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.