Maud Perdriel-Vaissiere, the Advisor on Asset Recovery for the UNCAC Coalition (a global civil society network committed to promoting compliance with the UN Convention Against Corruption) recently published a post on the UNCAC Coaltion blog entitled, “Is there an obligation under the UNCAC to share foreign bribery settlement monies with host countries?” Her answer is yes. Indeed, she says that the contrary position is based on a “gross misreading” of UNCAC, that UNCAC’s asset recovery provisions (in Chapter V) apply even to “stolen or embezzled funds over which foreign governments cannot establish prior ownership” (emphasis hers), and that there is “no doubt [that] there is an obligation under the UNCAC [for supply-side enforcers] to share foreign bribery settlement monies with host countries!” (The exclamation mark is hers as well.)
As readers of this blog may be aware, I think this is wrong, based on a sloppy and tendentious misreading of the language of the treaty. Though I’ve written on this before, I think Ms. Perdriel-Vaissiere’s analysis deserves a rebuttal.
Let me start by making a distinction I drew in my earlier post between four different ways that a government enforcement agency might obtain money from a bribe-paying entity:
- Forfeiture of illegally-obtained property
- Compensation for identifiable harm
- Punitive fines
- Disgorgement of the profits from unlawful conduct
There’s a tendency among those who take the “UNCAC-requires-sharing-of-settlement-proceeds” position to conflate these four categories, and sometimes to argue that UNCAC itself obliterates the distinctions between them. But that’s just not right. In order to make sense of UNCAC–both what it requires, and whether states are fulfilling their obligations–we need to keep these distinctions firmly in mind.
I take no issue with the claim that UNCAC (in particular Article 53 and associated provisions) requires States Parties to take appropriate measures to enable foreign states to pursue the first and second remedies. Indeed, Article 53(a) corresponds precisely to the first remedy, while Article 53(b) corresponds precisely to the second. But most important supply-side enforcing jurisdictions (most prominently the United States) already provide such mechanisms (though the compensation mechanism requires proof of concrete and measurable harm, as is standard legal practice, rather than a wooly assertion that the host country has been “victimized”). I have yet to see a sustained argument that the U.S. or any other significant supply-side enforcer is not in compliance with Article 53(a) or 53(b), though this is often suggested via misleading insinuations.
Rather, when people like Ms. Perdriel-Vaissiere complain about the fact that “only 3% of the payments imposed on [bribe-paying] companies over the last 13 years were returned to the countries where the bribe[s] took place,” they are referring *(carelessly) to payments that were based overwhelmingly based on the third category (fines), and to some extent the fourth (disgorgement). The disgorgement category is the hardest, and I’ll return to it near the end of this post, but for now let’s focus on punitive fines. If we rewrite Ms. Perdriel-Vaissiere’s sentence above to make it more accurate, it would read, “[O]nly [approximately] 3% of punitive fines imposed on [bribe-paying] companies were returned to the countries where the bribe took place.” But writing the sentence that way reveals it to be nonsensical–one cannot talk about punitive fines paid to one sovereign as “returned” (or not returned) to another sovereign.
That same basic problem pervades Ms. Perdriel-Vaissiere’s analysis. She notes (correctly) that UNCAC Article V applies to “any property derived from or obtained, directly or indirectly, through the commission of [a corruption] offense.” That’s true, but irrelevant: the monies that companies pay as punitive fines are not “property derived from” the corruption offense; those fines are an independent penalty meant to punish and deter. Once we recognize that fines are not “proceeds of corruption,” and put that together with the fact that supply-side jurisdictions like the U.S. already provide for compensation remedies (for states that can establish victim status according to accepted legal principles) as well as assistance in more traditional forfeiture actions, then the entirety of Ms. Perdriel-Vaissiere’s legal argument evaporates faster than water on a hot stove.
(We can also make short work of one other purported source support for the claim that states must share foreign bribery settlement monies with host countries: Ms. Perdriel-Vaissiere’s invocation of a (non-binding) resolution of UNCAC States Parties last year in Panama. The key clause merely “urges States parties to consider the use of the tools set out in chapter V of the Convention when resolving cases involving offences outlined in the Convention, including transnational bribery.”)
Now, the hard case–and really the one I think Ms. Perdriel-Vaissiere has in mind, despite her misleading invocation of the “only 3% of payments have been returned” statistic (where the denominator is based mostly on punitive fines), and her equally misleading suggestion that major States Parties like the U.S. do not already provide a compensation mechanism that complies with Article 53(b)–is disgorgement. The difficulty with disgorgement is that, even though we can agree that the defendant company has no right to its ill-gotten gains, there may be no clear consensus on which party does have the right to those proceeds. In particular, suppose there’s a conflict between the supply-side enforcing jurisdiction and the demand-side host state over which of those two sovereigns should recover the disgorged profits. Does UNCAC answer this question? Does UNCAC make clear that it is the host state, not the enforcing state, that is entitled to these ill-gotten proceeds?
No, it doesn’t, and nothing in Ms. Perdriel-Vaissiere’s post establishes that it does. As I acknowledge above, she is absolutely correct when she asserts that UNCAC defines “proceeds of corruption” broadly to include all property obtained through the commission of a corruption offense, but that gets us no closer to determining which sovereign is entitled to those proceeds when neither sovereign has a legitimate prior claim on the assets, and neither can meet the standard for recovering those assets as compensatory damages for a cognizable harm. The UNCAC provision most on point is Article 53(c), but that says only that States Parties must “[t]ake such measures as may be necessary to permit its courts or competent authorities, when having to decide on confiscation, to recognize another State Party’s claim as a legitimate owner of property” acquired through a corruption offense (emphasis mine). In other words, in cases involving disgorgement of illicit profits (rather than forfeiture or compensation), UNCAC says that each State Party must permit (not require) its courts to recognize (not necessarily accept) another State Party’s claim as a legitimate owner of the property (which presumably requires a determination as to whether the other state’s claim is indeed legitimate). There may be many good policy arguments for transferring some or all of the disgorged profits to the host state, or to some NGO in the host state that can use the money to help the citizens (though I have raised some countervailing concerns). Indeed, there may be good policy arguments for supply-side enforcers to structure settlements so as to promote even greater transfers than would be possible under a disgorgement remedy alone (and Professor Andrew Spalding has developed a creative legal theory to enable such settlement in the US, discussed in an earlier post). But nothing in UNCAC mandates such an approach to this issue.
Oh, and Ms. Perdriel-Vaissiere makes one more apparent legal mistake as well. She argues that Chapter V of UNCAC “is applicable (and ought to be applied) in any court or out of court proceedings involving the proceeds of corruption.” Perhaps this was careless phrasing, but it seems to imply that Chapter V’s provisions on confiscation and compensation remedies are self-executing. They are not. I gather there is a debate about whether some of UNCAC’s other provisions are self-executing, but Article 53(b) requires states to “take such measures as may be necessary to” (a) permit other States parties to bring an action in its courts to establish title to property, (b) permit its courts to provide other States parties with a compensation remedy, and (c) permit its courts or other authorities to recognize another State party’s claim to be a legitimate owner of confiscated assets. Unless I am very much mistaken, that is the language of a non-self-executing treaty, which must be given effect through domestic legislation, and cannot be directly enforced in court proceedings without such legislation.
I’m sorry, but the more of these attempts I read to support the legal claim that UNCAC requires enforcing jurisdictions to share proceeds collected in foreign bribery settlements to host states, the more frustrated I get. The anticorruption community can and should do better.