Today’s Guest Post is by Dr Helen Taylor, senior legal researcher at Spotlight on Corruption, a charity that shines a light on the United Kingdom’s role in corruption at home and abroad. Helen leads Spotlight’s court monitoring programme, tracking the enforcement of the UK’s anti-corruption law in major court cases and building an evidence base for advocacy and policy recommendations on asset recovery, victim compensation, and other corruption-related issues.

Last week a London court fined commodities giant Glencore for bribing officials in five African oil producing nations in return for getting “special deals” on their oil. While the court ordered the company to pay £280 million (just over $318 million) for its numerous violations of the U.K. foreign bribery law, it refused to direct Glencore to compensate those its bribes injured: the governments and citizens of the five nations. In fact, victims did not even get a foot in the courtroom door — the Serious Fraud Office, which prosecuted the case, refused to put a compensation request before the court, and the court itself rejected the Nigerian government’s application for compensation.

The case brings home the pressing need to reform the UK’s compensation framework to ensure overseas victims are represented and compensated in complex corruption cases.

In sentencing Glencore, the court described the corporate corruption as “endemic”, involving “sustained criminality” over many years and “extremely sizeable cash sums” being transported by private jet across borders. Yet the harm of this corporate offending was reduced to an abstract figure which was agreed between the parties and based on the gross profit derived by Glencore through its bribery. This figure formed the basis of the sentencing formula which culminated in the £280 million payment (£183 million fine, £93 million of assets confiscated, and £4 million for the Crown’s legal costs).

Nigeria’s failed bid for victim status

A week before Glencore was sentenced, Nigeria applied to the court for a compensation order, claiming status as a victim of the corporate offending. Arguing on behalf of the oil-rich West African country, Lord Garnier KC urged the court to recognise that “bribery is not a victimless crime” and that fines paid by Glencore should not all go to the UK consolidated fund held by HM Treasury, but be given to overseas victims who include the people and government of Nigeria.

The court rejected the application, finding that third parties like Nigeria do not have standing to seek a compensation order directly from the court and warned that allowing “representations from the wide range of victims” would pose “a risk of deluging the criminal justice system”. Despite consideration of compensation being the mandatory first step in the sentencing process, the court held that “compensation orders are ancillary; they are not the main purpose of sentencing”.

Siding instead with the Serious Fraud Office, the court held it was up to the prosecutor to decide who is a victim and whether to pursue compensation at sentencing. This unsatisfactory position leaves overseas victims entirely reliant on prosecutors to be heard and compensated in UK courts.

In stark contrast, a victim impact statement and request for restitution has been filed in US proceedings by Ian and Laurethé Hagen on behalf of Crusader Health, a Congolese company pursuing a $50 million claim for restitution as a third party harmed by Glencore’s bribery. In approaching the court directly, Crusader Health claim they qualify as victims who are entitled to compensation under the Mandatory Victims Restitution Act when Glencore is sentenced in the Southern District of New York on 21 November 2022.

The problems with the UK’s compensation framework run much deeper than victims’ lack of standing in criminal proceedings. The court sentencing Glencore fell back on existing case law to conclude that:

• a compensation order is only intended for “clear and simple cases”;
• no entities who suffered quantifiable losses had been identified; and
• Nigeria and other potential victims could instead pursue a civil claim for damages.

Time for the UK to get serious about reform

The Glencore case has seriously tested the effectiveness of the UK’s Compensation Principles, which the Serious Fraud Office and other law enforcement agencies signed in 2018. In practice, compensation has only been awarded in a handful of cases and the amounts returned to countries of origin have been paltry. The Glencore prosecution adds to a growing list of cases where the impossibly high bar for compensation in the UK has left the overseas victims of corruption out in the legal cold.

The ease with which the court disposed of Nigeria’s application and concluded that a compensation order was “entirely the wrong vehicle” for addressing the harms of corruption, shows that a radical shift in perspective and process is needed in the UK. To ensure the harm caused by foreign bribery is properly compensated, courts need to be empowered to order compensation in all (not just simple) cases following a conviction or pursuant to a Deferred Prosecution Agreement. The UK Parliament’s Justice Committee has recently recommended legislative changes to ensure that compensation orders can recognise the non-financial harm suffered by victims of fraud, and we need similar reforms for victims of corruption.

At the level of legal principle, this will require the adoption of a broader definition of harm that includes financial, economic, environmental and social damage — an approach already pioneered by a number of Latin American countries. A clear methodology should be developed for courts to assess the harms of corruption, which would allow for a broad approximation of losses based on the best available evidence. These changes should also embrace a more inclusive definition of “victim” that extends beyond foreign governments and competitors to focus on communities, and where appropriate individuals, who are affected by corruption.

At a more practical level, the difficulties of identifying overseas victims and evidencing the harms of corruption can be overcome through a concerted commitment and collaborative effort. First, law enforcement agencies should engage with victims and affected countries early in investigations to ensure victim impact assessments inform charging decisions. Second, companies seeking a Deferred Prosecution Agreement or entering a guilty plea (entitling them to a third reduction in fines) should be required to take proactive measures to identify potential victims and losses resulting from bribes paid, and to submit any evidence gathered to prosecutors. Third, clear guidance and specific processes should be developed to allow foreign governments and affected communities to submit evidence of harm to prosecutors.

Meanwhile, what can be done to compensate the victims of Glencore’s corruption? Rather than allowing Glencore’s hefty fine to be paid to HM Treasury, the UK should find alternative ways to proactively identify and compensate victims. In January 2022, the UK became the first country to publish its policy for returning the proceeds of corruption. This means it has the tools to ensure that funds can be returned in a way that mitigates the risk of re-corruption, and now is the moment to put that to creative use. This is no substitute for tackling the deficiencies in the current compensation framework, but it will signal that the UK is committed to the major reforms that are needed to ensure victims of corruption are compensated.