Compensating Corruption Victims: American Law on Bribery Damages

Parties to the UN Convention Against Corruption pledge in article 53 to “pay compensation or damages to another State Party that has been harmed” by an act of corruption, but nowhere does the convention say who it is that is harmed by corruption or how compensation is to be calculated.  In a submission to the 2015 meeting of convention parties, the UNCAC Coalition, an global network of civil society organizations, argued that the absence of guidance is “one of the main obstacles to the award of damages to victim countries” and urged the publication of “best practice examples with respect to the identification, quantification and reparation of the damage caused by corruption” as step in developing the needed guidance.

This writer recently summarized how American courts deal with compensation issues when the corrupt act is the payment of a bribe.  Written for the Open Society Foundations’ Justice Initiative, the paper explains that under both federal and state law individuals, businesses, and even foreign governments can recover damages for injuries sustained as a result of bribery and that with passage of the Foreign Corrupt Practices Act the number of cases has exploded.  Not all claimants have been successful of course.  In some actions their damages were too remote (not proximately caused in legal language); in others claimants failed to show how the bribery injured them, and in some cases foreign governments were denied recovery because their officials were so deeply involved in the bribery scheme that the government did not qualify as a victim under U.S. law.  But other claimants have enjoyed significant success — realizing in some instances awards in the tens of millions of dollars.

Whether American law is a “best practice example” of the kind the UNCAC Coalition had in mind I don’t know.  But it is an example, and one, given the creativity of American lawyers (spurred by the chance for a lucrative fee), that provides those thinking about victim compensation for corruption a rich vein of case law to explore.

The paper is the fifth in a series of papers commissioned by the Open Society Justice Initiative on civil society and anticorruption litigation.  It follows earlier ones on standing by GAB editor-in-chief Matthew Stephenson, on civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta, on private suits for defrauding government by Houston Law School Professor David Kwok, and private prosecution by Tamlyn Edmonds and David Jugnarain.


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