What are the consequences of “supply side” foreign bribery laws, like the US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (UKBA), on the developing countries that are often the bribe receivers in foreign bribery cases (the “demand side”)? When can OECD country (say, the United States) prosecutes a company for paying a bribe in a developing country (say Nigeria), what are the implications for Nigeria – for its institutions and for its overall corruption environment and anti-corruption framework? How does the investigation or prosecution affect Nigeria’s ability to investigate prosecute the same case? What are the consequences if the U.S. case is settled? How can Nigeria obtain restitution of the proceeds of the bribe? And should it?
Although foreign anti-bribery laws like the FCPA have attracted a great deal of analysis and discussion (including on this blog: see here, here, here, here, and here), there is much less material on those sorts of questions. (An exception is the work by Professor Kevin Davis, see here and here, also discussed on this blog.) In a new U4 paper I co-wrote with Bruce Zagaris, we attempt to provide a more in-depth analysis of how supply-side enforcement of foreign anti-bribery laws by OECD countries affects parallel investigation and enforcement action in the demand-side country whose officials allegedly took the bribes. Unfortunately, reliable information on how many supply-side enforcement actions result in parallel investigations by the demand-side host countries is not currently available (so far as we know), but we were able to extract a great deal of useful information from FCPA and UKBA cases, as well as other recent studies like the Stolen Asset Recovery Initiative (StAR) Left Out of the Bargain report.
The main takeaways from our study can be summarized as follows:
- The available evidence suggests that only a handful of developing countries have launched investigations on bribes paid by foreign companies following parallel investigations in the bribe payer’s country (a point emphasized by Rick Messick in a previous post).
- The failure of supply-side enforcement actions to prompt parallel demand-side action seems attributable to three main factors: (1) lack of technical capacity in developing countries to investigate complex multi-jurisdictional cases; (2) lack of political will to do so, especially when high-ranking public officials are involved; and (3) the inefficient flow of information between investigators and prosecutors in bribe-receiving and bribe-paying countries, due in part to distrust (e.g. a concern that confidential information may be leaked). (Incidentally, these explanations are in line with those Rick identified in his earlier post, noted above.)
- Donor agencies need to be more involved in this area. Donor agencies are ideally positioned to understand the context in which foreign bribery takes place; they also act as a bridge between developed and developing countries and thus can help facilitate the flow of information on foreign bribery cases.
- There is a need for more research in this area. The information available is clearly insufficient to answer all the questions posed at the beginning of this post. Primary research is needed to dig into foreign bribery cases investigated in OECD countries and verify if they result in parallel investigations in the bribe-receiving countries, to identify the factors that may facilitate such a connection between investigations, and to analyze the broader consequences for the bribe receiving country’s institutions and overall anti-corruption framework.
A final note on allocation of the proceeds of judgments or settlements in foreign anti-bribery cases: StAR’s Left Out of the Bargain report has triggered an interesting debate on whether, or when, the monies recovered in foreign bribery cases should be transferred to the bribe-receiver’s country (see here, here, and here, and here). We agree with StAR that such repatriation should happen more often. But we also recognize that such redistribution may become a disincentive for demand-side countries to launch their own investigations, and ultimately sanction both the foreign company and the domestic public official. And we also acknowledge that courts may be reluctant to repatriate monies to countries that fail to investigate and eventually sanction the bribe receiver (see for example the ICE case in Costa Rica). To reconcile these points, our paper further argues that:
- Repatriation should not be unconditional, but ideally tied to some action by the demand-side government that demonstrates willingness to prosecute the bribe receiver–although this is clearly complex to achieve from a legal perspective.
- For OECD countries it may be easier, from both a legal and public relations perspective, to repatriate monies recovered through disgorgements rather than through fines, because disgorgements are the direct result of the illicit profits made by the bribe payer in the foreign country. This raises other issues, related to what types of penalties are imposed in foreign bribery cases and why, as well as on the transparency and level of judicial review of settlements.