Swiss administrative court confiscates UAH $5bn of Yanukovych's assets but refuses to confiscate $8bn of Putin's entourage's assets
Source: "Економічна правда"
On the same day, 15 February 2023, the Swiss government's official website published two news items related to Ukraine.
As usual, one was good, and the other not so much.
Let's try to understand their essence and what is happening in the country that holds $8 billion of frozen Russian assets.
Confiscation of assets of persons associated with Yanukovych
Let's start with the good news.
The Federal Council has instructed the Federal Department of Finance to initiate legal proceedings to confiscate the assets of Yanukovych's associates.
In 2022, the Federal Council made this decision about the assets of former Party of Regions MP Yuriy Ivanyushchenko worth CHF 100 million.
Proceedings will now begin in relation to assets worth another 30 million. In total, there is a possibility of confiscating 130 million Swiss francs (over UAH 5 billion). If the court upholds the confiscation, the funds will be transferred to Ukraine.
These confiscation measures are not related to the sanctions imposed on Russia after 24 February 2022. They are a new round in a lengthy legal process that began after the overthrow of the Yanukovych regime and his flight from Ukraine.
A few days after Yanukovych's ouster, the Federal Council decided to freeze the Swiss assets of the fugitive president and his entourage. Ukraine, having opened criminal proceedings against him, requested mutual legal assistance from Switzerland.
After lengthy exchanges of documents, the cooperation between the two countries can finally bear fruit, which will be tangible not only in terms of bringing the open proceedings to a conclusion but also for the development of the real economy.
The legal basis for the confiscation of these assets is the Foreign Illicit Assets Act. This act regulates the freezing, confiscation, and restitution (return to the country of origin) of assets of Politically Exposed Persons (PEPs) or their relatives.
It provides for a special case of interstate legal assistance in criminal proceedings and is applied in exceptional cases where the state fails to confiscate the funds itself (something akin to the well-known principle of exhaustion of national measures).
The law stipulates that the relevant assets must first be frozen by a decision of the Federal Council (such a decision was made in 2014 concerning the assets of persons close to Yanukovych).
In general, the law allows for the freezing of assets only concerning persons who hold or have held high public office and persons closely related to them through personal, business, or family ties.
The maximum period for which assets can be frozen is ten years.
This period is about to expire, so it is very good that the Swiss government has finally decided that it is time to take the next step: confiscating the frozen assets. If this decision had not been made, the assets would have been released after the ten-year period and their owners would have regained the right to freely dispose of them.
The confiscation itself, as well as under the Ukrainian law ‘On Sanctions’, is carried out in court. Now, at this stage, the Federal Department of Finance must apply to the Federal Administrative Court for confiscation. This is what the Federal Council instructed it to do on 15 February.
In the course of the proceedings, the court will have to establish that the funds were obtained illegally in order for the confiscation to take place.
In addition, there are two other conditions: that the funds belong to politically exposed persons or their close associates or companies in which such politically exposed persons are the beneficial owners, and that the funds have been previously frozen.
Article 15 of the law provides for a presumption of illicit origin. That is, the starting assumption that the court must proceed from is that the funds were obtained illegally and their owner must convince the court otherwise. However, this presumption applies only under two conditions.
The first is that ‘the wealth of the person who has the right to dispose of the assets has experienced an extraordinary increase, which is related to the exercise of public authority by a politically exposed person’.
The second is that ‘the level of corruption in the country of origin or the environment of the politically exposed person during his/her tenure was recognized as high’.
To rebut the presumption of illegality, the interested party must prove that there is a preponderance of probability that the assets were acquired legally.
Swiss law provides that in the event of confiscation, the funds must be transferred to the country of origin in order to improve the living conditions of the people, strengthen the rule of law, and prevent the commission of serious crimes with impunity.
As a rule, the funds should be returned in the form of funding for projects that serve the public interest. However, the details of the return can be determined by a bilateral agreement between Switzerland and the country of origin.
Refusal to confiscate frozen assets of Russian oligarchs
Now for the bad news.
While the confiscation of the assets of people close to Yanukovych was not related to the sanctions imposed after 24 February, the second news is about these sanctions (is it a coincidence that both news were published on the same day?).
After 24 February 2022, about $8 billion belonging to Russian oligarchs were frozen in Switzerland. Recently, it has been reported that the Swiss international financial group Credit Suisse (CS) has blocked and de facto frozen about CHF 17.6 billion. This is more than twice the amount of Russian assets officially frozen in Switzerland.
‘Freezing’ means that the owners of the assets cannot dispose of them, but have the prospect of regaining control and the right to dispose of them. Irrevocable seizure of property occurs only in the event of confiscation.
Although global politicians support the idea of confiscating private Russian assets, Switzerland has stated that this is not in line with its legislation. This conclusion was reached by a working group led by the Federal Office of Justice.
The group's report states that the gratuitous confiscation of private assets contradicts the principle of the inviolability of property rights and is therefore incompatible with the Federal Constitution and Switzerland's international obligations.
Thus, we should not expect that the billions of dollars of wealth of Russian oligarchs frozen in Switzerland will be transferred to Ukraine shortly. Their status as frozen assets will continue to serve exclusively as political pressure and, if necessary, as a lever in negotiations.
In conclusion
The arithmetic of these two news is not in favor of the good: CHF 130 million that can be confiscated versus USD 8 billion that cannot be confiscated. However, history shows that Switzerland's categorical position may change over time. This country has already had experience in confiscating and transferring German assets after the end of World War II.
Therefore, we can hope for a positive decision on the confiscation of Swiss assets of the accomplices of Russian aggression, although not in the short term.
The analyzed news from the country, which is considered one of the world's financial centers, illustrates the drama in the process of restoring economic justice: gradual and very cautious steps forward border on large-scale delay.
The main reason for the delay is that the civilized world wants to treat even the aggressor in a ‘civilized’ manner.
However, doesn't the aggressor see such caution as weakness, and aren't the aggressor's rights secured at the expense of the victim?
The damage caused by the aggressive war must be compensated at the expense of Russia and its accomplices as soon as possible. Otherwise, the eternal question of whether the rule of law prevails over the rule of force may receive a bitter answer.
Analytical Centre ‘Institute of Legislative Ideas’