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THE INTERNATIONAL LAW OF RESPONSIBILITY FOR

ECONOMIC CRIMES

To my grandchildren, Elinge and Anne-Marlyse

The International Law of

Responsibility for

Economic Crimes

Holding State Officials Individually Liable for Acts of

Fraudulent Enrichment

NDIVA KOFELE-KALE

SMU Dedman School of Law, USA

© Ndiva Kofele-Kale 2006

All rights reserved. No part of this publication may be reproduced, stored in a retrieval

system or transmitted in any form or by any means, electronic, mechanical, photocopying,

recording or otherwise without the prior permission of the publisher.

Ndiva Kofele-Kale has asserted his right under the Copyright, Designs and Patents Act,

1988, to be identified as the author of this work.

Published by

Ashgate Publishing Limited Ashgate Publishing Company

Gower House Suite 420

Croft Road 101 Cherry Street

Aldershot Burlington, VT 05401-4405

Hampshire GU11 3HR USA

England

British Library Cataloguing in Publication Data

Kofele-Kale, Ndiva

The international law of responsibility for economic crimes

: holding state officials individually liable for acts of

fraudulent enrichment

1. Unjust enrichment (International law) 2.Misconduct in

office

I.Title

345'.02323

Library of Congress Cataloging-in-Publication Data

Kofele-Kale, Ndiva.

The international law of responsibility for economic crimes : holding state

officials individually liable for acts of fraudulent enrichment / Ndiva Kofele￾Kale.-- [2nd ed.].

p. cm.

Includes index.

ISBN 0-7546-4757-9

1. Political corruption. 2. Heads of state. 3. Unjust enrichment (International

law) I. Title.

KS5261.K64 2006

345'-235--dc22

200600433

ISBN-10: 0 7546 4757 9

ISBN-13: 978 0 7546 4757 7

Printed and bound in Great Britain by MPG Books Ltd. Bodmin, Cornwall.

Ashgate website: http://www.ashgate.com

Contents

Preface ix

Acknowledgments xii

1 Introduction 1

The Nature of the Problem 1

A Definition of Indigenous Spoliation 9

Domestic Consequences of Indigenous Spoliation 22

PART I: INDIGENOUS SPOLIATION AS AN INTERNATIONAL

ECONOMIC CRIME

2 Indigenous Spoliation as an International Crime 35

The Character of Crimes 35

The ILC’s Attempts at Defining an International Crime 42

Jurisprudence on the Draft Articles on State Responsibility 62

Individual Responsibility 66

Points of Contact between the Draft Articles, the Draft Code and the

Writings of Publicists 69

3 Indigenous Spoliation as a Breach of Fundamental Human Rights

Grounded in Customary Law 79

Customary Law Doctrine 79

The Doctrine of Permanent Sovereignty: Its Origins, Content and

Relation to Indigenous Spoliation 80

Permanent Sovereignty and the Creation of a New Economic Order 101

4 Indigenous Spoliation as a Breach of International Customary

Law of Fiduciary Relations 113

Custom in International Law 113

The Doctrine of Fiduciary Relations 114

The Trust as the Basis for Fiduciary Relationships 116

The Fiduciary Relationship in the International Sphere 124

Bases for Imposing Fiduciary Obligations on Public Officials 141

5 State Practice in International Fora with Respect to Acts of

Fraudulent Enrichment 157

State Practice at the International Level 158

The European Union Anti-Corruption Convention 172

The OECD Convention on Combating Bribery of Public Officials 175

The Council of Europe’s 1999 Criminal Law Convention on Corruption 176

vi The International Law of Responsibility for Economic Crimes

The Council of Europe’s Civil Law Convention on Corruption 178

The Inter-American Convention Against Corruption 184

The African Union Convention on Preventing and Combating

Corruption 187

The United Nations Convention Against Corruption 197

6 State Practice at the Domestic Level Criminalizing Acts of

Fraudulent Enrichment by Top State Officials 207

Constitutional Prohibitions 207

National Legislation 212

Special Constitutional Structures to Combat Spoliation 216

Commissions of Inquiry in Action 228

Statutory Anti-Corruption Bodies 232

Jurisprudence 241

Reprise 252

PART II: RESPONSIBILITY AND ACCOUNTABILITY FOR THE CRIME

OF INDIGENOUS SPOLIATION

7 The Cult of Sovereignty as an Obstacle to the Principle of

Leadership Responsibility for International Economic Crimes 259

The Cult of State Sovereignty 260

State and Sovereignty in Historical Perspective 269

Reprise 278

8 Judicial Barriers to Holding Heads of State Individually Liable

for Acts of Indigenous Spoliation 281

The Case Law 281

Other Obstacles to Recovery of Assets 292

A Bird’s-eye View of Swiss Banking Secrecy 296

Bilateral and Multilateral Agreements 301

The Response of the Banking Industry 311

9 Toward a Framework for Holding Constitutionally Responsible

Rulers Individually Liable for Acts of Indigenous Spoliation 317

The Doctrine of Individual Responsibility 317

On Rights and Duties 328

Rights and Duties with Respect to National Wealth 339

10 Legal Basis of Jurisdiction over Crimes of Indigenous Spoliation 343

Extra-Territorial Jurisdiction in International Law 343

Duty of All States to Prosecute Acts of Indigenous Spoliation 350

Issues of Procedural Capacity for Other Types of Plaintiffs 363

The Individual as a Proper Party Suing in the Name and on Behalf

of All Citizens of the Victim State 370

Contents vii

Conclusion 387

The International Law Crime of Indigenous Spoliation 387

Procedures for Norm Implementation 392

Index 403

This page intentionally left blank

Preface

The problem of ‘Grand’ Corruption (I prefer the term ‘indigenous spoliation’ or

‘patrimonicide’ because both capture the exceptional gravity and magnitude of the

plunder of national resources that takes place), the misuse of public power by high￾ranking state officials for private gain, has finally been ‘outed.’ The veil that once

shrouded this subject from public view, particularly the probing view of

multilateral institutions and national legislatures, is now lifted. It has taken over ten

years to get here. When the first edition of this work was published in 1995 there

was only a solitary multilateral convention against corruption by public officials or

private individuals. Now we can count at least seven, with several still in the draft

stage. This is clearly progress but the journey is far from over. Indigenous

spoliation has yet to be contained and much ground remains to be covered.

The mobilization of a global effort in the fight against high-level official

corruption was motivated by two factors. First, the grudging acceptance that the

corruption of public officials is a practice not confined to the Third World alone

but occurs everywhere, even in some of the most economically developed and

prosperous regions of the world. More especially, the increasing realization that

corruption flourishes in countries where a transparent and accountable culture is

lacking; central institutions are weak; legal rules are simply not enforced or non￾existent; and weak market participants do not operate under an internationally

accepted set of principles or standards. Second, the widespread recognition that

corruption is a threat to the stability of societies and retards the progress (social,

economic or political) of countries, particularly developing countries and those

with economies in transition. In the words of United Nations Secretary General

Kofi Annan at the signing ceremony for the United Nations Convention against

Corruption: ‘Corruption hurts the poor disproportionately – by diverting funds

intended for development, undermining a government’s ability to provide basic

services, feeding inequality and injustice, and discouraging foreign investment and

aid.’

Some four years ago, it was suggested to me that I might undertake the task of

preparing a second edition. The project appealed to me, the more so as the global

fight against corruption had entered into high gear, so to speak. I felt that it would

be illuminating and useful to assess how far this international effort has gone and

to draw attention to a few uncharted areas that continue to pose some difficulties in

the global war against Grand Corruption.

This then is the genesis of this new edition. As will be seen, there have been

major revisions of six of the ten chapters from the first edition. I have revised

Chapter 2, ‘Indigenous Spoliation as an International Crime,’ extensively to take

into account the more significant evolving state practice with respect to legal

regimes of responsibility. The revised chapter now incorporates (1) revisions to the

Draft of Code of Crimes which the International Law Commission (ILC) submitted

x The International Law of Responsibility for Economic Crimes

for adoption to the United Nations General Assembly in 1996 and (2) changes to

the ILC Draft Articles on State Responsibility following the work of Rapporteur

James Crawford. In the first edition Article 19’s dual regime of state responsibility

was arguably state practice in this area. This is no longer the case. This article

reflected Special Rapporteur Robert Ago’s multinational view of international law

and his belief that some state acts were so serious as to be criminal in nature.

Although this view was the more progressive one, it did not garner sufficient

support to gain the approval of the ILC. Over time sovereign opposition to the dual

regime of responsibility entrenched in Article 19 gathered steam to the point where

it was necessary to revisit the subject. The demise of Article 19 and its replacement

with Article 40 will be traced and discussed in great depth in this chapter.

I have revised Chapter 5 which presents recent additions to the international

legal regime to combat corruption. The 1995 European Union Convention on the

Protection of the European Communities’ Financial Interests and its two additional

Protocols represent the first of numerous multilateral expressions of a commitment

to combat the problem of official corruption. These were followed by the 1996

Inter-American Convention Against Corruption, the 1997 Organization for

Economic Cooperation and Development Convention on Combating Bribery of

Foreign Public Officials in International Business Transactions, the 1999 Council

of Europe Criminal Law Convention on Corruption together with its Additional

Protocol and, finally, the 2003 Council of Europe Civil Law Convention on

Corruption. In addition to these Euro-American instruments, the dawn of the new

millennium also saw the birth of two anti-corruption treaties in Africa, the 2001

South African Development Community Protocol Against Corruption and the

African Convention on Preventing and Combating Corruption of September 2002,

as well as the first global anti-corruption instrument, the 2004 United Nations

Convention against Corruption. Both the African and UN conventions will likely

cause a major sea change in the global war against corruption upon entry into

force. The former speaks to the needs of a continent whose modern history of

statehood is littered with unimaginable acts of indigenous spoliation: a continent

that has watched helplessly over the last four decades or so as an estimated $400

billion or more of its scarce development resources have been looted by its own

leaders, elected as well as appointed, and stashed away in foreign banks. The latter,

with its clearly articulated and hopefully enforceable provisions for the recovery

and repatriation of looted assets, holds out the promise of a comprehensive

international legal instrument to combat corruption. These developments are

examined in some detail in this chapter.

I have also made changes in Chapter 6 by updating state practice since 1995.

Particular attention is placed on the legal problems dogging the former President of

Zambia and former government ministers that are related to their alleged

involvement in looting their respective national economies; Nigeria’s

investigations of a former head of state and the government’s attempts to recover

sovereign funds looted by the late military ruler, General Sani Abacha and

members of his family; the lifting of President Estrada of the Philippines’

immunity, his impeachment in the Senate and subsequent trial for acts of

indigenous spoliation.

Preface xi

In revising Chapter 8 on ‘Judicial Barriers to Holding Heads of State

Individually Liable for Acts of Indigenous Spoliation,’ I have included changes in

bank secrecy laws, particularly the Swiss Government’s willingness to waive its

blocking statutes to permit victim States to recover stolen funds, and recent

developments on the Foreign Sovereign Immunities Act and the Act of State

defense and their implications for piercing the veil of sovereign immunity in

indigenous spoliation cases. The discussion on the doctrine of individual

responsibility in Chapter 9 has been substantially revised to include changes

contained in the final version of the Draft Code of Crimes against the Peace and

Security of Mankind that the ILC submitted to the United Nations General

Assembly in 1996 for adoption.

The discussion in Chapter 10 on the legal basis of jurisdiction over crimes of

indigenous spoliation has been updated also to include the more significant

scholarly contributions on the subject that have been published during the past ten

years. The revised Chapter 10 also explores opportunities for public interest legal

action and strategies to pursue legal remedies for corruption arising from

indigenous spoliation. Finally, the recommendations in the concluding chapter

have been revised to include what could very well be emerging ‘soft law’ in the

form of standards, codes and guiding principles adopted by the International

Monetary Fund and the World Bank in the fight against corruption. The inclusion

of all this new material has regrettably resulted in practically doubling the size of

the original book.

The central argument articulated in the first edition remains unchanged. There I

argued that the most effective way to combat corruption involving high-ranking

state officials is by elevating it to the status of a crime of universal interest, that is,

a crime under international law that: (a) entails individual responsibility and

punishment; and (b) is subject to universal jurisdiction. The appeal of high-level

corruption as a crime that shocks the conscience of humankind lies in the essential

attributes of a universal crime. Drawing from the jurisprudence of the Nuremberg

Tribunal, a crime of universal interest exhibits three crucial basics. First,

jurisdiction over this crime is universal and any state may participate in its

repression even though it was not committed in its territory, was not committed by

one of its nationals, or was not otherwise within its jurisdiction to prescribe and

enforce. The ubiquity of jurisdiction guarantees that those who divert national

assets into their private bank accounts can run but will find no place to hide.

Acknowledgments

My thanks are due to my colleagues Joseph Norton (James L. Walsh Distinguished

Faculty Fellow in Financial Institutions and Professor of Law at SMU Dedman

School of Law), Professor Chris Okeke of Golden Gate University College of Law

and Dr. Roberto MacLean (onetime Ambassador Extraordinary and Plenipotentiary

of Peru to the United States and former Judge of the Supreme Court of Peru) who

were among the first group of publicists to grasp the significance of this emerging

field of international economic law and who not only encouraged me in this

venture but likewise drew my attention to certain lacunae in the text of the first

edition. My debt to them is immense! Thanks are also due to my research

assistants, past and present, at SMU Dedman School of Law: Ms. Victoria Roa

(LL.M. 2004) and Ms. Seema Sharma (LL.M. 2004, J.D. 2006), and to Carolyn

Yates and Sharon Magill for preparing a camera-ready copy of the manuscript. I

acknowledge the immense contribution of Ms. Yolanda Eisenstein (J.D. 2004) who

prepared most of the revisions to chapter 2 and, in the process, became an expert

on the International Law Commission’s Articles on State Responsibility. Last, but

by no means least, I must express my warmest gratitude to John B. Attanasio

(Dean and William Hawley Atwell Professor of Constitutional Law, SMU Dedman

School of Law) for having provided me with two generous research grants in the

summers of 2003 and 2004 that allowed me to complete the revision of this new

edition. I am also deeply grateful to him for the financial support of my research

assistants.

The first edition of this book was originally published by Kluwer Law

International under its International Economic Development Law series. Kluwer

discontinued the series following a merger with Aspen Publishers of New York

while I was in the throes of revising the book for a second edition. Luckily for me,

Ashgate Publishing Limited came to the rescue and agreed to publish the second

edition. I am immensely grateful to Ms. Alison Kirk, Senior Commissioning

Editor, for her favorable recommendation to the Board of Editors of Ashgate

Publishing Limited.

I need hardly say that the views expressed in this book are my own personal

views and do not engage anyone else.

Ndiva Kofele-Kale

SMU Dedman School of Law

Dallas, TEXAS

August 2005

Chapter 1

Introduction

THE NATURE OF THE PROBLEM

Colony is a petroleum-rich country blessed with vast deposits of gold, diamonds

and other precious minerals. It gained its independence from Empire in 1965.

Independence was followed by five years of civil strife. In 1970, le maréchal

Pangloss with the help of ‘the firm’ overthrew a fragile civilian government and

installed himself President-for-Life. From the beginning he used Colony’s vast

mineral wealth as his personal preserve and within two decades had accumulated

an estimated $5 billion, an amount almost twice Colony’s entire foreign debt! In

early 1990, bowing to pressure from major Western aid donors, Pangloss allowed

political parties to organize and shortly thereafter held Colony’s first multiparty

parliamentary elections. These were immediately followed by Presidential

elections, also the first since maréchal seized power in 1970. Pangloss lost the

elections to his ex-wife, Candide, a former World Bank official and Colony’s first

ambassador to Empire. An attempted putsch by the Presidential Guard to return

Pangloss to power fizzled; Pangloss was implicated in this coup manqué and

placed under house arrest pending trial before a military tribunal. After

complicated negotiations, Pangloss was allowed to choose between a life in exile

to one under his former wife. Preferring the former, the Marshall sought and was

immediately granted political asylum in the United States where his eldest son was

serving as Colony’s ambassador. Pangloss left Colony on a chartered French

Concorde – since he no longer had access to the Presidential jet – accompanied by

two of his four wives (a third having had a change of heart decided to throw in her

lot with Candide), children, in-laws, assorted relatives and his closest associates.

He also took along several crates filled with currency, jewels, precious stones,

negotiable instruments and, thrown in for good measure, numerous trunks

containing 150 of his bespoke hats and turbans.

With Pangloss gone the new government began to assess the wreckage. Left

behind, a shocked President Candide soon discovered, was an economy that had

been brusquely ransacked and almost completely destroyed with the balance of

payments registering a current account deficit of 11% of GDP compared to a

surplus of 7% five years previously; GDP falling by an alarming 9% on average

the previous 3 years and likely to fall a further 6-7% that year; investments and

imports at about 30% and 20%, respectively, below their levels three years

previously; a fall in export earnings, together with internationally uncompetitive

2 The International Law of Responsibility for Economic Crimes

domestic interest rates which encouraged capital flight in the last three years of

Marshall Pangloss’s administration, resulting in a dramatic decline in Colony’s net

foreign reserves from $5 billion in June 1985 to minus $3.2 billion on the eve of

the presidential elections; a severe drop in government revenues and a sizeable

deficit equivalent to 15% of GDP in government operations; and to top it all, a

foreign debt of $3 billion. The situation was bleak.

The details of the problem are hypothetical, yet its substance is very real.

Colony could just as easily pass for the Philippines under Ferdinand Marcos or the

Romania of Nicolae Ceausescu or Jean-Claude (Baby Doc) Duvalier’s Haiti or the

Shah’s Iran or the Paraguay of Stroessner; and the fictional Marshall Pangloss lives

through the likes of Teodoro Obiang Nguema of Equatorial Guinea, or the Sani

Abachas of Nigeria.

The issues raised by this conduct – the sacking of national treasuries by the

very people in whom the public trust is placed, the subsequent flight of these

individuals to safe havens in Europe and America to live out their remaining years

in luxury and the attempts by the victim states to recover spoliated sovereign assets

– represent a complex and under-analyzed area of international law. But it is one

likely to take on increasing significance in this decade as the democratization

process proceeds in States that were formerly under authoritarian rule and as the

new governments are pressured by populations increasingly conscious of their

fundamental economic rights to go after former rulers. In countries that have been

injured by this kind of massive looting of their wealth and resources, this practice

has become the single most important obstacle to economic development.1

In each

of the countries discussed in this study, the confusion of public finance with private

financial interests of constitutionally-responsible officials has had fatal

consequences for the vast majority of the population. This tradition of plundering

the national treasury has brought about human suffering on a tragic scale, rolled

back the little gains in economic advancement and given ground to those who

advocate a return to the age of imperial rule.2

Fraudulent enrichment by heads of states and other top State officials have

become a permanent factor in the political life of many countries. Their lethal

effects on the world economy have been acknowledged and international policy

makers have begun to take tentative steps to bring these activities under

international discipline. Although the response to the problem of indigenous

spoliation has been slow when contrasted to the international preoccupation with

efforts aimed at protecting and preserving for future generations endangered

1 See also Joseph Nye, ‘Corruption and Political Development: a cost-benefit

analysis,’ in Political Corruption: A Handbook, 966 (Arnold J. Heidenheimer, Michael

Johnson & Victor T. Le Vine eds, 1989); Robert Williams, Political Corruption in Africa

(1987). 2 See Paul Johnson, ‘Colonialism’s Back – and Not a Moment Too Soon,’ The New

York Times Magazine, 18 April 1993/Section 6, 22, 43–44.