian leaders –or expect do so soon.

However, it is evident that despite idealistic turn of phrases and publicly expressed commitments from various Western leaders, recent events have not yet shown any tremendous change. Most of the official international initiatives undertaken in order to monitor and improve the process of returning stolen assets to their rightful owners (generally people of non-Western countries emerging from decades of corrupt and abusive rule) are supervised by bodies that are not themselves democratic (the World Bank, for instance) or by states that have never been too keen on challenging their own dubious practices, whether it be political corruption at the highest level, corruption of foreign elites, collusion with private companies or blatant leniency towards offshore centres and tax evasion.

Although Mr Zoellick, then World Bank President, may have been sincere when he said[13] that “there should be no safe haven for those who steal from the poor », reality in the post Arab Spring world is a different story. Recovering stolen assets that were deposited abroad remains a daunting task, and as of today there are still many dictatorial leaders who can stash their wealth in Western banks, with almost complete impunity [14].

 

 



[1] http://www.rai-see.org/

[2] Leonard Ghione is a Research Associate at Right to Nonviolence, an NGO working on justice in transition, including asset recovery.

[4] See authors such as Ronen Palan and Christian Chavagneux; see The Global City: New York, London, Tokyo  by Saskia Sassen (Princeton University Press, 1991)

[5] http://english.ahram.org.eg/NewsContent/3/12/62485/Business/Economy/UK-committed-to-Egyptian-asset-recovery-Minister.aspx

[7] The StAR was created in 2007 by the World Bank and the United Nations Office on Drugs and Crime (UNODC).

[8] Partly on-going and partly completed for the UK and the US

[9] http://star.worldbank.org/star/publication/barriers-asset-recovery

[10] http://www.state.gov/j/inl/rls/190483.htm

[11] http://www.unodc.org/documents/treaties/UNCAC/WorkingGroups/workinggroup2/2012-August-30-31/V1255775e.pdf

[12] See “The Deauville Partnership With Arab Countries in Transition Chair’s Summary of the Foreign Ministers Meeting” available at: http://www.state.gov/r/pa/prs/ps/2012/10/198514.htm

[13] http://www.unodc.org/unodc/en/frontpage/world-bank-and-unodc-to-pursue-stolen-asset-recovery.html

[14] See Thomas Pogge, for example.