Abacha loot deal collapses: Switzerland was poised to hand over $535m in blocked Abacha funds to the Nigerian government, but local difficulties in Nigeria mean the funds stay in Switzerland for the time being.

The Nigerian government's attempt to have Swiss banks return millions stashed abroad by General Sani Abacha has suffered a blow. Switzerland's federal court says it wants to hear an appeal by the Abacha family following the collapse of an out-of-court settlement between President Olusegun Obasanjo's government and the family. All transfers of information and funds will consequently cease until the court has ruled on the case.

Under the agreement, Nigeria was expected to receive $1 billion from banks in Switzerland and other countries, while the Abacha family would have kept $1 00m said to have been banked before Abacha came to power.

But Pascal Gossin, head of international legal co-operation at the Swiss justice ministry, said attorneys for the Nigerian authorities had informed the ministry that the terms of the settlement had not been fulfilled, "because Abacha's son, Mohammed, had failed to sign the necessary documents".

Switzerland had been poised to hand over $535m in blocked funds to the Nigerian government. The money in question was frozen in 1999 after Nigeria had asked Switzerland to help investigate the financial network allegedly set up by Abacha, who ruled Nigeria from 1993 until his death of an apparent heart attack in 1998.

The Abacha case proved a particular embarrassment for Switzerland because of the amount of money involved and the fact that much of it found its way into banks after the introduction of a 1998 law meant to clamp down on money laundering. The same applies to the case of the former Congolese president, Mobutu Sese Seko, who was said to have stashed between $4 billion and $10 billion in his Swiss accounts. Now the Congolese government has to fight and win a legal battle against an army of lawyers hired by both the Swiss banks and Mobutu's family to get the money returned.

When the late President Laurent Kabila came to power in 1997, he asked the Swiss authorities to freeze Mobutu's accounts and other ill-gotten Mobutu properties in the country. The reply was that officially there remained only $8m of Mobutu's fortune in Swiss banks. How they came to that figure and when it is going back, nobody knows.

The Swiss banks are demanding that Kinshasa submit all the necessary documents showing that the fortune was looted by Mobutu, who, however deposited his money sometimes in the names of his relatives, using secret codes. The Swiss banks know this.

The Congolese government says it is hoping to retrieve at least $3.4 billion of Mobutu's money, but it has remained on the level of hope. In fact, Francesco Lagher, an Italian specialist in embezzled funds, was recently fined 25,000 euros and jailed for four years by a French court in Monaco for having diverted $2.7m from a dormant account belonging to Mobutu. Lagher had always dealt with high profile clients such as Mobutu. He had transferred the money to the account of a fake legal firm, Eyael Ltd. The transfers were made betweeen 1 April and 4 May 1999.

Meanwhile, Mohammed Abacha was released from prison in Nigeria on 20 September only to be re-arrested hours later. He had spent three years in jail awaiting trial for allegedly embezzling billions of dollars in state finds.

But President Obasanjo ordered Mohammed to be freed on 23 September after negotiations with officials from Mohammed's home state of Kano. A statement from Obasanjo's office said the president had acted in the interest of justice in releasing Mohammed.

On his release, Mohammed was greeted by thousands of jubilant supporters in his home state of Kano and was driven away in a convoy of luxury cars accompanied by the police. Reports said Obasanjo had come under intense pressure from the powerful northern lobby based in Kano for Mohammed's release ahead of next year's presidential election.