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.
GAB | The Global Anticorruption Blog 
Dear Professor,
First of all, let me thank you for your interest in the blog post I published on the UNCAC Coalition Blog and, more generally, for your excellent contributions to the anti-bribery debate (Needless to say, I am an avid reader of your blog).
That being said, I have to admit that your rebuttal to my post has left me slightly confused: either my English is even worse than I thought it was, a possibility you have eloquently hinted at (I am, after all, a native French speaker), or you must have gotten my post mixed with someone else’s.
I am all the more puzzled given that the aforementioned blog post, published on the UNCAC Coalition website, is simply a shorter, easier-to-understand version of a reply I had posted on the GAB a few weeks ago in response to a blog post of yours (cf. ‘UNCAC, Asset Recovery, and the Perils of Careless Legal Analysis’ ). At the time, my reply had not raised as many concerns on your part; on the contrary, you had then remarked: “my main reaction is that I’m not sure that we disagree as much as you think we do, either about the policy issues or the interpretation of UNCAC.”
Indeed, we both agree that:
• …there are “different ways [through which] a government enforcement agency might obtain money from a bribe-paying entity” (including forfeiture of illegally-obtained property; damages; punitive fines; and disgorgement of profits) and that not all of them may target what amounts to “proceeds of corruption” (i.e. “property derived from or obtained, directly or indirectly, through the commission of [a corruption] offense”; UNCAC Article 2). In particular, I do agree that fines are not ‘property derived from’ the corruption offense; but rather are “an independent penalty meant to punish and deter”. However, at no point, either in the blog post I published on the UNCAC Coalition Blog or in my June 5, 2014 reply to the above-mentioned earlier post of yours, did I contradict that statement. Allow me to quote myself here: “therefore, I totally agree with you that foreign governments are not entitled to the punitive fines that are imposed on companies (these are not even proceeds of corruption)”;
• …the issue of the disposal of “disgorged profits” (which are, this time, ‘proceeds of corruption’) is indeed a tricky one given that, as you put it, these assets being of private origin, “neither sovereign has a legitimate prior claim on [them].” But, here again, at no point either in my UNCAC Coalition blog post, or in my previous reply to yours, have I claimed otherwise. More specifically, there is absolutely no mention of disgorged profits in the UNCAC Coalition blog post I recently published. All I said in my previous reply to your blog post was that “I totally agree with you that foreign governments are not entitled to (…) the disgorged profits (at least not directly)”. What I meant by “at least not directly” was that, while foreign governments cannot claim prior ownership over these assets, they may however recover them indirectly should they, as you put it yourself, “meet the standard for recovering those assets as compensatory damages.” That is why my UNCAC Coalition blog post was only concerned with compensation, which is, I believe, the best (and possibly the only) way for a foreign country to recover property in cases of foreign bribery (i.e. cases involving assets of private origin). In fact, as I had previously written, UNCAC Article 53.b) – which echoes UNCAC Article 35 (on compensation for damages) by requiring States Parties to “take such measures as may be necessary to permit its courts to order those who have committed offences established in accordance with this Convention to pay compensation or damages to another State Party that has been harmed by such offences” – “was precisely established to provide a concrete remedy to states harmed by corruption in situations – such as bribery or trading in influence – where the proceeds of corruption involve funds of private origin to which the state was never entitled to.” This analysis is confirmed by the authors of the UNCAC Technical Guide who wrote about Article 53b): “This innovative provision departs from the notion that proceeds of corruption should be recovered only on confiscation grounds and obligates States Parties to enable its Courts to recognize the right of victim States Parties to seek to recover compensation or damages” (p. 203).
• …(as most international treaties), UNCAC provisions are not self-executing and only become judicially enforceable through the implementation of legislation (1); however, the requirements contained in UNCAC Article 53 are mandatory (2), which means that unless one considers international obligations as mere paper tigers, States Parties have to comply with them. This is precisely what the UNCAC review process is meant for: to assess States Parties’ compliance with UNCAC obligations.
• …the U.S. do (already) provide for compensation mechanisms; however, and as I have written in my reply to the above-mentioned earlier post of yours, I doubt they are actually being enforced: “You suggest that the US honor their obligation under the UNCAC 53 because they provide for mechanisms by which victimized parties (individuals or states) may seek compensation. No doubt such tools exist, but are they actually being implemented? How often have they been used in foreign bribery settlements?” Neither – mind you – am I the only one to think so. See for instance: “U.S. Settlements for Overseas Bribes – Should foreign Bribe Victims Get Any?” (by Matthew Fowler; available here: http://blogs.iadb.org/sinmiedos/2013/12/16/u-s-settlements-for-overseas-bribes-should-foreign-bribe-victims-get-any/), “Where are the victims under the FCPA?” (by Jordan Maglich; available here: http://www.wiandlaw.com/where-are-victim%E2%80%99s-rights-under-the-fcpa/) or this legal paper by Shane Frick: “ICE” CAPADES: RESTITUTION ORDERS AND THE FCPA (12 Rich. J. Global L. & Bus. 433; 2013). In your view, given that compensation mechanisms are available in U.S laws, the U.S. must by definition be fulfilling their obligations under UNCAC Article 53. Is this really the end of the story as you seem to suggest (cf. “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 (…) then the entirety of Ms. Perdriel-Vaissiere’s legal argument evaporates faster than water on a hot stove.”)? Undoubtedly, the introduction of domestic laws (or the fact of already having laws in place) is an essential component of compliance; however, just as loving words are meaningless without loving acts, a law without enforcement carries little meaning and clearly, in my view, compliance involves more than the formal introduction of domestic provisions. More specifically, formal compliance with UNCAC Article 53 is great on paper but of no practical use if foreign states are not aware of the existence of proceeds of corruption abroad (nor of legal proceedings involving said property taking place in foreign jurisdictions) and, therefore, not in a position to make claims for damages. In that regard, as I noted previously, Article 53 ought to be read in conjunction with Article 56, which encourages States Parties to proactively share information “on proceeds of offences established in accordance with this Convention to another State Party without prior request, when it considers that the disclosure of such information might assist the receiving State Party in initiating or carrying out investigations, prosecutions or judicial proceedings or might lead to a request by that State Party under this chapter of the Convention” (emphasis added). This is also the position of the authors of the UNCAC Technical Guide: “Of course it is possible that the concerned State Party may not be aware of the existence of any proceedings, such as a company charged with bribery of a foreign public official in the jurisdiction of the former. States Parties should always be alert to ensuring that other States Parties are notified at an early stage as any other victim should be. States Parties should therefore consider notifying the concerned State Party of its right to stand and prove its claim, also in line with article 56” (p.205). Now, Professor, how often have the US facilitated foreign governments ‘actions towards direct recovery of property by providing them with information in a proactive and timely manner in accordance with Article 56?
• …UNCAC Article 53b) does not provide foreign States with a right to restitution; in fact, any claim should be supported, as you have noted, by “proof of concrete and measurable harm, as is standard legal practice”. However, once again, I never claimed otherwise. Here is what I wrote last June: “The first obstacle [to the full implementation of Article 53 (including proactive information sharing in line with Article 56)] relates to the technical difficulty encountered in many jurisdictions in identifying/recognizing, quantifying and ultimately repairing the damage caused by corruption. Since the UNCAC provides absolutely no guidance about it, many jurisdictions – for fear of having to deal with this complex technical issue – make the choice of not implementing the provision at all….” Indeed, while it is often heard that ‘corruption is not a victimless crime’ (including from DOJ spokespersons), when it comes to actually repairing the damage caused to foreign governments by corruption, a key question keeps arising: ‘How to measure the immeasurable?’
• …StAR’s findings are exaggerated since, as I have written in my previous reply to your post, “[StAR] compared the volume of payments made by or imposed on companies to sovereign governments (all types combined: fines, confiscated assets…) to the volume returned to foreign governments” whereas “to properly assess whether UNCAC’s provisions were being honored, StAR’s experts should have estimated the volume of damages that foreign governments could/should have claimed in the course of foreign bribery settlements reached these last thirteen years and then compared it to the actual volume of damages foreign governments got”. So, would you be tempted to reply, why do I keep quoting the now famous StAR’s “only-3%-of-the payments-imposed-on-companies-over-the-last-13-years-were-returned-to-the-countries-where-the-bribe-took-place”? Because, as I have said previously, 1/ “I believe that, even if such a calculation had been applied [i.e. based on compensatory damages], findings would have likely been the same given the low level of enforcement of Article 53″ (3); 2/ even though StAR’s calculation is slightly distorted, StAR’s report has “the merit of reminding that foreign bribery settlements are not out of the scope of the UNCAC and that more effort is needed in this area.” Being a lawyer, I have a passion for strong legal analysis; at the same time, I know that governments only take action when pressurized by the general public (through media awareness) and that to raise such awareness sometimes requires to distance oneself from strict accuracy; i.e. to “make a long story short”. I don’t like it any more than you do, but that’s the way it works in the real world. For example, the “$20-to-$40-billion-is-stolen-from-developing-countries-each-year”’s estimate used by the WB (and many others) is totally outdated (4) and yet, everybody uses it because it works: indeed, thanks to this eye-catching estimate, people do realize the importance of the issues at stake. The title of my blog post, and even more, its conclusion (cf. “No doubt there is an obligation under the UNCAC to share foreign bribery settlement monies with host countries!”) which may be considered, as you put it, either “sloppy” or “tendentious” (since they suggest that ALL settlement monies have to be shared which host countries), served the very same purpose: to raise awareness about the issue. While I am very happy to debate these issues with you Professor, they (sometimes – depending on the audience one is targeting) have to be framed in an easy-to-understand way so that we can reach out as many people as possible. In that regard, there is no doubt that StAR’s report greatly contributed to the asset recovery resolution adopted during the last Conference of States Parties (CoSP) to the UNCAC (Panama City; November 2013) which – even though it is non-binding – carries strong political weigh and, as I said, the UNCAC Coalition will make every effort to ensure that States Parties live up to their political commitments. Likewise, you are right, “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.” However, as I have previously written, “although the language is poor (and therefore the exact meaning of this resolution may not necessarily be obvious to those who did not attend the CoSP), it means that foreign bribery settlements should not be regarded (anymore) as a UNCAC-less area: the inclusion of language about settlements in transnational bribery cases in the resolution (implicitly referred to as “other legal mechanisms”) was indeed the main point of Nigerian draft resolution on asset recovery but also the main point of contention with the US (which also tabled a resolution on asset recovery)”.
Now, allow me clarify (hopefully once and for all) my position:
• UNCAC provisions apply (at least virtually) to any and all proceedings whenever they involves proceeds of corruption that have been transferred abroad (in accordance with UNCAC Article 3);
• Given that foreign bribery settlements do involve proceeds of corruption (5) (i.e. proceeds of active bribery), the UNCAC is applicable to such proceedings (and in particular Chapter V on asset recovery) and relevant UNCAC provisions (as transposed in domestic legislations) have to be applied;
• Given that proceeds of active bribery (at least when they involve private bribe-payers) are not assets over which governments have a legitimate prior claim, the best (and possibly the only) way to recover property in foreign bribery proceedings is to claim damages (as envisioned by UNCAC Articles 53b) and 35);
• The full and effective implementation of Article 53b (which, as I said above, goes beyond a mere transposition of the UNCAC provision into domestic legislation) is hampered by a series of concerns and obstacles. In addition to the above-mentioned ‘complexity exception’, “the low level of implementation of Article 53 is further explained by concern about the money being recycled through corruption. A legitimate concern which however leads to the situation where the citizens of these countries are doubly penalized for corrupt behavior of their public officials and governance failures. More generally, whatever the challenges and concerns are, and no matter how legitimate they may be (6), the ultimate losers are the ordinary citizens and particularly the poorest in society who rely heavily on the provision of public services (since they are not in position to afford them by themselves).
• This is, I believe, an area where more academic research should be conducted; and, in that regard, I would like to applaud the recent blog posts published by Sandy Spalding on the GAB (‘Reaching Bribery’s Victims’) – which show that the academic world can (and should) do better than rebutting “sloppy” blog posts from civil society.
A word to the wise,
Maud.
(1) I never pretended otherwise even when I (‘carelessly’) noted 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”. In fact, I was just using the “careless phrasing” of the UNCAC which, in its article 3 (scope of application), provides that: “This Convention shall apply, in accordance with its terms, to the prevention, investigation and prosecution of corruption and to the freezing, seizure, confiscation and return of the proceeds of offences established in accordance with this Convention” (emphasis added).
(2) “Whenever the phrase ‘each State Party shall adopt’ is used, the reference is to a mandatory provision”. Source: UNCAC Legislative guide, p.4.
(3) In that regard, it is worth noting that, when excluding punitive fines from StAR’s calculation, only 7.2% of the payments imposed on companies were returned to the countries where the bribe took place (own calculation based on “Left out of the bargain”; pages 72-73). In other words, the overall problem remains intact.
(4)This estimate comes from Raymond Baker’s book (Capitalism’s Achilles Heel) published in 2005. It only covers a bunch of countries and was based on research conducted by Baker in 1997: “Based on my 1997 work, I developed an estimate of corrupt proceeds transferred out of just 20 developing and transitional economies of $20 to $40 billion annually. Included in this estimate are Russia, China, Ukraine, Nigeria, Indonesia, Venezuela, Argentina, Iraq, Egypt, Turkey, Saudi Arabia, Pakistan, India, Côte d’Ivoire, Kenya, Algeria, Mexico, Belarus, Kazakhstan,and Turkmenistan” (page 168).
(5) And here again, just to ensure that we are on the same line, I am not thinking about the “punitive fines” that may be imposed on companies in the course of the proceedings.
(6) My blog post just as my previous reply to yours mostly focused on the challenges encountered in recipient countries (where the proceeds of corruption are located), they are also (of course) challenges in the “victim countries” including the lack of capacity or the lack of political will : of particular concern here is the situation where so-called “victim” countries are run by those engaged in large-scale corruption – and often control the whole state apparatus: indeed, under this scenario, government claims as envisioned by UNCAC Article 53, the pursuit of their own confiscation cases domestically just as the cooperation with a foreign jurisdiction are rendered unlikely.
PS/ There was a mistake in my blog that I only discovered when reading your blog…FYI – INSTEAD OF “Contrary to common belief, it is not only about recovering stolen or embezzled public funds stashed away by corrupt agents, or confiscating the lavish properties they illicitly acquired abroad. Instead it encompasses any and all proceeds of corruption, including stolen or embezzled funds over which foreign governments cannot establish prior ownership.” ONE CAN NOW READ “”Contrary to common belief, it is not only about recovering stolen or embezzled public funds stashed away by corrupt agents, or confiscating the lavish properties they illicitly acquired abroad – i.e. assets over which foreign governments can establish prior ownership. Instead it encompasses any and all proceeds of corruption, including assets of private origin and, in particular, the proceeds of active bribery (i.e. all the illicit profits, benefits or advantages of monetary value gained by companies as a result of paying a bribe to a foreign official).” …which, I guess you would agree, makes much more sense!
Wow, thanks for such a lengthy, thoughtful, and detailed reply! Even though we do not see eye to eye on all the details, I’m very glad we’ve had this exchange. I’m not sure it makes sense for me to try to go through your response point by point — I think others who are interested will be able to read through our respective arguments and make up their own minds.
For what it’s worth, I’m also not sure about how much we agree and how much we disagree. It seems that, when the points are framed at a high enough level of generality, there’s a great deal of agreement. Nonetheless, I think that some of the arguments you made in your post are hard to square with those higher-level assertions. For example, while I take your point about the need to pressure governments to take more constructive action to address these issues, I do stand by my objection to your use of the StAR Report’s misleading claim that “only 3% of the payments imposed on countries were returned to the countries where the bribe took place,” unaccompanied by an acknowledgement that this statistic includes punitive fines in the denominator.
In many ways, it seems that the exchange we’re having here actually encapsulates the tension I tried to describe in a separate post, on the conflicting roles of academics as analysts and advocates. (https://globalanticorruptionblog.com/2014/09/23/the-role-of-academics-in-anticorruption-some-tensions/) I read a great deal of your response to my criticisms of your post as saying — more or less — that although you actually agree with much (though not all) of what I have to say about the legal analysis, in practice — in the real world — “to raise awareness sometimes requires [one] to distance oneself from strict accuracy.”
I’m not at all comfortable with that. I acknowledge the difficulty and I respect your contrary position. Despite the sharply worded tone of our back-and-forth, I do understand the impulse to make things (to quote Dean Acheson) “clearer than the truth,” and I am (believe it or not) actually sympathetic to a great deal of what you say. But because of my different understanding of the obligations of legal academics to accurately represent the law (even “soft” international law like UNCAC), I will likely continue to hammer away at these points, even if you think (not unreasonably) that my time and energy would be better spent on more constructive contributions.
Sorry, one more thing: I wanted to ask you about how you made the calculation in your Note 3. You say that, based on the figures provided on pp. 72-73 of the StAR report, even when one excludes fines it still turns out that “only 7.2% of the payments imposed on companies were returned to the countries where the bribe took place.”
I haven’t attempted to make my own calculations, but quickly glancing at the chart on p. 72 of the report, it looks to be the case that at least in criminal cases, 71% of the monetary sanctions took the form of fines. In civil/administrative settlements (p. 73 of the report), it looks like only about 9.3% of the monetary penalties were fines, but 60.2% were “disgorgement of profits,” which — as I noted, and you seem to agree — is a tricky case where it’s not at all obvious the host country has a claim under UNCAC.
If the “3% figure” is calculated using the entirely amount of monetary payments as the denominator, I’m not sure how you can knock out 70% of that denominator and get a total of 7.1% returned. But again, I didn’t attempt to do the calculations carefully.
Admittedly, even if one knocks out 70% of the denominator, it still looks like a fairly small percentage is “returned” — but here I’d caution that we can’t assume everything in the categories other than fines/disgorgement is subject to a potential return obligation under UNCAC. I think what one would have to do — and I don’t know whether this can be done straightforwardly with the data the StAR report provides — is to estimate the total amount, in all of these cases, that _should_ have been returned pursuant to UNCAC, and than see what percentage was actually returned. Until that’s done, I’m going to maintain my attitude of respectful skepticism toward the claim that there’s a massive failure on the part of the DOJ, SEC, SFO, etc. to comply with Article 53.
Sorry Professor but, once again, it seems like you got me wrong! I only excluded punitive fines from my calculation – hence the figure: 7.2%! That being said, I could have also remove “disgorged profits” since, as we both agree, their disposal is tricky (under the terms of the UNCAC) and only focus on compensation (which is an obligation under the UNCAC – articles 35 & 53): according to the study, the amount paid by companies as “compensation/restitution” only accounts for 0.7% of the total monetary sanctions imposed on them in foreign bribery settlements…This brings me to the questions I have raised in my earlier reply: How often have the US compensation mechanisms been used in foreign bribery settlements (or proceedings)? How often have the US facilitated foreign governments ‘actions towards direct recovery of property by providing them with information in a proactive and timely manner in accordance with Article 56? I look forward to your responses.
Oh, great, thanks for the helpful clarification!
I agree it’s very tricky to try to make these calculations. One thing that might be helpful — perhaps StAR, or the UNCAC Coalition, or some researcher who has the time and interest — might go through a sample of recent anti-bribery recoveries and try to make a plausible estimate of approximately how much money _in that particular case_ should have been returned to the demand-side government (in light of UNCAC obligations). Doing this for the full set of cases might be too demanding, because it would require some sort of independent assessment by the researchers as to what the actual UNCAC repatriation obligation likely should have been, but perhaps this could be done for a handful of large judgments. I think that might do more not only to convince skeptics (like me), but also to help pressure governments in the way you emphasized as important in your post.
As for your broader questions about (1) how well the US compensation mechanisms are functioning, and (2) whether the US government is adequately facilitating foreign governments’ actions toward direct recovery of property by providing timely information and assistance:
On the first question, I’m not entirely sure, but it is certainly the case that the legal mechanisms are in place. The difficulty is that, to bring a claim for compensation, the party bringing the claim has to show that it was directly and proximately injured. That does make it hard for national governments to bring compensation claims, but this doesn’t, in my view, suggest non-compliance with the UNCAC obligation. Rather, it suggests that very few national governments may have plausible claims for compensatory damages, under traditional legal principles (which UNCAC did not, in my view, disturb). But this is indeed an important open question: Is the fact that there have been very few successful claims for compensation by demand-side governments due to the fact that supply-side governments have not provided adequate legal mechanisms, or due to the fact that very few demand-side governments actually have valid compensatory damages claims under traditional legal principles? I look forward to further research and debate on that question.
On the second question, I also don’t know too much about this, but my impression is that the US is actually fairly good about responding to foreign requests for legal assistance with asset seizure and recovery. I’ve just started reading the new StAR report on this, which seems to give a glass-half-empty/glass-half-full evaluation of progress on this front. It is true, though, that in some cases the US has indicated reluctance to repatriate money to national governments, especially when there are concerns about corruption in that government (e.g. Nigeria). There, I do think there are serious concerns about whether the US position is consistent with its UNCAC obligations. More generally, though, I’m not sure I’ve seen evidence that the US is not living up to its obligations to cooperate with foreign governments trying to recover stolen assets.
I suppose on this question, there’s a sort of “burden-of-argumentative proof” issue. You say, essentially, “There’s not very much asset recovery, that’s prima facie evidence the US isn’t living up to its obligations, so the burden is on defenders of the US to offer evidence that it is indeed in compliance.” I say, “The US has all the legal mechanisms in place and at least purports to respond to all legitimate requests for cooperation, so the burden is on critics to offer evidence that the US is not in fact in compliance.”
One thing I suspect we do agree on is that even though we approach the issue differently, it would really be great to have more concrete information on this. Hence my suggestion above that someone try to evaluate specific cases, focusing in particular on UNCAC compliance, rather than relying on aggregate numbers or paper laws.