GAB is delighted to welcome back Susan Hawley, Policy Director at Corruption Watch, to contribute today’s guest post:

The issue of whether money from foreign bribery settlements should go back to the people of affected countries has generated a fair amount of heat over the years. Back in 2013, the World Bank’s Stolen Asset Recovery Initiative (StAR) asked whether countries whose people were most harmed by corrupt practices were being left out of the bargain in foreign bribery settlements. According to the StAR study, out of the $6 billion in monetary sanctions imposed for foreign bribery in 395 settlements between 1999 and 2012, only 3.3%, or $197 million, had been returned to the countries where the bribes were paid. Those statistics have provoked considerable controversy, as has the question whether the UN Convention Against Corruption (UNCAC) requires states parties to share money from foreign bribery settlements with affected countries. Yet the fact remains that when the huge fines paid by US and European companies for bribing officials in developing countries go into the treasuries of the US and Europe, while the people of those countries affected by that bribery get nothing, this creates a serious credibility and legitimacy problem for the international anticorruption regime.

For that reason, the UK enforcement bodies’ publication, this past June 1^st, of joint principles to compensate overseas victims of economic crime is a welcome development, and provides another opportunity to think again about what is possible and what is desirable in terms of compensating the people of affected countries when companies get sanctioned for paying bribes. The UK Compensation Principles were first mooted and drafted at the 2016 London Anti-Corruption Summit; that Summit’s Joint Communique recognized that “compensation payments and financial settlements … can be an important method to support those who have suffered from corruption,” and led nine countries (though only four from the OECD) to commit to develop common principles for compensation payments to be made “safely, fairly and in a transparent manner to the countries affected.” The UK’s new principles are an effort to fulfill that Summit commitment. They commit the UK’s enforcement bodies to:

• Consider compensation in all relevant cases;
• Use whatever legal means to achieve it;
• Work cross-government to identify victims, assess the case and obtain evidence for compensation, and identify a means by which compensation can be paid in a transparent, accountable and fair way that avoids risk of further corruption; and
• Proactively engage where possible with law enforcement in affected states.

Interestingly, these principles have been in informal operation since late 2015, which helps shed some light on how these principles are likely to operate in practice.

The picture that emerges is that compensation is not straightforward, even when the government commits to pursuing whatever legal means to achieve it. While the Code of Practice for UK Deferred Prosecution Agreements (DPAs) states that it is “particularly desirable” for compensation to be paid, and despite the fact that under a DPA it should be easier for a prosecutor to get a company to agree to pay compensation, only one of the three UK DPAs concluded so far for foreign bribery has included compensation to affected countries or victims. In the other two (including one involving Rolls Royce), no compensation was provided, for two related reasons: First, the cases were “too complex” involving bribes paid across multiple jurisdictions, and, second, it was not obvious who the victims were. There was one other case in which a substantial compensation payment was made to the affected company, but this was only possible because of a guilty plea by the company, and details are still not available because the case is still subject to reporting restrictions. As for judicial determinations, there have been very few convictions for overseas corruption so far, and thus the case law is scant. In one case, involving UK printing company Smith and Ouzman, the judge stated that he would not have ordered compensation if he had been asked, because there was no evidence that the governments concerned were taking steps against their own officials, and also because the judge didn’t have confidence that the compensation would reach the right entity. Interestingly, the UK’s Serious Fraud Office managed to broker an agreement with the UK Treasury that saw some of the money confiscated from the company sent to the relevant countries anyway, with the UK’s Department for International Development (DFID) helping determine how the money would be spent. A similar agreement with the UK’s Treasury was reached in March 2018 to ensure that money confiscated in a civil case involving the proceeds of corruption would be returned to the people of Chad through development projects identified by DFID.

So, what are the lessons so far and what does the UK need to do next if it wants to be a beacon on compensation?

• First, the UK enforcement bodies need to develop mechanisms that enable compensation determinations to be made even in complex cases. The current legal landscape, whereby compensation can only be given in “simple” cases, has left the UK in the somewhat bizarre situation whereby the more widely a company bribes, the more global its wrongdoing, and the more it uses intermediaries to pay the bribes, the less likely it is to have to pay out compensation to countries or individuals affected by its wrongdoing. Complexity should not be an insurmountable obstacle to compensation.
• Second, too many of the recent cases tie compensation amounts to the size of the bribe or the corporate profit obtained, rather than the magnitude of the harm caused. Getting a clearer picture of harm and loss caused by foreign bribery is going to be crucial to seeing more compensation returned to affected countries.
• Third, there needs to be consistency, transparency, and accountability to ensure that these important principles work in practice and provide a model for other countries to follow. That means earlier engagement with the public and with civil society organizations, who, as the Global Forum on Asset Recovery principles on asset return recognize, have a key role to play in helping identify how harm can be remedied and money returned.

Despite these important areas for improvement, the UK’s Compensation Principles are an important start that deserve careful attention from other countries and strong implementation from the UK.