When Trafigura Group director Mark Irwin appeared earlier this month in a Swiss criminal court, it marked a significant turning point for the commodities trading sector and its long-standing ties to Switzerland.
Swiss Justice Confronts Commodity Trading Giants
Swiss prosecutors have never before placed a commodity trading house on trial or pursued a corporate corruption case. This landmark moment unfolded in the alpine town of Bellinzona, where Trafigura, along with former Chief Operating Officer Mike Wainwright and two others, faced allegations of bribery. All parties denied the charges.
Mark Irwin, one of Trafigura’s earliest employees, represented the company in court, where testimonies from both current and former executives offered unprecedented insights into decision-making at one of the world’s largest commodity traders. Handling volumes of oil equivalent to the combined daily demand of Germany, France, and Spain, Trafigura has become emblematic of the global commodity trade.
This trial also underscores a broader shift in Switzerland, historically characterized by its lenient regulatory approach.
A Shift in Switzerland’s Approach to Regulation
Trafigura’s lawyers accused federal prosecutors of being on a “crusade,” while Wainwright’s defense argued he was unfairly singled out. Adrià Budry Carbó of Swiss NGO Public Eye noted, “Switzerland became a leading commodities hub thanks to a unique combination of tax privileges, its financial industry, weak regulation, and a lax embargo policy.” He described the trial as the first public scrutiny of a “corruption machinery.”
Switzerland has long been a haven for global traders, drawn by its low taxes, neutrality, and business-friendly laws. From Egyptian cotton merchants in the 1960s to Russian oil tycoons in the 1990s, Switzerland’s policies have attracted major players.
However, mirroring US enforcement actions, Swiss prosecutors have begun targeting the sector. Glencore Plc and Gunvor Group were fined for historical corruption in recent years, though these cases didn’t go to trial. Trafigura, by contrast, faced court proceedings after prosecutors rejected its offer to settle.
Inside the Bellinzona Courtroom
Over two weeks, a flood of lawyers, PR representatives, journalists, and onlookers descended on Bellinzona. The courtroom was barely equipped to handle the crowd, with defendants and witnesses joining lines for limited facilities.
The charges focused on bribes allegedly paid between 2009 and 2011. Prosecutors accused Trafigura of failing to implement adequate compliance measures, resulting in approximately $5 million being funneled to Angolan oil official Paulo Gouveia Junior.
Trafigura’s defense emphasized the independence of its compliance team during the period in question. Irwin, under questioning, admitted, “I cannot explain the payments to Mr. Gouveia.” Prosecutors are seeking $157 million in penalties, but Swiss courts often take months to deliver verdicts.
Switzerland’s Status as a Commodities Hub Under Threat
Despite recent crackdowns, Switzerland remains a major player in the commodities trade. Swiss-based firms handle a third of global crude and oil products, contributing significantly to local budgets. Geneva’s income derives 22% from trading, with Zug and Lugano following closely.
However, competition is intensifying. Singapore has lured many traders with tax breaks, including Trafigura, which restructured under a Singapore parent company in 2015. Meanwhile, Middle Eastern hubs like Dubai have absorbed trade flows due to Switzerland’s alignment with EU sanctions on Russian commodities.
Yet Switzerland’s low taxation rates and capital gains exemptions keep it attractive. Trafigura reported a mere 2.8% tax rate on $2.8 billion in profits in its most recent financial year, illustrating the country’s ongoing allure.
A Critical Moment for Trafigura
The trial comes at a delicate time for Trafigura, which is preparing for a CEO transition next month. The company has also faced scandals this year, including a $1.1 billion loss linked to employee misconduct in Mongolia and a guilty plea in a US court over historical corruption in Brazil.
The outcome of the Bellinzona trial could influence Switzerland’s regulatory environment and its future as a commodities hub.