Settling Prosecutions for Corruption: Developing Nations’ Issues

The OECD Antibribery Convention requires its 43 state parties to levy “effective, proportionate and dissuasive criminal penalties” on individuals or corporations who have bribed a foreign official. Since the convention took effect February 15, 1999, through June 1, 2014, when data was last compiled, the OECD Secretariat reports that more than two-thirds of all prosecutions have ended in a pre-trial settlement. Settlements are permitted under the convention, but they must still impose “effective, proportionate and dissuasive” sanctions on the settling defendant.

Developing nations, the World Bank/UNODC’s StAR Program, and civil society groups say many of these settlements have let corporate bribe payers off too easy.  They also say that, where a case involved bribery of a developing country official, settlement has made it harder for the developing state to collect the fine and other monies due from the bribe payer under its laws.

The OECD is considering issuing a guide on settlement terms.  To help its drafters ensure they appreciate developing nations’ concerns, Norway’s Agency for Development Cooperation asked I write a paper on settlements and developing nations. Last week I posted a draft that focused on settlement strategy.  Thanks to several very helpful comments and discussions, the final paper covers much different ground.  Among the points it makes:

  • Fears that OECD settlements will bar prosecution for the same acts in developing nations seem to be misplaced given current law, but concerns a settlement could compromise a developing state’s ability to recover — i) profits the defendant realized from corrupting its officials or ii) sufficient funds to compensate citizens injured by the corruption — are genuine.
  • Developing states with weak criminal justice systems face a dilemma when weighing whether to settle or try their own cases for corruption.  As last week’s post explained, a weak judicial system means a tough settlement is out of reach, for the system’s very weakness tells defendants if they go to trial they will prevail — or equivalently, be able to delay resolution for decades.  If a government loses a string of corruption cases, it risks encouraging more corruption as those tempted to commit acts of corruption see they are very likely to get off scot-free.

When, as in the case of transnational bribery, two sovereigns both have the legal right to try the perpetrators, tension is inevitable.  The paper offers several recommendations for if not eliminating the tension at least managing it. What in international law would be termed advancing principles of comity.  Click on Settlements of Criminal Corruption Cases — Developing States’ Issues to download the paper.  Comments earnestly solicited.  Many, many thanks to those who commented on last week’s version.

4 thoughts on “Settling Prosecutions for Corruption: Developing Nations’ Issues

  1. Pingback: Plea bargain in corruption cases! | Matthews' Blog

  2. Pingback: Plea bargain in corruption cases! | Matthews' Blog

  3. I would suggest listing another factor related to Preconditions for Settlement that is being hinted throughout the text, but is key for processes in developing jurisdictions – the likelihood of facing a severe sanction (both fine and prison time). This primarily relates to actual court practices, not statutory brackets. As you probably know, in very many developing jurisdictions courts issue sanctions that are largely considered as lenient , often even going beyond the prescribed statutory minimums for such offences. So even if convicted, the amount of fine/time served (if any) becomes negligible for perpetrators. The situation is notably opposite in developed countries, especially those with Sentencing Guidelines where there is a some foreseeability of sanctioning.

    As a side note, another factor affecting company behavior that could be considered in the longer run research the conclusion is proposing is the likelihood of being caught. Criminology and criminal justice research had shown back in 2004/5 that this factor is gaining equal prominence in determining criminal behavior as the severity of sanctioning. This may be a notable factor for corporate corrupt practices, as primary activities by in large take place in jurisdictions which are likely not to have the capacity to identify such practices and which only come to light if one of the big jurisdictions gets somehow engaged (although not necessarily because of their high capacity to identify criminal activities, but rather the company interest to acquire a more lenient treatment through self-reporting, which seems to be scenario suggested by the OECD analysis of foreign bribery cases which showed that more than 50% of those analyzed emerged through company internal investigations and reporting).

    • Thanks for your suggestions. Both excellent points.

      Brazil may have just provided a good example of your first point: when developing nation courts do impose sanctions on an offender, they are often watered down. After serving two-and-a-half years of his ten year sentence, Marcelo Odebrecht was recently released. He will serve another two-and-a-half years under house arrest (in his 34,000 square foot mansion in one of San Paulo’s toniest neighborhoods). He will then be permitted to leave his home for work for another two-and-a-half years and will do community service for the rest of his 10-year sentence. Even if the courts don’t waiver, the prison authorities may. Schabir Shaik was sentenced to 15 years for corruption arising out of his dealings with Jacob Zuma but was sent to a hospital and later granted a medical parole.

      The speed with which a penalty is imposted for a crime has a much greater impact on individuals, research shows, than the severity. Trouble with applying that to corruption cases is that it can take so long to bring them to trial or to a point where the individual defendants will settle.

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