Against Global Standards in Corporate Settlements in Transnational Anti-Bribery Cases

A couple weeks ago, Susan Hawley, the policy director of the UK-based NGO Corruption Watch, published a provocative post on this blog calling for the adoption of “global standards for corporate settlements in foreign bribery cases.” Her post, which drew on a recent Corruption Watch report on the use (and alleged abuse) of the practice of resolving foreign bribery enforcement actions through pre-indictment diversionary settlements—mainly deferred-prosecution and non-prosecution agreements (DPAs/NPAs)—echoed similar arguments advanced in a joint letter sent by Corruption Watch, Transparency International, Global Witness, and the UNCAC Coalition to the OECD, on the occasion of last month’s Ministerial meeting on the OECD Anti-Bribery Convention.

A central concern articulated in Ms. Hawley’s post, as well as the CW report and the joint letter, is the fear that corporate settlements too often let companies off too easily–and let responsible individuals off altogether–thus undermining the deterrent effect of the laws against transnational bribery. I’m sympathetic to the concern about inadequate deterrence, but unconvinced by the suggestion that over-reliance on DPAs/NPAs is the real problem. (Indeed, I tend to think that under-use of these mechanisms in other countries, such as France, is a far greater concern.) My last post took up that set of issues. But, as I noted there, the question whether the U.S. use of settlements is (roughly) appropriate is conceptually distinct from the question whether there ought to be global standards (or guidelines) on the use of such settlements. After all, while one could object to U.S. practices and call for (different) global guidelines—as Corruption Watch does—one could also object to U.S. practices but still resist attempts to develop global guidelines. Or one could not only endorse current U.S. practices, but also call for global guidelines that similarly endorse those practices. And then there’s my position: basically sympathetic to the general U.S. approach to corporate settlements in FCPA cases, and generally skeptical of the case for global guidelines.

Having spent my last post elaborating some of the reasons for my former instinct, let me now say a bit about the reasons I’m unconvinced by the call for global guidelines on corporate settlements (or at least why I think such calls are premature):

  • First, the right approach to corporate settlements may depend substantially on other aspects of a country’s institutional environment, enforcement capabilities, and legal traditions. Consider, for example, the call in the joint letter for judicial oversight of settlements, “includ[ing] proper scrutiny of the evidence.” It seems to me that the appropriate role for a court in reviewing a settlement may depend on how much confidence we have in prosecutors and courts, respectively, doing the right thing. A significant judicial oversight role may often make things better, but there might also be contexts in which it can make things worse. I’m not sure there’s a one-size-fits-all approach here, and we should be extremely cautious about insisting that all countries give similar responsibilities to their judicial systems. And perhaps it’s also worth noting here that not all countries recognize criminal liability for legal entities, which might reasonably influence certain aspects of settlement practices.
  • Second, and relatedly, as I noted in my last post, calibrating the proper approach to corporate settlements—deciding how generous or flexible the prosecution ought to be in negotiating a settlement—requires making difficult trade-offs. A more generous government approach to settlement has the obvious downside of reducing punishment (conditional on detection). But it has the advantages of encouraging self-disclosure, and of economizing on enforcement costs. How any given country strikes this balance may depend on factors such as its resources for independently detecting and prosecuting foreign bribery cases. Here again, I’m not so sure that there’s a single right approach, suitable for all countries.
  • Third, premature adoption of global guidelines might unnecessarily limit diversity and experimentation, which could help generate more evidence as to the pros and cons of different approaches. For example, the UK’s recent adoption of a law allowing DPAs, while generally modeled on the U.S. approach, has a much greater role for judicial oversight. In addition to my previous point about differences in countries’ legal traditions and institutions, it’s arguably a good idea to have the US and UK approaches proceeding in parallel, at least for a while, as this will produce more information about how an active judicial oversight role may affect settlement and enforcement practices. Cutting that off now, by insisting that the UK approach (or the US approach) is the international “best practice” that ought to be enshrined in a set of global guidelines, would impede our ability to learn.
  • Fourth, pushing for consistency in approaches to settlement, while intended to “level up,” could inadvertently lead to “leveling down.” Suppose, for example, that the joint letter’s concern about country-to-country variation in settlement practices leading to “an uneven playing field” gains traction at the OECD, but that the letter’s calls for things like full transparency of settlements, only providing settlements in cases of full disclosure of all wrongdoing, etc., turn out to be infeasible due to intractable political resistance. Under those circumstances, it’s possible that the (over-)emphasis on the need for consistent global standards could generate precisely the opposite of what organizations like Corruption Watch are hoping for: relatively mild (but internationally consistent!) standards for corporate bribery settlements, which would in turn discourage—or provide an excuse to avoid—more demanding approaches.

Now, to be clear, I do not think that trying to generate a list of aspirational “best practices” is necessarily a bad idea, and it’s possible to read the joint letter (and Ms. Hawley’s post) is simply as something in that spirit. Even though I disagree with some of the specific recommendations, having an open discussion about the proper use of settlements is healthy and productive. What makes me nervous is the rhetoric about the need for “global standards” to address the alleged problem of international inconsistency (and the associated “uneven playing field”). Ultimately, I have yet to be convinced that this is really much of a problem. After all, we’re still in a world where the United States is responsible for the overwhelming majority of enforcement actions against foreign bribery. Most countries, including most OECD signatories, don’t enforce their foreign anti-bribery laws at all, whether through settlements or anything else. So it seems a bit odd to be playing up the need for global standards when what we really need is more serious enforcement by countries other than the United States.

2 thoughts on “Against Global Standards in Corporate Settlements in Transnational Anti-Bribery Cases

  1. I agree with you that countries should not rush to adopt a global standard governing corporate settlements in transnational anti-bribery cases. One reason is that countries differ in the standards that govern corporate liability and also in the types of firms that dominate their economies. This affects the appropriate structure of corporate criminal enforcement.

    The U.S. approach is justifiable because the U.S. anti-corruption enforcement focuses on publicly held firms which are subject to criminal respondeat superior liability for both bribery and for accounting provisions violations. In the U.S. firms can be held criminally liable for deliberate wrongdoing by a mid-level manager or lower level employee, even if the board of directors and senior management was 100% committed to deterring bribery and the firm adopted an effective compliance program. Corporate liability nevertheless can be used to help deter bribery, in this situation, when it is structured to induce firms to self-report and to fully cooperate by providing evidence to prosecutors. Corporate liability deter if prosecutors use this evidence to pursue the individuals responsible. The U.S. can use deferred and non-prosecution agreements to induce self-reporting and cooperation.

    U.S. criminal enforcement policy is thus tailored to the large publicly held firms subject to a very broad corporate criminal liability regime with shareholders who have little control over the firm’s anti-bribery efforts.

    By contrast, in many other countries, corporate criminal enforcement policy is necessarily focused on corporate wrongdoing caused by senior managers or directors who likely own a controlling interest in the firm. In many countries, corporations cannot be held criminally liable unless the board or senior management was complicit in the crime. In addition, in many countries, firms tend to have controlling shareholders who are involved in management.
    The arguments favoring D/NPAs do not apply as easily to cases that come before many foreign prosecutors: situations where senior managers (who are substantial shareholders) deliberately bribed a foreign official. In this situation, the firm is unlikely to genuinely help prosecutors convict the wrongdoer. Moreover, corporate liability imposed on firms with owner-managers falls directly on individual wrongdoers.

  2. I agree with your points. In particular, I am convinced that your fourth point is an important concern. It seems that in a concerted effort to create global standards for global standards sake, there might be a tendency inherent in all negotiations where an agreement is a foregone conclusion to end up at the lowest common denominator, rather than the highest. Earlier, I wrote about this concern in the context of regional legislation: https://globalanticorruptionblog.com/2015/11/09/coordination-by-legislation-is-regional-anticorruption-legislation-in-the-east-african-community-a-good-idea/

    One point that comes to mind in this discussion is potential forum shopping. Are there instances where multiple countries might have jurisdiction over a corporate entity for the same illegal conduct, and that corporation might be able to choose to settle with the country with the most lenient standards? Certainly if its possible to choose the country to settle with, one would expect a corporation to take advantage of the disparity. Of course, this also raises potential double jeopardy issues in the corporate settlement context, which have been discussed on this blog in the past: https://globalanticorruptionblog.com/2015/03/09/why-international-double-jeopardy-is-a-bad-idea/.

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