The Swiss foreign ministry says it has no alternative but to end the freezing of assets belonging to the late dictator of Zaire, Mobutu Sese Seko.
Its decision, announced on Thursday, followed a ruling two days ago at the Federal Criminal Court in Bellinzona.
The court rejected a citizen's appeal by Basel University criminologist Mark Pieth to keep a freeze on the assets in Swiss banks valued at SFr7.7 million ($6.68 million).
Pieth had opposed returning the funds to Mobutu's heirs, who he alleged were suspected of criminal activities in what is now the Democratic Republic of Congo.
The foreign ministry said it did not agree with the situation but there was nothing more it could do.
"[The foreign ministry] deplores this outcome, which ends 12 years of freezing of the assets in which all options to come to a fair solution were attempted", it said in a statement.
It said the case underlined the need to change legislation to prevent similar situations in the future.
The ministry said it had informed the banks and the parties concerned through their lawyers on Wednesday.
Switzerland blocked assets deposited by Mobutu and his clan in 1997 following a request from the country's government.
In 2008, Swiss authorities agreed to keep the assets frozen so that a Congolese government lawyer could initiate proceedings in Switzerland to block the assets and enable the competent legal authority to decide how to deal with the case.
But in April this year, the Swiss Prosecutor's Office said the statute of limitations had run out in the case and the assets should therefore be handed over to Mobutu's heirs.
Thursday's statement argued that the Swiss government had gone to "considerable lengths" to bring the case to a satisfactory end.
Mandated by the government, the foreign ministry had helped the parties concerned to find a solution.
However, the lack of support over a long period from the Congolese authorities, together with the inflexibility of the Mobutu heirs, meant that it was not possible to reach an agreement, the statement added.
The foreign ministry said the requirement finally to make restitution to the Mobutu assets underlined the need to adapt Swiss legislation to prevent similar cases from recurring.
It was instructed by the government in December last year to draft a law making it possible to confiscate and to return illicit assets of so-called politically exposed persons.
This legislation is now being drafted and a bill should be ready by next year.
After the ruling, Pieth told the Tages-Anzeiger newspaper he was unable to continue his legal fight – "I've used up all my ammo."
He added that it would be wrong to portray all dictators as mafia bosses, but said there were individual criminal regimes to whom that description applied.
"The Mobutu regime tortured and killed opponents en masse in order to consolidate its power, get rich and exploit the country over decades. Robert Mugabe is doing a similar thing in Zimbabwe," he said.
Pieth believed however that it had become harder for dictators to hide illegally acquired fortunes in Switzerland.
"The problem is that a bank doesn't know, just like that, who's behind a corporation – potentates don't use their real names. But imagine a bank taking money from Mugabe, despite the fact that they must realise what's going on. That would be so bad that they'd probably worry about their licence. We've taken a big step forward."
swissinfo.ch and agencies
1997: Government of the Democratic Republic of Congo requests legal assistance from Switzerland to trace alleged assets of toppled dictator Mobutu.
1997: Swiss government freezes assets worth SFr10 million deposited by Mobutu and his family.
2001: Canton Vaud approves claims by Swiss businessman from Mobutu funds for outstanding bills, but government blocks the payout.
2001: Mobutu's villa on Lake Geneva auctioned off for SFr3.1 million.
2003: Government confirms freeze of Mobutu assets.
2006: Federal Court orders partial unfreeze of assets and payment of SFr2.35 million to a Swiss businessman.
2007: The then Swiss president, Micheline Calmy-Rey, announces Switzerland is prepared to release funds belonging to Mobutu.
2008: Criminology professor Mark Pieth says returning assets deposited in Swiss banks by the late president of Zaire, Mobutu Sese Seko, to his family would send a "terrible signal".
July 2009: Federal Criminal Court rejects a citizen's appeal to keep a freeze on the Mobutu assets. Two days later, Swiss foreign ministry announces it is forced to unfreeze them.