The Federal Court dismisses complaints against the freezing of funds from the Yanukovych regime. However, there are further hurdles to overcome before restitution.
Viktor Yanukovych during a speech in Berlin in 2010.
Following the escape of Ukrainian President Viktor Yanukovych in February 2014, the Swiss Federal Council, using emergency powers, froze assets in Switzerland belonging to associates of the ousted leader. Despite criminal proceedings in Ukraine, investigations by the Swiss Public Prosecutor’s Office, and bilateral legal assistance, no final judgments have been made regarding the hundreds of millions of dollars.
The corruption and money laundering allegations against the owners of the funds have partially expired. Nevertheless, Switzerland is pursuing a path to recover over 130 million Swiss francs to return to Ukraine. The funds are currently frozen under the Potentate Money Act, which came into effect in 2016.
In three judgments released on Friday, the Federal Court delivered a significant victory for the Federal Council in this matter. The Lausanne judges confirmed that the conditions for the account freezes are met and rejected complaints from account holders against decisions of the Federal Administrative Court.
The descriptions indicate that the funds belong to three individuals from the Yanukovych regime: former Ukrainian parliamentarian Yuriy Ivanyushchenko, the son of former Ukrainian Prime Minister Mykola Azarov, and former politician Alexander Yefremov.
The appeal procedures mainly focused on the conditions for an account freeze as outlined in the Potentate Money Act concerning confiscation in case of failed legal assistance. The key question is whether the requirement that the originating state of the frozen funds cannot meet the legal assistance requirements due to a “complete or substantial collapse or the lack of availability of its judicial system” is met. The complainants argued that this was not the case for Ukraine, even after the start of the Russian invasion in February 2022.
No General Proof of a Failed State Required
The Federal Office of Justice acknowledged in a statement that legal assistance with Ukraine “generally proceeds largely normally.” However, the Federal Court clarified that the condition for the freeze, which requires a state structure failure or a “failed state,” applies solely to a state’s situation in relation to a specific legal assistance procedure with Switzerland. “It is not a general political or economic assessment, but a specific evaluation in connection with a particular procedure,” the court stated.
The court must assess whether the requesting state is capable and willing to conduct a criminal procedure that meets the requirements of the legal assistance law. The Federal Court admitted that the Federal Council or the Federal Department of Finance, representing the Council, only provided a summary justification of their position in the specific case. The reference to the Russian invasion alone appeared insufficient. However, this deficiency was addressed during the proceedings, including reports from the Swiss Embassy in Kyiv and the Basel Institute on Governance, which advises Ukraine.
These reports highlight the power struggle within the authorities responsible for combating corruption, the disappearance of evidence, the personnel issues due to the war, and the impossibility of conducting investigations in the Russian-occupied territories. “Under these circumstances, the lower court was entitled to assume that the failure of prosecution in Ukraine is at least partly due to the unavailability of the Ukrainian justice system,” the Federal Court concluded. Thus, the condition for the account freeze is met.
Prompt Injunction Lawsuits Demanded
Addressing the account holders’ complaint about the disproportionately long duration of the proceedings, the Lausanne judges stated: “The complainants, who have been unable to access their accounts for over ten years, must finally be given the opportunity to comment on the legality of acquiring the frozen assets. Injunction proceedings must be initiated promptly for this purpose.” This marks the next hurdle. The Federal Department of Finance must now file injunction lawsuits with the Federal Administrative Court to prove that the frozen assets were unlawfully acquired.
The law presumes unlawfulness and sets two conditions. Firstly, the assets of the individual must have increased extraordinarily due to the exercise of public office. Secondly, the level of corruption in the originating state must have been notoriously high. The presumption of unlawfulness is overturned “when it can be proven with a high degree of probability that the assets were acquired lawfully.” The final stage of the process involves the restitution of the frozen assets. Injunction lawsuits are being prepared, the Federal Department of Finance confirmed upon inquiry.
The Potentate Money Act was enacted after the Arab Spring and numerous emergency freezes but remained ineffective in the cases of Mubarak and Ben Ali funds. Whether it will be successful in the Ukrainian case, as assured by the Federal Council during the National Council’s question time on June 10, will be revealed in the upcoming procedural steps.
Judgments 1C_435/2024, 1C_604/2024, 1C_610/2024 of the Federal Court dated May 19, 25, publication scheduled.