A few months ago, Chinese officials announced a number of new incentives for whistleblowers to come forward to disclose corporate wrongdoing: pledging to develop protection plans for whistleblowers when necessary to “prevent and end acts of retaliation” and increasing the rewards whistleblowers could potentially receive to approximately $33,000 for “actionable information” (with even greater sums available for “significant contributions of information”). While these policies are fascinating in their own right, they also feed into a larger discussion that has been taking place both on this blog and in other forums, regarding what impact, if any, an increased commitment to anticorruption norms by demand-side countries may have upon the current anticorruption regime. A number of authors have already discussed this phenomenon both in broad strokes and specifically within the context of China’s increased enforcement of anticorruption laws (though some have suggested China’s recent, high-profile corruption prosecutions, including a $490 million fine of GlaxoSmithKline, may serve as a cover for protectionist policies). One area that may warrant further consideration, however, is the likely impact that the rise of demand-side prosecutions and the resulting potential for parallel enforcement by demand-side and supply-side countries may have upon these states’ whistleblowing regimes.
While the ways in which the increased prevalence of demand-side corruption prosecutions will impact the interactions between supply- and demand-side countries’ anticorruption regimes remains unclear, this phenomenon seems likely to result in one of two possible outcomes with respect to states’ attitudes towards whistleblowers. First, countries may perceive some benefit to ensuring that they are the only–or, at the very least, the first–government to receive a whistleblower’s report. Second, states may alter their whistleblowing policies to reflect the fact that whistleblowers can potentially report to, and be rewarded by, both demand- and supply-side countries. While the impact of these different scenarios on the ways in which whistleblowing protections and incentives will develop over time may be quite different, both appear disadvantageous to states’ anticorruption efforts, to the whistleblowers themselves, or both.
As was argued in Jordan’s recent post, there is good reason to believe that, if a corporation is subject to prosecution for the same conduct by both demand- and supply-side states, the “second-mover” should reduce the penalty it imposes upon the defendant so as not to subject a corporation to excessive punishment. The logical consequence of this policy, however, is that it provides states with a financial incentive to ensure that they are the first and potentially the only state to receive information regarding a corporation’s wrongdoing. In this scenario, states may be tempted to embrace policies intended to induce whistleblowers to approach them with allegations of corruption. For example:
- States may be willing to increase the rewards that a whistleblower could receive relative to others’ offers.
- States may make whistleblower rewards or bounties contingent upon a guarantee that a whistleblower will provide his or her report only to the country in question (similar to the current requirement that a whistleblower provide “original” information in order to be eligible for a bounty under the Dodd-Frank Act).
- Demand-side countries may place greater emphasis upon their ability to protect a whistleblower’s from employment retaliation. This inducement could be particularly powerful in light of a recent Second Circuit decision finding that the Dodd-Frank Act’s anti-retaliation protections (though not its bounty provisions) lack extraterritorial effect.
At first blush, such policies may seem to provide additional incentives for individual whistleblowers to come forward, while also encouraging states to adopt more robust whistleblower protection regimes. Yet such measures are antithetical to the spirit of cooperation that would, in an ideal world, exist with respect to anticorruption efforts that touch upon the interests of more than one state. Moreover, these provisions could encourage an increase in false or misleading reports from those hoping to take advantage of heightened incentives for uncovering corruption. Attempts to limit whistleblowers’ ability to report their concerns to more than one state may be similarly problematic as such restrictions could preclude countries that are better-positioned to prosecute a particular instance of corruption from receiving the information they require.
Alternatively, the rise of parallel prosecutions by demand and supply-side countries could result in a situation in which states, aware of the fact that whistleblowers will likely have the opportunity to report to (and be rewarded by) more than one country’s anticorruption regime, may reduce the incentives provided to whistleblowers. There are a number of potentially negative consequences which could flow from this decision:
- First, the increased logistical difficulties of reporting corruption to more than one organization (and the attendant risk to whistleblowers of having their identities revealed, thereby exposing them to potential retaliation) when coupled with the decreased awards offered by individual states, could deter some whistleblowers from coming forward altogether.
- Second, states may fail to appropriately calibrate the degree to which their bounty/incentive systems should be reduced in order to account for the possibility that whistleblowers will be rewarded by both demand- and supply-side states. Different countries are likely to be willing (or able) to provide different incentives to whistleblowers (compare, for example, China’s offer of $33,000 for actionable information with the $100,000 minimum reward for a whistleblower who qualifies to receive a “bounty” per the Dodd-Frank Act). As such, states attempting to uniformly reduce their own bounty systems may potentially provide fewer incentives to whistleblowers than those currently available, which may also discourage whistleblowers from reporting wrongdoing.
- Third, it is by no means certain that, even with increased demand-side enforcement, states will be equally interested in pursuing every instance of corruption. Thus whistleblowers may well find themselves receiving, once again, diminished rewards for reporting wrongdoing if either a supply or demand state is unwilling to pursue a case against the alleged perpetrator.
Thus, while it may be difficult to predict if the rise of demand-side prosecutions will result in increased incentives for states to induce whistleblowers to report exclusively to them or a decrease in the rewards offered by individual states, it seems likely that both scenarios may well prove to be either to whistleblowers’ or the global anticorruption regime’s detriment. This prediction only serves to further underscore the importance of ensuring that anticorruption experts continue to seriously consider how best to adapt to the increased prevalence of demand-side prosecutions and to continue to work to promote cooperation between supply and demand-side investigations and enforcement.