11 May, 2020 19:27

Armenia Passes Property Confiscation Law as Corruption Investigations Into Former Officials Gather Pace

By Mark Dovich

Armenia’s President Armen Sarkissian signed today the Law on Confiscation of Illegal Property and 14 related laws.

In mid-April, Armenia’s National Assembly overwhelmingly passed a bill expanding the power of state authorities to seize property suspected to have been acquired through illegal means, such as money laundering. The legislation comes as numerous prominent figures connected with the pre-Velvet Revolution governments have been indicted or arrested in an escalating anti-corruption drive spearheaded by Prime Minister Nikol Pashinyan’s administration.

What Exactly Does the New Legislation Entail?

The Law On Confiscation of Illegal Property, as it is officially known, permits Armenia’s state prosecutors to petition the courts to place a hold on any property they suspect was acquired illegally, provided the property is worth more than $105,000 and was acquired in or after 1991, the year Armenia declared independence from the Soviet Union.

Under the procedures envisaged in the legislation, prosecutors will then have six months to prove to the court that the property was acquired through illegal means, while property owners will have the right to argue their defense before the court in the same period. If the court sides with the prosecutor, the properties in question will then be transferred to the state.

Supporters of the law, including Justice Minister Rustam Badasyan, argue that it helps move Armenia’s legislative framework in the field of anti-corruption closer to international standards. And most observers of Armenia’s politics would agree that anti-corruption efforts are urgently needed in the country, though their views on how such goals are to be achieved would likely be far more divergent.

On the other hand, critics of the law have raised concerns over its possible ramifications in related industries. To that end, former Deputy Prime Minister Vache Gabrielyan has voiced worries that the law could reduce Armenia’s appeal to international investors. Justice Minister Badasyan has dismissed these concerns, arguing that tackling longstanding corruption issues will prove the most effective way to improve Armenia’s investment climate.

Similarly, former Central Bank head Bagrat Asatryan has claimed the law may weaken the country’s banking sector. And, as analyst Benyamin Poghosyan has pointed out, the law does not specify what will happen to assets seized that are mortgaged in banks. For example, will seized assets be considered bank property if they had previously been mortgaged? 

Additionally, in an article for CivilNet, Poghosyan underlines that in the 1990s, when the U.S. and its European allies pushed the post-Soviet states to enact radical “shock therapy” economic reforms, many people in Armenia acquired property without proper documentation. Since the new law will require owners to produce documentation to defend against claims of illegal property acquisition since 1991, the widespread lack of documentation may harm owners of legally-acquired property, who will have difficulties proving they did not commit illegal acts.

In response, the government has stated that it intends to use the law primarily to open cases involving property acquisitions that took place in the last decade. Nonetheless, the force of the law does technically extend to 1991, and it remains unclear how the government will handle cases involving property owners who lack proper documentation.

Finally, the law’s provision that authorities seeking to seize suspicious property may access banking and insurance information without court orders has raised right to privacy concerns.

New Investigations Swirl Around Owners of Armenia’s Largest Internet Provider

The legislation’s passage preceded a series of indictment and arrest notices that have been issued in recent days by Armenia’s National Security Service (NSS). The investigations involve several prominent figures connected with the previous governments. Pashinyan’s administration has long claimed that anti-corruption efforts represent a major government priority, though its efforts have largely been frustrated by law enforcement bodies’ lack of capacity to tackle such cases.

Most recently, the NSS issued an arrest notice for Gurgen Khachatryan, the son of former Finance Minister Gagik Khachatryan, on bribery-related charges. The Khachatryan family owns an extensive business empire that stretches across numerous industries in Armenia’s economy. The crown jewel of their holdings is Ucom, the country’s largest internet and cable television provider. Gurgen Khachatryan serves as the chairman of the company’s board of directors.

However, as of May 4, Khachatryan had not yet been arrested. It remains unclear if Khachatryan remains in Armenia or has fled the country, despite the fact that he has been banned from traveling abroad since January, when another indictment was brought against him.

In evading arrest, the junior Khachatryan appears to be following the playbook of other former officials who have been accused of embezzlement, such as former Yerevan Mayor and Transport Minister Gagik Beglaryan and former Chief Compulsory Enforcement Officer Mihran Poghosyan. Beglaryan is currently believed to be abroad, and Poghosyan has been confirmed to be living in Russia, where authorities have so far refused to extradite him to Armenia.

Meanwhile, Gagik Khachatryan has been in custody since August 2019 on charges of large-scale embezzlement and abuse of power. When the NSS issued an arrest notice for his son several days ago, law enforcement bodies also announced they would be bringing new charges against the senior Khachatryan for corruption and money laundering.

In light of these events, Mane Gevorgyan, Nikol Pashinyan’s spokesperson, said that the authorities would agree to the sale of Ucom by the Khachatryan family to the state only if the family “agrees to transfer all proceeds from such a deal to the government”. In response, Aram Orbelyan, a lawyer representing Ucom, has claimed that the government’s offer is in gross violation of Armenia’s property rights laws.

Moreover, it has recently come to light that Veon, the parent company of Beeline, one of Russia’s largest telecommunications operators, has pulled out from a planned acquisition of Ucom. It is widely suspected that Veon’s decision is related to the passage of the property confiscation law and the subsequent indictments issued against the Khachatyrans.

Money Laundering Charges Issued Against Prominent Businessman

Earlier last month, the government announced indictments against another prominent figure, Mikayel Minasyan, the son in-law of former President Serzh Sargsyan and the former Ambassador of Armenia to the Vatican, on charges of illegal enrichment and money laundering. Investigative reports have revealed that Minasyan and his closest associates hold shares in many of Armenia’s largest industrial enterprises, including the country’s largest mine, the Zangezur Copper-Molybdenum Combine. Minasyan is also widely believed to retain control over many of Armenia’s anti-government news organizations, providing him with considerable influence over the country’s media. 

Despite the issuing of indictments, Minasyan has not been arrested and is currently living abroad. Minasyan’s lawyer has dismissed the indictments as politically-motivated. Meanwhile, Minasyan, who has emerged as one of the Pashinyan administration’s most vocal critics, has in recent days taken to social media to proclaim his innocence and denounce Pashinyan’s government.

Gauging the Property Confiscation Law’s Long-Term Efficacy

The long-term effectiveness of the new property confiscation law should be examined through three distinct lenses. 

First, observers should assess the law’s efficacy in terms of retributive justice—penalizing those who acquired assets through illegal means. Second, the legislation’s impact should be studied for its deterrent effect—discouraging would-be owners from using illegal means to acquire property in the future. Finally, the law should be analyzed for its transitional justice component—its effectiveness in returning stolen funds to the Armenian state’s coffers.

At the same time, observers should also follow the law’s impact on related industries and economic conditions, particularly Armenia’s investment climate. Indeed, for legislation as wide-ranging as the property confiscation law, its long-term effectiveness will become clear not only when time has passed, but also once this entire range of factors is taken into account.