Monthly Archives: March 2022

Reforming the Indian Judiciary from the Bottom Up

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“Corruption is as old as society. Corruption has become a way of life, [an] acceptable way of life. And judges don’t drop from heaven.” 

This was former Chief Justice Ranjan Gogoi’s reply when a journalist asked him about corruption in India’s courts. Such a statement may seem extraordinary coming from a former Chief Justice, but he is not alone in holding this belief. Two other former Chief Justices have acknowledged the pervasive corruption problem facing India’s judiciary, particularly in the lower courts where most Indians interact with the judicial system. And this perception is backed up by quantitative evidence: according to Transparency International, 32% of Indians who used the courts in 2020 had paid a bribe that year, while 38% resorted to personal connections to navigate the system. 

Much of the public outrage over India’s judicial corruption has understandably been directed toward individual corrupt judges (see here, here, and here), but the problem reflects deeper systemic issues—perhaps most importantly, the massive case backlog. There are currently forty million pending court cases in the country’s District Courts and Subordinate Courts, and every year that number grows by millions more. By some estimates, it would take 400 years for the judiciary to clear the backlog at its current rate (and that’s assuming no new cases are filed in the meantime). It takes an average of 35 months to resolve a legal issue in India, the longest in the world according to one report. And many cases take much longer: over half a million cases have been pending for over twenty years.

This case backlog, and the glacial pace of Indian justice, is not only a crisis for the administration of justice but also a breeding ground for corruption. Given the extraordinary delays, those litigants who can afford to do so have strong incentives to pay bribes or use connections to get a faster verdict. (Most bribes are paid to court officials or middlemen, including lawyers, rather than directly to judges.) And, without excusing those judges who violate their oaths of office, it’s not that surprising that overworked, underpaid judges dealing with crushing caseloads would be tempted to accept these under-the-table payments. In essence, then, the extreme case backlog in the lower courts has created something of a two-track system, one for those that can pay the price to skip the line, and one for everyone else.

As the number of pending cases continues to balloon, this problem is only going to get worse. While punishing those judges (and their staff) who are caught requesting or receiving bribes—and those litigants and facilitators who offer those bribes—may be morally and legally justified, cracking down on individual wrongdoers is not enough to address the structural roots of India’s judicial corruption problem. 

What can be done? Though there are no easy solutions, India needs to adopt reforms to increase both the quantity and the quality of its lower court judges:

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NGOs Call Italian Judiciary to Account for Not Enforcing the Antibribery Law

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The Italian judiciary is threatening to upset the global norm against bribing officials of another nation.  As party to both the OECD Antibribery Convention and the UN Convention Against Corruption, Italy is obliged to sanction Italian companies and nationals that bribe the public servants of other nations.  Yet despite overwhelming evidence that oil and gas giant Eni S.p.A, the country’s largest company, bribed Nigerian officials to secure a lucrative oil block, a Milan trial court recently acquitted Eni and codefendant Royal Dutch (decision here.)

Acknowledging the prosecution had presented strong circumstantial evidence of bribery — what it termed “conduct implementing the agreement” to pay Nigerian officials in return for “the unlawful act of the public official” — the court nonetheless held this was not enough. Following earlier appeals court decisions in foreign bribery cases, it ruled the prosecution must also show an actual “agreement between clearly identified parties” Hence, it concluded, “even the proof of the bribe or the unlawfulness of the act committed by the official” is not enough to warrant conviction.

Officials from the U.S. Department of Justice and Germany’s Ministry of Justice will shortly review Italy’s compliance with its obligations under the OECD Antibribery Convention. The Italian NGO ReCommon, Nigeria’s Human and Environmental Agenda, and Corner House from the United Kingdom have prepared this thorough and damning critique of the decision in the ENI case and earlier ones where Italian courts have held that absent an express agreement to pay a bribe to a foreign official, defendants must be acquitted.

As the three NGOs explain in their analysis, those negotiating the OECD Convention recognized that requiring the prosecution to show an express agreement to bribe set an impossibly high hurdle. They settled instead on allowing courts to infer an agreement from the surrounding circumstances, circumstances such as those the prosecution presented in the ENI-Shell case. Indeed, American courts long ago recognized that requiring the prosecution to produce an express, written agreement to pay a bribe rendered the antibribery law a nullity.

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The Unfulfilled Promise of the UK’s Anticorruption Innovations

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When it comes to the fight against global corruption, the United Kingdom presents a paradox. On the one hand, the UK has long enjoyed a reputation as relatively “clean.” The country gets good marks on Transparency International’s Corruption Perception Index, and the Financial Action Task Force considers the UK a world leader in preventing money laundering. Yet, at the same time, the UK—and London in particular—is well-known as a popular laundromat for dirty money and a haven for kleptocrats.

It would be tempting to say that the UK cares about suppressing corruption at home but is indifferent (or worse) to how its nationals and its policies affect corruption abroad. But that is too simple, because in some respects the UK has been an innovator in the fight against transnational bribery and illicit wealth, and has often taken the lead in enacting new and more powerful anticorruption and anti-money laundering tools. Over the past dozen years, three such innovations are especially notable: the 2010 UK Bribery Act (UKBA), the 2016 legislation mandating a public registry of the beneficial owners of all private companies registered in the UK, and the 2017 Criminal Finances Act authorizing unexplained wealth orders (UWOs)—court orders that require the owners of UK assets to prove that the funds used to purchase those assets came from legitimate sources, with the assets frozen and eventually seized if the owner is unable to do so.

Yet the paradox continues: While the UK received well-deserved praise for enacting these measures, in practice all three have been far less effective than proponents hoped. The reasons for these failures are different, but they share common threads. Continue reading →

Managing Corruption Risk in U.S. Public Pension Funds

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Public pension funds provide retirement benefits for government employees, such as firefighters, teachers, and police officers. In the United States, the pension funds of state employees are typically managed by a board of trustees that is generally comprised of investment professionals, beneficiary representatives, and individuals appointed by state elected officials. (Fund governance structures vary somewhat from state to state.) These trustees then exert tremendous influence over the allocation of pension assets to different investment vehicles, such as private equity and hedge funds. While individual pension funds vary in size, the total amount of money involved is enormous: Public pension fund managers in the United States are responsible for allocating over $5.5 trillion in assets across different investment vehicles.

How pension managers select among different investment opportunities remains a largely opaque process. This lack of transparency—coupled with broad investment discretion—fosters a substantial risk of corruption. Such corruption can take several different forms:

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New Podcast Episode, Featuring Oksana Nesterenko

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A new episode of KickBack: The Global Anticorruption Podcast is now available. During the ongoing emergency in Ukraine, as Russia’s unprovoked military aggression throws the region and the world into crisis, my colleagues at the Interdisciplinary Corruption Research Network (ICRN) and I are going to try as best as we can to feature on KickBack experts who can shed greater light on how issues related to corruption relate to the ongoing crisis. And rather than keeping to our usual schedule of releasing new episodes every two weeks, we will release new episodes as soon as they are available. In the new episode, I was privileged to welcome to the podcast Oksana Nesterenko, Associate Professor of Law at the National University of Kyiv-Mohyla and Executive Director of the Anti-Corruption Research and Education Centre. Professor Nesterenko was forced to leave Kyiv after the Russian attack, and she spoke with me from Poland, where she, like so many of her fellow citizens, is a refugee. In the first part of our conversation, Professor Nesterenko explains why the war between Russia and Ukraine is really a war of values, and why gradual reforms in Ukraine in the direction of liberal democracy and anticorruption threatened the Putin regime, and why this, rather than any actual military or security threat to Russia, is the real underlying reason for the Putin regime’s attempt to topple the current Ukrainian government. She also explains that Putin’s war is also an attempt to deflect domestic attention from his regime’s failures, including the government dysfunction caused by his corrupt approach to governance. She also provides an assessment of Ukrainian President Volodymyr Zelensky’s pre-war anticorruption efforts, emphasizing that from the perspective of anticorruption activists were disappointed in the lack of progress on some issues, but recognizing that as a politician he had to balance interests and demands from different stakeholders. In the final part of our conversation, we turn to the question of Russian (and Ukrainian) dirty money flowing into wealthy Western countries, and what more can and should be done to stop this. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). If you like it, please subscribe/follow, and tell all your friends. And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Summary of Third Annual AML Research Conference. Announcement of Fourth

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Thanks to Jason Sharman of Cambridge University and dodging shopping fame, those who didn’t attend last January’s conference “Empirical Approaches to Anti-Money Laundering and Financial Crime” are in luck. He has produced an excellent summary of the papers presented at this, the now third annual AML conference jointly sponsored by the Bahamas Central Bank and the Inter-American Development Bank.  

There are dozens if not hundreds of other AML conferences held each year. At these, bankers and their lawyers, accountants, and consultants flyspeck the latest rules, court decisions, and other matters germane to complying with AML laws and regulations. As well they should, for as AML Penalties chronicles in their weekly bulletin, fines for violations are beginning to creep upwards. Conference attendees are also constantly on watch for cheaper ways to meet their legal obligations; AML compliance costs for all financial institutions are currently estimated to exceed $200 billion per year.

Like the first two conferences, last January’s had a much different agenda than those devoted to compliance. Rather than asking “what are the rules” and “how can we comply,” it asked more fundamental ones: “Are the current anti-money laundering rules worth cost?” “Are they keeping dirty money out of the system?” “Are there more cost-effective ways of doing so?”

It is now clear that Russian oligarchs have had little trouble evading the current AML regime. Might this suggest the sponsors of the Bahamas conference are on to something? That the questions they are posing deserve at least as much attention as those discussed at the many compliance conferences?

Next year’s conference will be held January 19 and 20 in Nassau. The announcement is here.

A Spirited Discussion of the Proposal To Create an International Anticorruption Court

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As longtime readers of this blog are likely aware, over the years I’ve had the opportunity to participate in debates over the proposal to create an International Anti-Corruption Court (IACC), modeled on but separate from the International Criminal Court. Though sympathetic to the motives behind this proposal, I have been consistently skeptical (see, for example, here and here). Despite skepticism from me and others, dogged and effective advocacy by IACC proponents have convinced some governments to formally embrace the idea. Perhaps most notably, in Canada both the Liberal and Conservative parties have endorsed the idea, and Canada’s Foreign Minister has been formally instructed by the Prime Minister to work with international partners to help establish an IACC.

Inspired by these developments, the Anti-Corruption Law Program at the University of British Columbia’s Allard School of Law held an online webinar two weeks ago on the proposal to create an IACC. I was invited to be a part of this conversation, along with three distinguished co-panelists: Juanita Olaya Garcia (a lawyer and member of the International Expert Panel for the Open Government Partnership), Peter MacKay (former Canadian Minister of Justice in the cabinet of Conservative Prime Minister Stephen Harper), and Allan Rock (former Canadian Minister of Justice in the cabinet of Liberal Prime Minister Jean Chrétien). Although we had quite diverse perspectives–with Mr. MacKay and Mr. Rock advocating for the IACC, and Ms. Garcia and I sounding more skeptical notes–the conversation, ably moderated by Roy Cullen, was, in my humble opinion, respectful and constructive, and I hope readers interested in this debate will find the discussion helpful in clarifying some of the important questions and issues that this provocative proposal raises..

Those who are interested can find a recording of the webinar here. (There are some introductory remarks at the beginning; for those who want to skip right to the substantive debate, that begins at about the 6:10 mark.)

The U.S. Could Learn from the U.K. in the Virgin Islands

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Corruption is a perennial problem in the Caribbean. Although many of the Caribbean islands are independent, many others are held by former colonial powers, including the United States and the United Kingdom, which respectively control adjacent island groups known as the U.S. Virgin Islands (USVI) and the British Virgin Islands (BVI). Encouragingly, over the last six years, the UK has undertaken significant efforts to crack down on corruption in the BVI. Disappointingly, the US has yet to follow suit. The US government—and, once appointed, the new US Attorney for the USVI—should follow the UK’s lead and make anticorruption a top priority.

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Anticorruption Bibliography–March 2022 Update

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An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. Additionally, the bibliography is available in more user-friendly, searchable form at Global Integrity’s Anti-Corruption Corpus website. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

New Podcast Episode, Featuring Igor Logvinenko

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A new episode of KickBack: The Global Anticorruption Podcast is now available. During the ongoing emergency in Ukraine, as Russia’s unprovoked military aggression throws the region and the world into crisis, my colleagues at the Interdisciplinary Corruption Research Network (ICRN) and I are going to try as best as we can to feature on KickBack experts who can shed greater light on how issues related to corruption relate to the ongoing crisis. And rather than keeping to our usual schedule of releasing new episodes every two weeks, we will release new episodes as soon as they are available. In the new episode, I had the opportunity to speak to Igor Logvinenko, Associate Professor at Occidental College and author of Global Finance, Local Control: Corruption and Wealth in Contemporary Russia. In the first part of our conversation, Igor discusses Russia’s Russia’s historical corruption and current financial integration into world business, and we then turn to the impact of the current sanctions on Russia–including government sanctions on Russia and Russian companies, actions by private companies, and the use of targeted individual sanctions and asset seizures. In addition to discussing these issues in the context of the current war, Igor also discusses more broadly the role of Western financial systems, international financial integration, and the possibility for locally-driven structural changes to fight grand corruption. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the Interdisciplinary Corruption Research Network (ICRN). If you like it, please subscribe/follow, and tell all your friends. And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.