ON PRINCIPLES OF RESPONSIBLE ASSET REPATRIATION TO UZBEKISTAN

Proposal by Uzbek civil society activists

We are a group of Uzbek activists cit­i­zens con­cerned about the future of our coun­try. We write because we under­stand the Swiss gov­ern­ment may soon nego­ti­ate the return of sev­er­al hun­dred mil­lion Swiss francs that were stolen from the peo­ple of Uzbekistan through cor­rup­tion in the country’s tele­com sec­tor and hid­den in Swiss banks. We urge the gov­ern­ment of Switzerland to ensure that these assets are returned respon­si­bly to Uzbekistan. By respon­si­bly, we mean in ways that pro­vide rem­e­dy to the cit­i­zens of Uzbekistan as the true vic­tims of grand cor­rup­tion and that ensure con­crete mea­sures to elim­i­nate sys­tem­at­ic cor­rup­tion in Uzbekistan.

The need for responsible repatriation of stolen assets

Repatriation of stolen assets is respon­si­ble if it con­tributes to the fight against cor­rup­tion on glob­al and nation­al levels.

Grand cor­rup­tion in Uzbekistan is endem­ic and pen­e­trates all lev­els of the polit­i­cal, admin­is­tra­tive, legal, cor­po­rate, and finan­cial insti­tu­tions. A clear cor­re­la­tion is seen between cor­rup­tion at the high­est lev­els and the gross vio­la­tions of human rights.

Therefore, a cau­tious asset return pol­i­cy should be pur­sued. There is a high risk that with­out anti- cor­rup­tion mech­a­nisms in place uncon­di­tion­al return of the pro­ceeds of cor­rup­tion will very like­ly lead to funds being stolen once again and recy­cled anew into west­ern and off­shore jurisdictions.

Unconditional return of the pro­ceeds of cor­rup­tion would vio­late both the word and spir­it of the UN Convention against Corruption, inter­na­tion­al human rights law, and the glob­al frame­work for fight­ing cor­rup­tion. UNCAC requires the return of stolen assets to the coun­tries of their ori­gin. States how­ev­er can­not selec­tive­ly com­ply with UNCAC pro­vi­sions; they must com­ply with all pro­vi­sions, includ­ing those requir­ing the estab­lish­ment of anti-cor­rup­tion pre­ven­tion mechanisms.

If asset-hold­ing states fail to ensure that the return of the pro­ceeds of cor­rup­tion serves as a deter­rence to future crimes, this must be con­sid­ered irre­spon­si­ble, if not com­plic­it with per­pet­u­at­ing cor­rup­tion in the request­ing state.

Proposed principles of asset restitution to Uzbekistan

At the Global Forum on Asset Recovery in December 2017, rep­re­sen­ta­tives of the Swiss and oth­er gov­ern­ments agreed to prin­ci­ples to guide asset return. Among oth­er things, the gov­ern­ments pledged that the return should guar­an­tee trans­paren­cy and account­abil­i­ty in the use of the assets returned, ben­e­fit the cit­i­zens of the receiv­ing coun­try, strength­en the receiv­ing nation’s abil­i­ty tofight cor­rup­tion, and ensure civ­il soci­ety par­tic­i­pa­tion in the return and use of funds.

Below we pro­pose eight guide­lines that empha­size and elab­o­rate on these prin­ci­ples in the con­text of any return of stolen assets to Uzbekistan:

  1. The asset return should be con­sid­ered in the con­text of, and con­tribute to, the fight against cor­rup­tion and human rights vio­la­tions on glob­al and domes­tic lev­els and meet stan­dards of trans­paren­cy and accountability.
  2. Therefore, there should be no return of assets with­out sound con­di­tions and mech­a­nisms to pre­vent the assets being stolen again.
  3. The asset return should serve as rem­e­dy for the vic­tims of cor­rup­tion, i.e., the entire pop­u­la­tion of Uzbekistan.
  4. The best rem­e­dy for vic­tims is not com­pen­sa­tion – which would nei­ther be prac­ti­cal (withUzbekistan’s spe­cif­ic insti­tu­tion­al envi­ron­ment) nor have any last­ing long-term, sys­temic effect – but rather mea­sures to reduce the scale of cor­rup­tion and human rights abuse in Uzbekistan.
  5. Asset return should be used as an incen­tive to reform those spe­cif­ic insti­tu­tion­al con­di­tions that were and remain dri­ving fac­tors for the orig­i­nal crimes – bribery and extor­tion in the tele­com sec­tor of Uzbekistan – and con­se­quent mon­ey laun­der­ing. Below we iden­ti­fy five such insti­tu­tion­al conditions.
  6. Reforms can­not be imple­ment­ed overnight, and will require sev­er­al years. Therefore, the resti­tu­tion process should be extend­ed over time and fol­low a step-by-step approach, reward­ing Uzbekistan for mak­ing bench­marked and mea­sur­able progress in real­iz­ing reform.
  7. Provided the prin­ci­ples 1–6 are sat­is­fied, the Government of Uzbekistan should have con­trol and ulti­mate approval over the dis­po­si­tion of the assets, fol­low­ing a trans­par­ent process inclu­sive of con­sul­ta­tions with rel­e­vant inter­na­tion­al stake­hold­ers and Uzbek civ­il soci­ety. The imple­men­ta­tion of these prin­ci­ples would cre­ate a com­plete­ly new real­i­ty in Uzbekistan in terms of the gov­er­nance sys­tem and, as such, give suf­fi­cient assur­ances that the assets are not re-stolen and re-laundered.
  8. In case the gov­ern­ment of Uzbekistan rejects these guide­lines, the Swiss gov­ern­ment should keep the assets until the Uzbek lead­er­ship accepts the deal and has shown legit­i­mate and ver­i­fi­able progress.

Five institutional sectors to be reformed as prerequisite for asset return

  1.  Establish a trans­par­ent and com­pet­i­tive ten­der­ing process, includ­ing in the spheres of allo­ca­tion of fre­quen­cies and licens­es, the pub­lic pro­cure­ment of goods, pub­lic works, and con­tract­ed ser­vices. Publish all mate­r­i­al relat­ed to pub­lic pro­cure­ment and con­ces­sion con­tracts in the pub­lic domain.
  2.  Reform the pub­lic admin­is­tra­tion to make sure civ­il ser­vants car­ry out the duties of their role, abide by the law, and work in the pub­lic inter­est instead of act­ing out of per­son­al loy­al­ty to high-rank­ing offi­cials. With this in mind, imple­ment a con­flict of inter­est reg­u­la­tion for all civ­il ser­vants and gov­ern­ment offi­cials in Uzbekistan and pro­vide full trans­paren­cy of their income.
  3. Establish inde­pen­dence of judi­cia­ry and legal pro­fes­sion; enforce the rights for fair trail and due process;
  4. Ensure trans­paren­cy of pub­lic and cor­po­rate finance, includ­ing: oblig­a­tory audit­ing of state and its major cor­po­rate con­trac­tors by rep­utable inter­na­tion­al audi­tors and the full pub­li­ca­tion of such audit reports in the pub­lic domain; dis­close gov­ern­ment books to the pub­lic, with an empha­sis on export rev­enues; and admin­is­ter a trans­par­ent sys­tem of cor­po­rate dis­clo­sure, with a require­ment that all cor­po­rate enti­ties oper­at­ing in Uzbekistan par­tic­i­pate in a pub­lic reg­is­ter of ben­e­fi­cial owners.
  5. Provide over­sight includ­ing through the estab­lish­ment of an inde­pen­dent pub­lic anti- cor­rup­tion agency; and allow civ­il soci­ety and media out­lets to freely oper­ate and con­duct jour­nal­ist inves­ti­ga­tions with­out fear of harass­ment and repressions.

We note there are many wide­ly rec­og­nized inter­na­tion­al indi­ca­tors avail­able that would mea­sure­gov­ern­ments’ progress in meet­ing these objec­tives (see annexed below dis­cus­sion of Indicators for Gaging the Progress of Reform in Uzbekistan, pre­pared by mem­bers of the Working Group on Responsible Asset Repatriation).

Why specifically these five institutional conditions?

The com­plete absence of insti­tu­tion­al integri­ty in the five sec­tors men­tioned above were key enabling fac­tors for the orig­i­nal cor­rup­tion case. As such, these areas should be addressed as pre­req­ui­sites for return­ing the pro­ceeds of cor­rup­tion to the Government of Uzbekistan. But what is right for the tele­com indus­try can also be applied to oth­er sec­tors of economy.

First, Uzbekistan did not at that time and still does not have an estab­lished sys­tem for trans­par­ent and com­pet­i­tive ten­der­ing process­es, nei­ther in allo­cat­ing fre­quen­cies and licens­es, nor in pub­lic pro­cure­ment. Given the absence of trans­par­ent pub­lic pro­cure­ment, it is very like­ly that unless appro­pri­ate reforms are imple­ment­ed, the returned assets will be redis­trib­uted via opaque lucra­tive pro­cure­ment con­tracts, a fre­quent prac­tice if not the rule for use of pub­lic funds in Uzbekistan.

Gulnara Karimova

Second, Gulnara Karimova did not act alone in extort­ing bribes from tele­com com­pa­nies in exchange for issuance of oper­at­ing licens­es. Karimova would have been unable to car­ry out the orig­i­nal crimes with­out involve­ment of a num­ber of gov­ern­ment insti­tu­tions. A num­ber of high rank­ing offi­cials were direct­ly involved in issu­ing these licens­es, and these indi­vid­u­als act­ed out

of per­son­al loy­al­ty to her­self and her father, for­mer pres­i­dent Islam Karimov. This high­lights the sys­temic impact of the patron­age sys­tem upon how pub­lic office was and still is run, and the total absence of con­flict of inter­est reg­u­la­tion in Uzbekistan. It also demon­strates the lack of a civ­il ser­vice which works in the pub­lic inter­est and can with­stand pres­sure from high rank­ing cor­rupt officials.

Third, it is notable that from the very begin­ning, west­ern tele­com com­pa­nies sought back-door deals with local offi­cials, instead of rely­ing on judi­cial mea­sures and legal means to engage in and pro­tect their busi­ness and prop­er­ty rights. We under­stand west­ern com­pa­nies were well aware of the absence of rule of law and inde­pen­dent judi­cia­ry in the country.

Fourth, the pub­lic and cor­po­rate finance sys­tems in Uzbekistan are extreme­ly opaque. Neither the state itself nor its major cor­po­rate con­trac­tors are under oblig­a­tion to open their finances to scruti­ny by rep­utable audi­tors. Additionally, the state bud­get does not reflect income from export rev­enues the gov­ern­ment con­trols, such as rev­enues from the cot­ton sec­tor – linked to forced labor and human rights vio­la­tions. Instead, these rev­enues go into hid­den extra-bud­getary accounts con­trolled by a few indi­vid­u­als around the President, and are used at the dis­cre­tion of polit­i­cal elites on expen­di­tures unknown to the pub­lic. It is unfor­tu­nate­ly very like­ly that an uncon­di­tion­al return of assets to Uzbekistan will leave the state sus­cep­ti­ble to repeat­ing such prac­tices; with the funds remain­ing absent from the state budget.

Fifth, essen­tial mon­i­tor­ing, over­sight and com­pli­ance insti­tu­tions are absent. Uzbekistan does not have an inde­pen­dent anti-cor­rup­tion state agency capa­ble of inde­pen­dent­ly detect­ing and pre­vent­ing cas­es of gov­ern­ment cor­rup­tion. Uzbekistan also lacks an inde­pen­dent orga­nized civ­il soci­ety – fol­low­ing a large-scale crack­down between 2004and2007 – or an inde­pen­dent press that would be able, with­out fear of repres­sion or reprisal, mon­i­tor, doc­u­ment and report on cor­rupt prac­tices, espe­cial­ly on cas­es of grand cor­rup­tion. Activists and jour­nal­ists who tried in the past to report on such cas­es were detained, tor­tured and impris­oned. While some of these jour­nal­ists and activists have been recent­ly released from prison, which con­sti­tutes a pos­i­tive sign, they are still sub­ject to report­ing require­ments, harass­ment, and oth­er con­di­tions incon­sis­tent with full reha­bil­i­ta­tion by the state. Nor have they been com­pen­sat­ed by the state for their unjust impris­on­ment. In fact, legal­ly, these indi­vid­u­als are still con­sid­ered crim­i­nals accord­ing to the judi­cial sys­tem of Uzbekistan, and the orig­i­nal mis­car­riage of jus­tice has not been addressed.

Our demand for seri­ous changes in these five areas as part of the process for return­ing assets to Uzbekistan should not be seen as con­fronta­tion­al towards the gov­ern­ment. The Uzbek polit­i­cal lead­er­ship has itself com­mit­ted to reforms in these areas and has even made a few steps for­ward. For instance, a draft law on pub­lic admin­is­tra­tion has already been pub­lished, which still needs to be adopt­ed and, more impor­tant­ly, imple­ment­ed. There has been also one case of fair tri­al open to the pub­lic (in March-April 2018, tri­al of Bobomurod Abdullaev and two oth­ers). So far, this is a sin­gle such prece­dent. Besides, there are some indi­ca­tions of open­ing for Uzbek press to report on con­tro­ver­sial issues, though the press does not still dare to con­duct jour­nal­ist inves­ti­ga­tions into cor­rup­tion cas­es. These pos­i­tive signs do not yet rep­re­sent fun­da­men­tal or irre­versible change. What is need­ed in Uzbekistan is not promise and rhetoric of change, but a sus­tained path­way to reform and the adop­tion of stan­dards of good governance.

It still remains to be seen whether the gov­ern­ment will adopt a full pack­age of anti-cor­rup­tion reforms and, more impor­tant­ly, imple­ment new leg­is­la­tion into actu­al prac­tice. We believe that each sig­nif­i­cant step and improve­ment in these five areas should be reward­ed, with a cor­re­spond­ing por­tion of assets returned to the gov­ern­ment. Such a sequenced, bench­marked approach to resti­tu­tion would be per­fect­ly in line with the course of reform to which the new Uzbek polit­i­cal lead­er­ship has pub­licly com­mit­ted, notably with­in Uzbekistan’s Development Strategy(2017–2021). The return of assets should rein­force the process of reforms, offer­ing a guar­an­tee that they will become sus­tain­able and, over time, irreversible.

Why not a Bota Fund-like solution?

We believe that the cre­ation of the Bota Foundation in 2009 as a chan­nel for resti­tut­ing Kazakhgate mon­ey to the peo­ple of Kazakhstan was the right deci­sion. The lat­est resti­tu­tion by Switzerland to Kazakhstan of $48 mil­lion, in 2012, was, by con­trast, much worse, from the point of view of prin­ci­ples of respon­si­ble return.

Bota Foundation logo

An inves­ti­ga­tion was con­duct­ed into USD 21.76m of the resti­tut­ed assets ear­marked for a Youth Corps Program. It revealed that the Project Coordinator for the Youth Corps Program is a con­sor­tium made up of Government Organized NGOs (GONGOs). The con­sor­tium is head­ed bythe President’s eldest daugh­ter, Dariga Nazarbayeva, who is a politi­cian in her own right. This GONGO con­sor­tium will receive approx­i­mate­ly USD 465,000 for its ser­vices as Project Coordinator. “From the lim­it­ed avail­able pro­cure­ment data, — write the authors of the sum­ma­ry report, — exam­ples have been uncov­ered of lav­ish spend­ing on pro­mo­tion­al mate­r­i­al, awards tothe rul­ing party’s youth wing, expen­di­ture on mate­ri­als that have a pro­pa­gan­dis­tic func­tion, andthe selec­tion of ‘host orga­ni­za­tions’ that are pre­dom­i­nant­ly GONGOs, some of which are run direct­ly by pub­lic offi­cials and politi­cians espous­ing strong com­mit­ment to the President’snational ide­ol­o­gy.” 1 This result­ed in resti­tu­tion ben­e­fit­ing the rul­ing par­ty and senior offi­cials of Kazakhstan, but not the vic­tims of corruption.

Under the cur­rent state of affairs in Uzbekistan, the Bota Fund-like solu­tion can­not be applied with­out vio­lat­ing the prin­ci­ples of trans­paren­cy and account­abil­i­ty and respon­si­ble return, because the con­di­tions for oper­a­tion of such a fund, inde­pen­dent from the gov­ern­ment, do not exist.

First, the Bota Fund in Kazakhstan oper­at­ed through allo­ca­tion of grants to local NGOs which, in turn, deliv­ered finan­cial and tech­ni­cal assis­tance to low-income fam­i­lies. In Uzbekistan, such inde­pen­dent NGOs sim­ply do not exist. Between 2004 and 2007, the rel­a­tive­ly inde­pen­dent NGOs were sup­pressed, leav­ing Uzbekistan with no inde­pen­dent orga­nized civ­il soci­ety. Due to repres­sion inflict­ed by the Karimov regime, there are cur­rent­ly no stake­hold­ers in Uzbekistan who could either pro­vide Bota-like ser­vices to the pop­u­la­tion or con­duct inde­pen­dent mon­i­tor­ing of how these funds are being used.

1 See Lasslett, K. and Mayne, T. (2018) A Case of Irresponsible Asset Return? The Swiss- Kazakhstan $48.8 Millionhttps://kiar.center/wp-content/uploads/2018/08/A‑Case-of-Irresponsible-Return-Summary-Report.pdf

Second, in the cur­rent absence of a trans­par­ent ten­der­ing and pub­lic pro­cure­ment process in Uzbekistan, there is a very high prob­a­bil­i­ty that the mon­ey will be chan­neled through lucra­tive con­tracts to cronies of polit­i­cal elites, and thus stolen once more. Examples of such shad­owy deals on the allo­ca­tion of con­tracts on con­struc­tion and recon­struc­tion in Tashkent are mul­ti­ple nowadays.

Third, with­out a trans­par­ent sys­tem of pub­lic finance, the gov­ern­ment can manip­u­late the use of the returned assets. For exam­ple, it could cut fund­ing it had planned to pro­vide for health, edu­ca­tion, and oth­er social projects, divert these funds to pri­vate inter­ests, and employ the returned assets to cov­er the gap in pub­lic funds. By shift­ing funds this way, the intend­ed resti­tu­tion would bear no pos­i­tive effect for the peo­ple of Uzbekistan.

Finally, we believe that using the assets to rein­force anti-cor­rup­tion reforms will be most ben­e­fi­cial for the vic­tims of cor­rup­tion and the devel­op­ment of Uzbekistan over the long term, sup­port­ing sys­temic, trans­par­ent insti­tu­tion­al reforms with last­ing effect.

Umida Niyazova, on behalf of Uzbek-German Forum for Human Rights, Berlin, Germany,

umida.niyazova@gmail.com

Nadejda Atayeva, on behalf of Association for Human Rights in Central Asia, Le Mans, France,

n.atayeva@gmail.com

Jodgor Obid, Uzbek polit­i­cal refugee, res­i­dent of Austria

Dilya Erkinzoda, Uzbek polit­i­cal refugee, res­i­dent of Sweden

Ulughbek Haydarov, jour­nal­ist, for­mer polit­i­cal pris­on­er, res­i­dent of Canada

Alisher Taksanov, jour­nal­ist, polit­i­cal emi­grant, res­i­dent of Switzerland

Alisher Abidov, polit­i­cal emi­grant, res­i­dent of Norway

A num­ber of local Uzbek activists sup­port these pro­pos­als, but their names are not dis­closed out of con­cerns over their safety.

Appendix

International Working Group on Responsible Asset Repatriation

INDICATORS FOR GAGING THE PROGRESS OF ANTI-CORRUPTION REFORM IN UZBEKISTAN

The Swiss and Uzbek gov­ern­ments are nego­ti­at­ing a return of Gulnara Karimova’s assets, stolen­from the peo­ple of Uzbekistan and hid­den in Swiss banks. Uzbek civ­il soci­ety activists are urg­ing the agree­ment to include reforms of Uzbek insti­tu­tions and ensure the assets are not again stolen, but are instead used to pro­mote the wel­fare of Uzbek cit­i­zens. The reforms they seek are sim­i­lar to those the United Nations, World Bank, and oth­er donors include when pro­vid­ing finan­cial assis­tance to governments.

The inter­na­tion­al com­mu­ni­ty has devel­oped a range of indi­ca­tors to mea­sure the progress a gov­ern­ment is mak­ing in real­iz­ing such reforms. The reforms Uzbek civ­il soci­ety col­lec­tive­ly urge, along with some of the key indi­ca­tors used to mark progress in achiev­ing each, are list­ed below. We urge the Swiss and Uzbek gov­ern­ments to incor­po­rate these bench­marks into the asset return agree­ment. They should also agree on ambi­tious and real­is­tic tar­gets for improvingUzbekistan’s score on achiev­ing gen­uine reforms, as funds are returned.

1) Establishing a trans­par­ent and com­pet­i­tive ten­der­ing process.

The World Bank’s annu­al Benchmarking Public Procurement reports how close nation­al­pro­cure­ment sys­tems come to agreed upon stan­dards of open­ness and com­pet­i­tive­ness. Georgia’sInstitute for the Development of Freedom of Information has, with oth­er orga­ni­za­tions in Eurasia and Eastern Europe, devised a method for mea­sur­ing how open and com­pet­i­tive pro­cure­ment sys­tems in the region are.

2) Creating a capa­ble, inde­pen­dent, apo­lit­i­cal civ­il service.

Published annu­al­ly, the World Bank Country Performance and Institutional Assessment rates how close­ly coun­tries adhere to the prin­ci­ples of a mer­it-based, polit­i­cal­ly neu­tral civ­il service.Professors Peter Evans and James Rauch’s method for mea­sur­ing the qual­i­ty of a nation’s civilser­vice is wide­ly employed by schol­ars and pol­i­cy­mak­ers alike to eval­u­ate pub­lic ser­vice bureaucracies.

3) Establishing an inde­pen­dent judi­cia­ry ded­i­cat­ed to enforc­ing fair tri­al rights and observ­ing due process of law.

Gothenburg University’s V‑Dem project rates coun­tries annu­al­ly on the extent to which the exec­u­tive respects the con­sti­tu­tion and com­plies with court rul­ings; and extent to which the judi­cia­ry can act in an inde­pen­dent fash­ion. The World Justice Project and the Bertelsmann Transformation Index both pub­lish a year­ly assess­ment of how close­ly gov­ern­ments adhere to rule of law principles.

4) Ensuring a trans­par­ent pub­lic finan­cial man­age­ment sys­tem and trans­paren­cy in cor­po­rate own­er­ship and finance.

A part­ner­ship that includes the Swiss gov­ern­ment, the European Union, and the IMF have devel­oped the Public Expenditure and Financial Accountability Framework (PEFA), a now uni­ver­sal­ly accept­ed sys­tem for assess­ing the trans­paren­cy and effec­tive­ness of pub­lic finan­cial man­age­ment sys­tems. The Open Budget Survey assess­es the pub­lic avail­abil­i­ty of bud­get infor­ma­tion and oth­er bud­get­ing prac­tices that con­tribute to an account­able and respon­sive pub­lic finance sys­tem. The Financial Secrecy Index admin­is­tered by the Tax Justice Network pro­vides inter­na­tion­al­ly rec­og­nized bench­marks for cor­po­rate and finan­cial trans­paren­cy and compliance.

5) Strengthening account­abil­i­ty through estab­lish­ing an inde­pen­dent anti-cor­rup­tion agency and guar­an­tee­ing civ­il soci­ety and the media free­dom to operate.

The World Bank gath­ers infor­ma­tion from a vari­ety of sources each year which it then com­pilesin­to a scale show­ing “voice and account­abil­i­ty,” the extent to which a country’s cit­i­zens can­par­tic­i­pate in select­ing their gov­ern­ment, how free they are to express their opin­ions and cre­ate pri­vate, vol­un­tary asso­ci­a­tions, and whether the media faces restric­tions on what it can publish.

Federal Assembly of Switzerland
Swiss Federal Council
Federal Department of Foreign Affairs (FDFA)
Federal Department of Justice and Police
Task Force on Asset Recovery, FDFA
Swiss Agency for Development and Cooperation, FDFA

PDF of this doc­u­ment is here.

How to return one bil­lion dol­lars stolen from the peo­ple of Uzbekistan

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