Understanding the US travel ban on Schembri-Mizzi and how it hurts Malta

The United States Congress – the American parliament – includes measures in so-called annual “appropriations legislation” that require the Secretary of State to bar certain foreign corrupt officials and human rights violators and their immediate family members from entry into the United States.

These measures give the Secretary discretion to designate such barred individuals publicly or privately – as happened in the case of former OPM chief of staff Keith Schembri and former Labour minister Konrad Mizzi, ostensibly over corrupt acts in connection with the Delimara gas plant.

Why does the US issue such travel bans?

Visa bans apply to foreign officials about whom the Secretary “has credible information indicating that they have been involved, directly or indirectly, in significant corruption, including corruption related to the extraction of natural resources, or a gross violation of human rights.”

The ban is mandated by Section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, and to date, the US government has publicly designated over 150 individuals for a visa ban.

The US says that the measures are intended at promoting anti-corruption and human rights.

Who are the people slapped with a US travel ban under 7031(c)?

The first public designation took place in 2018.

Among primary designees, the greatest number of public designations from a single country involve nationals of Saudi Arabia (17), all designated for their roles in the October 2018 murder of Jamal Khashoggi, a Saudi dissident and journalist.

Latin America is the most represented C Foreign Officials Designated on Corruption or Human Rights Grounds Congressional Research Service 2 region among public designations (26); the region’s total is boosted by a case that dates to 1989 involving 13 former Salvadoran military officials who had been involved in the planning and execution of extrajudicial killings of six Jesuit priests and two others.

The least represented region among the public designations is Asia, with one Cambodian, one Sri Lankan, and four Burmese public designations.

The Secretary of State also has to submit a report to congressional committees 30 days after enactment of the act for 2021, and then every 90 days with information on the provision’s implementation during the previous 12 months. While the reports may include a classified annex, Section 7031(c)(5) requires any unclassified portion of these reports to be posted on the State Department website.

What is the US trying to do with this travel ban?

As described by David Phillips, director of the Program on Peacebuilding and Human Rights at Columbia University in New York, a former advisor to the Clinton, Bush and Obama administrations, Section 7031 (c) is a powerful yet underutilized tool of US foreign policy.

“The threat that foreign officials may be publicly designated and shamed for engaging in significant corruption or human rights abuses and the threat to family members of being barred from entry to the U.S. is a strong disincentive or deterrent to foreign officials,” Phillips writes.

Different administrations may interpret significant corruption and human rights abuses in different ways, reflecting their foreign policy priorities or attitudes towards different countries.

For example, the Trump administration designated the former President of the Gambia for significant corruption in 2018. Nicaragua’s Supreme Electoral Council President was designated for significant corruption, and Serbian Goran Radosavljevic was publicly designated for violation of human rights in the murder of three Albanian-American brothers in Kosovo during the war.

Under the Biden administration, Albania’s former President and Prime Minister Sali Berisha was sanctioned in mid-May 2021 for significant corruption; the Prosecutor General of Slovakia for significant corruption; Ukrainian oligarch Ihor Kolomoyskyi was designated in March 2021. A Paraguayan Congressman was designated for significant corruption in April 2021. Congressman Boris Espana Carceres of Guatemala and two former Nambian government ministers were designated for significant corruption in June 2021. 

“7031 (c) serves as a versatile and effective tool of foreign policy. However, safeguards are needed to prevent any mishandling or politicization of a designation. Individuals should have the right to address questions about their conduct at some point in the process,” Phillips writes.

“Individuals should be able to argue why they may warrant an exemption. Once designated, a mechanism should exist to permit an appeal by the individual.  Lastly, until a final determination is made the process requires discretion so that reputations are not ruined unnecessarily.”

How is this different from OFAC sanctions?

The travel sanction is not like the US Treasury Department’s OFAC sanctions (Office of Foreign Asset Control). The OFAC sanctions, while not legislatively binding under Maltese law, affects banking relationships for blacklisted subjects and are considered as political instruments used by the United States in relations with other foreign nations.

Indeed, OFAC sanctions affected banking relationships for Maltese subjects like Darren and Gordon Debono, who are implicated in a €30 million Libyan fuel smuggling ring and facing court proceedings in Italy as well as in Malta. The blacklisting of Debono’s restaurants for example, meant they could not accept credit card payments.

OFAC enforces economic sanctions based on US foreign policy goals, by targeting regimes, terrorists, traffickers, WMD proliferation entities, and other threats to American foreign and economic policy.

While the Maltese government’s Sanctions Monitoring Board informs all financial entities of OFAC sanctions, Maltese jurisprudence has declared that banks have no legal right to restrict customers from withdrawing their deposits on the basis of American sanctions.

Back in 2018, Bank of Valletta froze Darren Debono’s company World Water Fisheries’ deposit monies, amounting to €99,080 due to the OFAC sanctions and a guidance note from the Maltese SMB.

BOV told the court that to be able to maintain its international banking operations, particularly with foreign correspondent credit institutions operating in the US dollar market, it was obliged to abide by OFAC sanctions.

But only the foreign minister has the power to freeze, block or restrict the use of a person’s assets.

The Maltese courts decreed that there is no express condition on bank account terms that deposits can be blocked or frozen as a consequence of OFAC sanctions.

Additionally, directives by the Malta Financial Services Authority recommend licence holders and the public that US sanctions are not legally binding in Malta – unlike United Nations and European sanctions.

Consequently, the Court held that since BOV had no legal basis for its actions, the defendant bank had to release the funds to World Water Fisheries.

What is the political significance of the US travel ban?

We could go anywhere with this.

For the Americans, it is a tiny squeeze on Mizzi and Schembri; but to a Maltese audience and the wider ramifications inside the European Union, it is a chess move that sets in motion other moves. The Americans are watching where this goes...

For example, if the Americans have credible information of corrupt acts on Electrogas, is it the same as what is already known by Maltese investigators? Surely there will be pressure for a police investigation on the ‘Electrogas’ contract. The Nationalist Party will weaponise the travel ban by demanding that all the parties in that contract be investigated.

And what effect could this have on Malta’s bid for a €200 million EU grant for its gas pipeline? The Caruana Galizia family has lobbied on this project as being intrinsically connected to a gas exit price that will benefit Electrogas, of which Yorgen Fenech – the man accused of mastermining the Caruana Galizia assassination – is still a shareholder. Electrogas will still be the owner of the plant that converts any gas from the pipeline into electricity: will the EU think twice about financing this pipeline?

The travel ban could be the first step. What if the squeeze metastizes into an OFAC sanction? That’s where it could make life impossible for Schembri’s business interests... which other chess piece could fall at that point?

And finally, a word about Steward, the great American interest that is now controlling three state hospitals at quite a considerable cost for the Maltese. That contract was a Muscat concoction that went totally belly-up. Do the Americans have credible information on corrupt acts connected to the Vitals contract as well? The Maltese are trying to find a way out of Konrad Mizzi’s €100 million liability exit... will the Americans threaten to keep up the pressure until the Maltese cave in?