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Getting The Deal Through

Global overview

Homer E Moyer Jr

Miller & Chevalier Chartered

Tuesday 19 February 2019


Corruption, including corruption of public officials, dates from early in human history and countries have long had laws to punish their corrupt officials and those who pay them bribes. But national laws prohibiting a country’s own citizens and corporations from bribing public officials of other nations are a new phenomenon, less than a generation old. Over the course of the past 20 years, anti-corruption law has established itself as an important, transnational legal speciality, one that has produced multiple international conventions and scores of national laws, as well as an emerging jurisprudence that has become a prominent reality in international business and a well-publicised theme in the media.

This edition undertakes to capture the growing anti-corruption jurisprudence that is developing around the globe. It does so first by summarising national anti-corruption laws that have implemented and expanded the treaty obligations that more than 150 countries have assumed. These conventions oblige their signatories to enact laws that prohibit paying bribes to foreign officials. Dozens of countries have already done so, as this edition confirms. These laws address both the paying and receiving of illicit payments – the supply and demand sides of the official corruption equation – as well as mechanisms of international cooperation that have never before existed.

Second, this edition addresses national financial record-keeping requirements that are increasingly an aspect of foreign bribery laws because of their inclusion in anti-corruption conventions and treaties. These requirements are intended to prevent the use of accounting practices to generate funds for bribery or to disguise bribery on a company’s books and records. Violations of record-keeping requirements can provide separate bases of liability for companies involved in foreign and domestic bribery.

Finally, because the bribery of a foreign government official also implicates the domestic laws of the corrupt official’s country, this edition summarises the better-established national laws that prohibit domestic bribery of public officials. Generally not a creation of international obligations, these are the laws that apply to the demand side of the equation and may be brought to bear on payers of bribes who, although foreign nationals, may be subject to personal jurisdiction, apprehension and prosecution under domestic bribery statutes.

The growth of anti-corruption law can be traced through a number of milestone events that have led to the current state of the law, which has most recently been expanded by the entry into force in December 2005 of the sweeping United Nations Convention against Corruption (UNCAC). Spurred on by a growing number of high-profile enforcement actions, investigative reporting and broad media coverage, ongoing scrutiny by non-governmental organisations (NGOs) and the appearance of an expanding cottage industry of anti-corruption compliance programmes in multinational corporations, anti-corruption law and practice is rapidly coming of age.

The US ‘questionable payments’ disclosures and the FCPA

The roots of today’s legal structure prohibiting the bribery of foreign government officials can be traced to the discovery in the early 1970s of a widespread pattern of corrupt payments to foreign government officials by US companies. First dubbed merely ‘questionable’ payments by regulators and corporations alike, these practices came to light in the wake of revelations that a large number of major US corporations had used off-book accounts to make large payments to foreign officials to secure business. Investigating these disclosures, the US Securities and Exchange Commission (SEC) established a voluntary disclosure programme that allowed companies that admitted to having made illicit payments to escape prosecution, on the condition that they implement compliance programmes to prevent the payment of future bribes. Ultimately, more than 400 companies, many among the largest in the United States, admitted to having made a total of more than US$300 million in illicit payments to foreign government officials and political parties. Citing the destabilising repercussions in foreign governments whose officials were implicated in bribery schemes – including Japan, Italy and the Netherlands – the US Congress, in 1977, enacted the Foreign Corrupt Practices Act (FCPA) that prohibits US companies and individuals from bribing non-US government officials to obtain or retain business, and provided for both criminal and civil penalties.

In the first 15 years of the FCPA’s implementation, during which time the US law was unique in prohibiting bribery of foreign officials, enforcement was steady but modest, averaging one or two cases a year. Although there were recurring objections to the perceived impact that this unilateral law was having on the competitiveness of US companies, attempts to repeal or dilute the FCPA were unsuccessful. Thereafter, beginning in the early to mid-1990s, enforcement of the FCPA sharply escalated, and, at the same time, a number of international and multinational developments focused greater public attention on the subject of official corruption and generated new and significant anti-corruption initiatives.

Transparency International

A different type of milestone occurred in Germany in 1993 with the founding of Transparency International, an NGO created to combat global corruption. With national chapters and chapters-in-formation now in more than 100 countries, Transparency International promotes transparency in governmental activities and lobbies governments to enact anti-corruption reforms. Transparency International’s annual Corruption Perceptions Index (CPI), which it first published in 1995, has been uniquely effective in publicising and heightening public awareness of those countries in which official corruption is perceived to be most rampant. Using assessment and opinion surveys, the CPI currently ranks 180 countries and territories by their perceived levels of corruption and publishes the results annually. In 2017, Denmark, New Zealand, Finland and Norway topped the CPI as the countries perceived to be the world’s least corrupt, while Somalia, South Sudan and Syria were seen as the most corrupt.

In 1999, Transparency International also developed and published the Bribe Payers Index (BPI), which is designed to evaluate the supply side of corruption by ranking the 28 leading exporting countries according to the propensity of their companies to not bribe foreign officials. In the most recent BPI, published in 2011, Dutch and Swiss firms were seen as the least likely to bribe, while Russian, Chinese and Mexican firms were seen as the worst offenders.

Through these and other initiatives, Transparency International has become recognised as a strong and effective voice dedicated to combating corruption worldwide.

The World Bank

Three years after the formation of Transparency International, the World Bank joined the battle to stem official corruption. In 1996, James D Wolfensohn, then president of the World Bank, announced at the annual meetings of the World Bank and the International Monetary Fund that the international community had to deal with ‘the cancer of corruption’. Since then, the World Bank has launched more than 600 programmes designed to curb corruption globally and within its own projects. These programmes, which have proved controversial and have encountered opposition from various World Bank member states, include debarring consultants and contractors that engage in corruption in connection with World Bank-funded projects. Since 1999, the World Bank has debarred or otherwise sanctioned more than 900 firms and individuals for fraud and corruption, and referrals from the Integrity Vice Presidency (INT) about findings of fraud or corruption to national authorities for prosecution have resulted in more than 60 criminal convictions.

In 2018, the World Bank announced that during the fiscal year ending 30 June 2018, it debarred or otherwise sanctioned 78 firms and individuals for wrongdoing under its Voluntary Disclosure Programme (VDP), including several high-profile negotiated resolution agreements in which companies acknowledged misconduct related to a number of World Bank-financed projects and cooperated with authorities from numerous countries to quickly address corruption identified during ongoing World Bank investigations. The World Bank maintains a list of firms and individuals it has debarred for fraud and corruption on its website and, in an effort to increase the transparency and accountability of its sanctions process, it recently began publishing the full text of sanction decisions issued by its Sanctions Board. As part of the World Bank’s effort to curb corruption, the Integrity Compliance Office also works to strengthen anti-corruption initiatives in companies of all sizes, including assisting debarred companies to develop suitable compliance programmes and fulfil other conditions of their sanctions.

In July 2004 and August 2006, the World Bank instituted a series of reforms that established a two-tier administrative sanctions process that involves a first level of review by a chief suspension and debarment officer, followed by a second level review by the World Bank Group’s Sanctions Board in cases where the sanctions are contested. In August 2006, the World Bank also established the VDP that allows firms and individuals that have engaged in misconduct – such as fraud, corruption, collusion or coercion – to avoid public debarment by disclosing all past misconduct, adopting a compliance programme, retaining a compliance monitor and ceasing all corrupt practices. The World Bank’s Department of Institutional Integrity administers the VDP, which was developed in a two-year pilot programme. In late-2017, the World Bank’s Office of Suspension and Debarment (OSD) published an addendum to its landmark 2015 report on World Bank enforcement activity. The addendum contains case processing and other performance metrics related to 489 sanctions imposed on firms and individuals involved in World Bank-financed projects from 2007 to 30 June 2017 (not including cross-debarments or sanctioned affiliates). Per the OSD report, most of these sanctions resulted in debarments.

In April 2010, the World Bank and four other multilateral development banks (MDBs) – the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank Group – each agreed to cross-debar any firm debarred by another MDB for engaging in corruption or fraud on an MDB-financed development project. Mutual enforcement is subject to several criteria, including that the initial debarment is made public and the debarment decision is made within 10 years of the misconduct. The agreement also provides for wider enforcement of cross-debarment procedures by welcoming other international financial institutions to join the agreement after its entry into force. According to recent annual updates issued by INT, the World Bank has crossed-debarred hundreds of entities over the past five years, including 73 in the fiscal year 2018.

In October 2010, the World Bank announced the creation of the International Corruption Hunters Alliance (ICHA) to connect anti-corruption authorities from different countries and aid in the tracking and resolving of complex corruption and fraud investigations that are cross-border in nature. According to the World Bank, the ICHA, which organises biennial meetings, has succeeded in bringing together more than 350 enforcement and anti-corruption officials from more than 130 countries in an effort to inject momentum into global anti-corruption efforts.

Finally, the World Bank has significantly expanded its partnerships with national authorities and development organisations in recent years to increase the impact of World Bank investigations and increase the capacity of countries throughout the world to combat corruption. For example, since 2010, the World Bank has entered into more than 50 cooperation agreements with authorities such as the:

  • UK Serious Fraud Office;
  • European Anti-Fraud Office;
  • International Criminal Court;
  • United States Agency for International Development;
  • Australian Agency for International Development;
  • Nordic Development Fund;
  • Ministry of Security and Justice of the Netherlands;
  • Liberia Anti-Corruption Commission; and
  • Ombudsman of the Philippines.

In the coming years, the World Bank’s prestige and leverage promise to be significant forces in combating official corruption, although the World Bank continues to face resistance from countries in which corrupt practices are found to have occurred.

International anti-corruption conventions

Watershed developments in the creation of global anti-corruption law came with the adoption of a series of international anti-corruption conventions between 1996 and 2005. Although attention in the early 1990s was focused on the Organisation for Economic Cooperation and Development (OECD), the Organisation of American States (OAS) was the first to reach an agreement, followed by the OECD, the Council of Europe and the African Union. The most recent, and most ambitious, is the UNCAC, adopted in 2003. The events unfolded as follows.

IACAC

On 29 March 1996, OAS members initialled the Inter-American Convention against Corruption (IACAC) in Caracas. The IACAC entered into force on 6 March 1997, and 34 member countries have now ratified it. The IACAC requires each signatory country to enact laws criminalising the bribery of government officials. It also provides for extradition and asset seizure of offending parties. In addition to emphasising heightened government ethics, improved financial disclosures and transparent bookkeeping, the IACAC facilitates international cooperation in evidence gathering.

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