What Happens to the Gaddafis’ Fortune? Could Frozen Assets be used to Satisfy Claims for Reparation?

Dr Conor McCarthy is a visiting fellow, from April of this year, at the British Institute of International and Comparative Law. He is author of Reparations and Victim Support in the International Criminal Court, a monograph to be published by Cambridge University Press in early 2012.

The imposition of an assets freeze is now well established in the practice of the Security Council as part of the range of measures at its disposal to maintain or restore international peace and security. It was not surprising therefore that as part of the range of measures taken by the Security Council to address the current situation in Libya, an asset freeze was imposed on various individuals occupying senior positions in the Libyan government and in its security forces as well as on persons closely connected with the ruling regime. In line with previous resolutions in which an asset freeze has been imposed the range of assets frozen by Resolution 1970 (2011) is enormously broad. Paragraph 19 of the resolution requires member states of the United Nations to freeze “all financial assets and economic resources … owned or controlled, directly or indirectly…” by the individuals identified in Annex II of the resolution.

Given the seniority of the individuals in question and the power and influence which they appear to wield within Libya, many states have interpreted the scope of assets “owned or controlled” for the purposes of Resolution 1970 to include a vast swathe of the Libyan state’s assets held abroad. The UK government, for instance, is reported to have frozen around $2bn of assets held in the UK by the Libyan Investment Fund (see here and here). For its part, the United States has frozen around $30bn of assets, including those held by Libya’s sovereign wealth fund and the Central Bank of Libya. Assets owned or controlled by numerous other individuals and entities have also been frozen in the member states of the European Union pursuant to Council Regulation (EU) No 204/2011 adopted on 2 March 2011 (see here and here). Billions more are thought to have been frozen in other jurisdictions throughout the world.

With such an enormous body of wealth frozen in Europe, the United States and elsewhere, what is the position of individuals who have been injured in the violence, past and present, for which the Libyan state or individuals within its senior leadership are alleged to bear responsibility? Is it possible that any of the funds now frozen could be used to satisfy a claim for reparation in respect of such responsibility, assuming it could be established?

One avenue reportedly contemplated by lawyers representing individuals killed or injured by the IRA, which Libya has previously acknowledged supporting, is through a civil action in UK courts against Muammar Gaddafi or others within the Libyan leadership. Such an action would inevitably face substantial problems of immunity from jurisdiction. But regardless of the question of immunity, the attachment of property frozen pursuant to Resolution 1970 to satisfy claims for reparation appears to be impermissible under its terms. Although the resolution permits the use of frozen funds to satisfy a judgment debt this is only allowed “provided the judgment was entered into prior to the date of [Resolution 1970]”. Moreover, in paragraph 19 of the resolution the Security Council expressed its intention “to ensure that assets frozen … shall at a later stage be made available to and for the benefit of the people of the Libyan Arab Jamahiriya”, suggesting that use of funds to provide compensation, at least to non-Libyan nationals, would be impermissible. Indeed, during Prime Minister’s Questions on 2 March 2011, in response to a parliamentary question regarding the use of frozen funds for compensation, the British Prime Minister, David Cameron, appeared to indicate the UK government’s considered view that the use of frozen funds in this manner would be impermissible on precisely this ground. He stated, “[h]aving sought advice [on the matter] those assets really do belong to the Libyan people”.

Given the terms of Resolution 1970, not to mention the problem of state immunity, the prospect of individuals obtaining attachment of frozen funds seems remote to say the least. But what is the position of those individuals, both Libyan and foreign, who are killed or injured in the present fighting? Are there other avenues that may be open to individuals injured in circumstances which may give rise to the responsibility of the Libyan state under international law?

Here, the position of foreign nationals must be distinguished from that of Libyan nationals. The latter have few available avenues for redress other than relying on unreceptive, not to mention dysfunctional, domestic processes. The prospects for foreign nationals are, however, marginally better. As regards foreign nationals, the challenges presented by the death or injury of such persons or the destruction of their property in the course of a civil war or armed uprising is a problem that international law has long had rules to address. Numerous civil wars in Central and South America in the Nineteenth Century gave rise to precisely this issue. It was, in large measure, out of these situations that the international law on the treatment of aliens and the international law of diplomatic protection emerged. Using these bodies of rules states whose nationals have been injured in Libya may, in due course, seek to make diplomatic protection claims against Libya for the payment of compensation in respect of the harm suffered by their nationals where such injury resulted from circumstances which gave rise to Libya’s responsibility under international law. Violations of human rights guarantees or international humanitarian law by the Libyan military or security forces would fall into this category as would any failure by Libya to afford the “minimum standard” of protection to foreign nationals required of it by international law.

If Libya, however, remains in a prolonged state of turmoil or if the Gaddafi regime remains in power there is little prospect of such claims being satisfied. Depending on the number and scope of the claims that eventually arise, it is conceivable that the Security Council could look to the precedent of the United Nations Compensation Commission (UNCC) in an effort to deal with such a situation. Although not on all fours with the situation in Libya, the UNCC was established to deal with the many claims by states for injury suffered by their nationals arising from Iraq’s invasion of Kuwait, through compensation payments from an account resourced, in part, through frozen Iraqi funds.

Such a process, however, may well be politically unpalatable for various permanent members of the Security Council. Moreover, in contrast to the UNCC which operated on the legal premise, expressly established by Resolution 687 (1991), that Iraq bore responsibility for all direct losses flowing from its invasion and occupation of Kuwait, no analogous predetermination of responsibility could be applied in respect of the kind of claims which may arise from the situation in Libya. Determining issues of responsibility would enormously complicate any claims process attempting to deal with such claims and, as a likely result, the establishment of such a process seems unlikely indeed. Perhaps for the lucky few, claims may be taken up bilaterally, in due course, by their state of nationality. For those whose state of nationality lacks the interest, not to mention the political clout, to take up such claims the chances of obtaining redress under rules of diplomatic protection are remote.

So what other options might be available – both for Libyan and foreign nationals? Is there any mechanism which could hold out the possibility of redress for individuals injured in atrocities perpetrated in the course of the ongoing violence? In this regard the Security Council’s referral to the International Criminal Court, with its regime for victim redress, may become relevant. Article 75(1) of the Rome Statute gives the International Criminal Court the power to establish principles regarding reparations to victims of crimes within its jurisdiction while Article 75(2) gives the Court the power to make a reparations order against a convicted perpetrator. Even prior to a reparations order being made (but after an arrest warrant or summons has been issued) the International Criminal Court can require States Parties to take protective measures, including the freezing and seizure of assets, for the purposes of an eventual reparations award. Such orders have already been made in the Bemba, Lubanga and Katanga cases among others. As regards the situation in Libya, it is worth recalling, however, that at this early stage no charges have been brought and all of those presently in the public spotlight are entitled to the presumption of innocence. But it does appear that, at least in some instances, a substantial amount of personal wealth may be available for reparations in respect of the situation in Libya should convictions eventually result.

But given that such assets are all frozen pursuant to Security Council Resolution 1970 for the ultimate benefit of the people of Libya, could such assets ultimately be forfeited for the purposes of an ICC reparations award? Substantial impediments would undoubtedly stand in the way of such an outcome. Members States of the United Nations are, after all, bound by the terms of Resolution 1970 regardless of their other international obligations (including any order from the ICC to freeze or forfeit assets for the purposes of a reparations award) by the combined effect of Articles 25 and 103 of the UN Charter.

For its part the ICC, not being a party to the United Nations Charter, is not prevented, should it decide to do so, from issuing its own freezing order in respect of persons whose property is, at the same time, frozen pursuant to a Security Council resolution. In fact, such orders have already been issued, for example, in the Lubanga and Katanga cases, both of whom had previously been designated by the Security Council Sanctions Committee pursuant to Security Council Resolution 1596 (2005). Member States of the United Nations are, however, bound by the relevant terms of Resolution 1970. A difficult question, therefore, concerns the disposition of assets subject to a parallel freezing order e.g. by both the ICC and the Security Council, in circumstances where the ICC sought to forfeit such assets for the purposes of reparations. From the perspective of ICC States Parties this would present a classic situation of norm conflict. States facing such a conflict would, however, be bound by Article 25 and 103 of the UN Charter to give primacy to their obligations under that instrument and, as a result, could not enforce an ICC reparations order without violating their obligations under the Charter, unless approval for the use of frozen assets in this manner was provided by the Security Council itself.

There are many potential avenues, at both the national and international levels, through which victims of the current conflict in Libya may seek redress. In practice, however, the obstacles – legal, procedural and practical – facing those who seek to avail of such opportunities are substantial.