Guest Post: Is UNCAC Article 35 a “Dead Letter” in the United States?

Today’s Guest Post is by Craig R. Arndt, an international lawyer living in Bangkok. In the course of a long career, he advised multinational clients on a range of corruption-related matters and has represented those injured by corruption in actions to recover damages.

The drafters of the United Nations Convention Against Corruption recognized that corruption was a transnational disease. And that accordingly, no country could fight it on its own. Hence, in its very first article the Convention makes it clear that states ratifying it are obliged to “promote, facilitate, and support international cooperation and technical assistance in the prevention of and fight against corruption.”  

Article 35 of the Convention sets forth one of the ways states are required to work together to curb cooperation. It provides that each party must “ensure that entities or persons who have suffered damage as a result of an act of corruption have the right to initiate legal proceedings against those responsible . . . to obtain compensation.”

Rick has documented the sorry state of civil recoveries by bribery victims in transnational cases (here, here, here, here, here, here, here and here). That state is now even sorrier thanks to two recent decisions by American federal courts of appeal. In the words of one commentator, the two “gut” article 35.

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Accountability Key Words

No other word is associated more with fighting corruption than “accountability.”  Google turns up 43 million references to the phrase “accountability corruption references” in less than a second (!). There are 177 articles with the word accountability in the title in the latest version of Matthew’s bibliography.

Thanks to Andreas Schedler, we know accountability is not unidirectional. It can go from down to up, as when voters hold politicians to account, and side-to-side, as when a government audit agency reports on the performance of another government entity. As Dale Brinkerhoff explains, the meaning of accountability ranges from nothing more than having to provide information, as when an agency must fille an annual report on its activities, to a politician or administrator having to explain why something is being done or not done, to the imposition of sanctions on someone or some agency for doing or not doing something.

The failure to curb corruption is almost always attributed to a lack of accountability, and prescriptions for reducing corruption inevitably recommend strengthening accountability. But as Schedler, Brinkerhoff, and many others have shown, “accountability” is really a complex of ideas. And that is before trying to parse what ideas lie behind its rough equivalents in other languages: rendición de cuentas in Spanish; bibinka in Filipino; and tanggung gugat sosial in Bahasa. To name but a few

Thanks to American University’s Accountability Research Center, we now have a guide to the many concepts buried in the English term “accountability” and similar ones in Arabic, Chinese, Hindi, and a half a dozen other major tongues. Its title is Accountability Keywords; it’s a web site with a monograph of the same name and some 40 posts to date that expound on how the term is used in different ways in different circumstances in different places. An invaluable resource for advocates, policymakers, and scholars.    

Greasing the Wheels: How Norway’s Sovereign Wealth Fund Ended Up Financing Russian Corruption

Norway’s Government Pension Fund Global (GPFG) is one of the largest sovereign wealth funds in the world. Established in 1990 to diversify Norway’s oil wealth and minimize negative consequences associated with fluctuations in commodities markets, GPFG has amassed close to $1.3 trillion in assets. In keeping with Norway’s sterling reputation for integrity, GPFG has embraced anticorruption as one of the fund’s guiding principles. In fact, GPFG requires the companies in which it invests “to identify and manage corruption risk, and to report publicly on their anti-corruption efforts.” The fund’s Council of Ethics has also declared that the fund will keep “gross corruption” out of its portfolio, and GPFG has been widely praised for its social responsibility (see here and here).

Yet despite all this, GPFG has not avoided corruption-related scandals, particularly with respect to its investments in Russia. Understanding how things went wrong offers more general lessons for how sovereign wealth funds can strengthen their safeguards against investing in corrupt companies and supporting corrupt regimes. Continue reading

South African NGO to U.S. Department of Justice: Please Investigate Bain and Company for FCPA Violations

In a Guest Post Monday, Nicole Fritz of South Africa’s Helen Suzman Foundation recounted Boston consulting guru Bain and Company’s role in the massive corruption that infected her country during the reign of its now deposed president Jacob Zuma. Today, she asks the Department of Justice to investigate the Company for “potential breaches of the U.S. Foreign Corrupt Practices Act of 1977.”

As she explains in a letter sent to the head of the FCPA unit, the evidence of violations is “not mere opinion.” Rather, it is drawn

from reports produced by two separate judicial commissions of inquiry, chaired by eminent South African judges: first, the Judicial Commission of Inquiry into State Capture Report (“State Capture Report”); second, the final report of the Commission of Inquiry into Tax Administration and Governance at the South African Revenue Services, colloquially referred to in South Africa as the ‘Nugent Commission Report.’  

The full text of her letter is here.

Guest Post: Will the Biden Administration Help South Africa Escape Capture?

Today’s Guest Post is by Nicole Fritz, a South African public interest lawyer and executive director the Helen Suzman Foundation, a non-partisan think-tank dedicated to promoting liberal, democratic values and human rights in post-apartheid South Africa.

President Biden’s meeting Friday with South African President Cyril Ramaphosa offers a prime opportunity to show the Administration is serious about its new global anticorruption policy. Issued last December, the Administration promises a raft of new initiatives to not only crackdown on corruption at home but to help democratic, reform-minded regimes root out corruption that they cannot do on their own. President Ramaphosa’s government qualifies on all counts. Where it could best use assistance is in unraveling an American company’s role in the efforts of Ramaphosa’s predecessor, Jacob Zuma, to rob the country blind. 

During his nine-year rule, Zuma sought to “capture the state,” to remake South Africa’s fledgling young democratic government into a machine to enrich himself, his family, and his friends. No sooner did he take office in 2009 then he began stacking key government-owned enterprises with cronies and accomplices and purging the public service of professional, independently-minded civil servants.  He was finally forced from office after widespread public protest and coordinated efforts of civil society, those few remaining independent state agencies, and reformers within his own party.

In one of his last desperate bids to quell discontent and remain in office, Zuma established the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector. That Commission has defined the Ramaphosa presidency and the Commission’s several-thousand-page report, completed in June, reveals in astonishing detail just how far Zuma and accomplices extended their reach into the inner-workings of the government in pursuit of personal riches.

An especially damning chapter (here) recounts the role of the Boston management consulting firm Bain & Company in the state capture scheme.

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Sri Lanka Should Cancel Not Renegotiate Corrupt Loans 

It will be years if not decades before the once prospering nation of Sri Lanka recovers from the financial and humanitarian crisis brought on by the fiscal profligacy of the Rajapaksa family. During the 10-year rule presidential rule of Mahindra (2005 -2015), the government began borrowing ever larger sums, principally from China, to build ports, roads, and other infrastructure. Younger brother Gotabaya continued the family tradition when elected president in 2019, borrowing more and more to keep the project pipeline full and the business community happy.

For many projects, the terminus of the pipeline was the Rajapaksa’s home district. A herd of white elephants poured forth: an unused airport (Mattala Rajapaksa International Airport), a deserted cricket stadium (Mahinda Rajapaksa International Cricket Stadium), and a useless international conference center. Whether the loans for these projects were the result of corrupt dealings has been much discussed but never investigated. Same with many other loans taken out during Mahinda and Gotabaya’s reigns.

The Rajapaksa’ reckless borrowing was accompanied by other equally irresponsible fiscal policies: state-owned enterprises that bled resources, a regressive, poorly enforced tax code. Gotabaya’s 2019 cuts in personal and corporate taxation and its almost halving the VAT (from 15% to 8%) put an economy headed over the cliff into overdrive. The inevitable result of borrowing too much and taking too little in: last May the government announced it could not pay its debts, the sovereign equivalent of a corporation or person declaring bankruptcy.

The International Monetary Fund has now come to the rescue, offering to lend the government $2.9 billion while it renegotiates the some $35 billion it owes the Asian Development Bank, China, India, Japan, the World Bank, and private lenders.

But not all Sri Lanka’s debts should be renegotiated. Where a loan was taken out because a government official was bribed, Sri Lanka has a clear right to cancel or rescind it. That right to walk from a loan procured through corruption is recognized under international law (article 8(2) of the Council of Europe’s Civil Law Convention Against Corruption, article 34 of the UN Convention Against Corruption, UNICTRAL Principles of International Contracts 3.3.1) and the domestic laws of most legal systems. Indeed, it is a part of the common law of Sri Lanka (Review Sri Lanka UNCAC Compliance) and article 52 of China’s contract law expressly states “A contract is void [if] 1. either party enters into the contract by means of fraud. . ..”

Sri Lankans will suffer for years for the wrongs done to them by the Rajapaksas and accomplices. They should not have to bear the burden of paying off one single dollar, yuan, rupee, or yen of a loan taken out corruptly. Where there are suspicions that a loan, as those to support the elephant herd in the Rajapaksas’ home district, was tainted with corruption, an investigation should be opened. And during loan renegotiations, Sir Lanka should make it clear that no matter the terms, it reserves the right to cancel or rescind any contract procured through corruption.

Anticorruption Bibliography–September 2022 Update

Hi everyone, As some of you have noticed, GAB has been on a longer-than-usual summer break, but we will be back to getting new content up on a regular basis soon. In the meantime, I’m happy to say than an updated version of my anticorruption bibliography is now available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. Additionally, the bibliography is available in more user-friendly, searchable form at Global Integrity’s Anti-Corruption Corpus website. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

State Capture: A “How to” Guide

The Democratic Alliance, South African’s principle opposition party, has brought suit seeking a declaration a policy of the African National Congress, the nation’s ruling party, is “inconsistent with the Constitution. . . and the Public Service Act” and hence invalid.

The policy at issue is the ANC’s Cadre Deployment and Development Policy. It sets out how the party selects who will serve in the national, regional, and local levels of South Africa’s government, either in an elected position or as a member of the career service.  The DA alleges that the effect of the policy is to give the ANC “control over the functioning of critical institutions of government. . . blurr[ing] the lines between the ANC and the State and facili[tating] state capture. . . . .” The case’s founding affidavit, equivalent to a complaint in common law jurisdictions, asserts the policy has “inhibited the ability of the State to function effectively in order to promote the rights in the Bill of Rights [and that it] has eroded South Africa’s democratic founding. . . . “

Evidence developed by the Judicial Commission of Inquiry into Allegations of State Capture, established after ANC leader Jacob Zuma was forced to resign as South African president, is cited throughout the affidavit to show how he and ANC cronies implemented the policy and what its effect has been.* The policy reads as a “how to” manual for capturing the state in a weak or developing democracy. One can only hope this will be how the South Africa’s judges read it as well.

A copy of the policy is here for readers’ information. And more importantly, for those working on prevent state capture elsewhere, to help them thwart similar efforts.

*Earlier today South African Chief Justice Raymond Mnyamezeli Mlungisi “Ray” Zondo, the commission chair, spoke to the failure of the ANC to come to grips with Zuma’s behavior and expressed the fear the state could be re-captured were another Zuma-like figure elected president. Click here to listen to his to warning to South Africans of all parties. Thanks to a South African reader for alerting me to his extraordinary and powerful remarks.

That Corruption Infects the Italian Judiciary Is Now Undeniable

In March 2021, a Milan trial court acquitted Italian oil giant ENI, its partner Royal Dutch Shell, and numerous individuals of bribing Nigerian President Goodluck Jonathan and pals to secure the rights to the lucrative offshore oil field denominated OPL-245. The evidence of bribery was overwhelming, including internal Shell e-mails describing the scheme and the testimony of an ENI official confirming his bosses were fully aware of it. Suspicions that someone had “gotten” to the judges immediately arose stoked by revelations of close ties between the presiding judge and ENI’s senior counsel.

Any doubt that the verdict was tainted was put to rest when the court published its opinion justifying it. As the attached analysis by the British, Italian, and Nigerian NGOs that have pushed the case shows, the court’s “reasoning” was laughable. Two examples of many. The court wrote off the then oil minister’s sale of OPL-245 rights to a company he secretly owned as a trifle because neither he nor the government officials bribed to approve the sale objected. Equally ridiculous, the court found that a Shell briefing note reporting that part of the bribe would be in the form of political contributions simply recounted a rumor then circulating.

Between the strength of the evidence the prosecution presented and the court’s flimsy if not bizarre reasoning dismissing it, the expectation was that the acquittal would easily and quickly be overturned on appeal. That hope is not to be however.  Last week the Italian prosecutors assigned to handle the appeal announced they were withdrawing it. 

Thus ENI, Shell, and the 13 individuals named as accomplices in the payment of a $1.1 billion bribe stand exonerated. And it now clear that the rot in the Italian judiciary reaches into its once revered prosecution service.

Nor is the damage from the rot limited to Italy. Thanks to the doctrine of ne bis in idem (double jeopardy in American law), a Dutch investigation of Shell’s role had to be dropped (here).  

The last hope for justice now lies with the Nigerian judiciary. Ne bid in idem only bars EU countries from pursuing a case. A Nigerian investigation of the companies and their accomplices is underway. It is critical it continue and that the international anticorruption community do all it can to support it given what has happened in Italy.

Moreover, as this blog has urged, it is critical too that the OECD hold Italy to account for its failure to live up to its obligations to sanction Italian companies that bribe foreign officials. The ENI-Shell case must be an outlier not a precedent.

New Podcast Episode, Featuring Andrii Borovyk and Gretta Fenner

A new episode of KickBack: The Global Anticorruption Podcast is now available.I know that I said in the post announcing the episode from a couple weeks back that that one would be the last post before our summer vacation, but I spoke too soon–last week I had the opportunity to speak with Andrii Borovyk, the Executive Director of Transparency International’s Ukraine chapter, and Gretta Fenner, the Managing Director of the Basel Institute on Governance, about addressing corruption risks inherent in emergency aid to Ukraine during the current conflict and the anticipated future infusion of funds to assist with post-war reconstruction. (Full disclosure: I am on the Board of Directors for Transparency International Ukraine, an unpaid position, and in that capacity I have worked with Andrii, though not directly on this issue.) After sharing their respective backgrounds in the field, Andrii and Gretta discuss how Russia’s aggression affected anticorruption advocacy work within Ukraine, and emphasize the importance for both domestic and international actors to strengthen institutions and mechanisms to prevent corruption in aid and reconstruction efforts. The conversation touches on, among other things, the challenges of pushing an anticorruption agenda in a time of national emergency, the role that aid conditionalities can play in promoting effective reform, and the importance of open, accessible, and centralized public information repositories. You can also find both this episode and an archive of prior episodes at the following locations: This really will be the last podcast episode before we go on summer break, but we will be releasing new episodes in September. The Global Anticorruption Blog is also going to go on summer hiatus during August, though I may post occasionally if something particularly important and time-sensitive comes up. As always, I’ll remind you that KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN), encourage you to subscribe, and invite you to suggest for people or topics you’d like to hear on the podcast by sending me a message.