Author Archives: Sam Hickey

About Sam Hickey

Sam Hickey graduated from the University of Queensland with an LLB (Hons I) before clerking at the Federal Court of Australia. Sam then practiced as an Associate at a global law firm in Sydney, Australia, before reading for an LLM at Harvard Law School. Sam currently works at a global law firm in New York, focusing on white-collar crime and criminal investigations. He has published in U.S. U.K., and Australian law journals. Contact: samuel.hickey@outlook.com.

Principles for Victim Remediation in Foreign Bribery Cases

Posted on by
9

There is a broad consensus that foreign bribery harms the citizens and governments of developing nations. But in most cases where enforcement agencies in a “supply side” jurisdiction (that is, the home jurisdiction of the companies that paid the bribes) reach a settlement with a company accused of bribing foreign officials, the settlement does not provide for any remedial payments to the government or citizens of the “demand side” country where the bribery took place. Given the inherent difficulties in setting right the harm corruption causes, this is hardly surprising. Nevertheless, scholars and activists have increasingly called for settlement agreements between supply side enforcers and bribe-paying companies to include requirements that the companies make such remediation to the victims of the foreign bribery scheme, and some prosecutorial agencies, like the U.S. Department of Justice (DOJ) and the U.K. Serious Fraud Office (SFO), have occasionally done something along these lines. They have done so, however, only intermittently, and as an exercise of prosecutorial discretion, without any overarching policy agenda or conceptual framework.

In a recent article, I proposed a framework that could achieve more consistent outcomes and be used as a benchmark for developing best practices. I do not focus on grand designs for a private right of action for the foreign victims of corruption, or on obligations under international law. Because the action is happening on the ground, through the exercise of prosecutorial discretion in negotiating settlements, that’s where I focus. In this post, I outline the factors that enforcement agencies should take into account when deciding whether to pursue remediation in any given case. Continue reading →

Possible Reforms to Australia’s Approach to Corporate Criminal Liability: “Failure to Prevent”, Strict Liability, or Something Else?

Posted on by
Reply

Many of the most significant bribery offenses, both domestically and internationally, involve corporations. When, and under what conditions, should the corporation itself—as opposed to, or in addition to, the individual employees involved in the wrongdoing—be held criminally liable? The attribution of criminal liability is sometimes thought to be conceptually or philosophically problematic: As Baron Thurlow LC once observed, a corporation has “no soul to be damned and no body to be kicked.” Yet it is clear that corporations can do wrong, and the prospect, and extent, of corporate criminal liability can have significant impacts on corporate behavior. Various legal systems have developed different approaches, but in some jurisdictions there has been considerable dissatisfaction with the status quo, and agitation for reform.

Australia is one such jurisdiction. In response to concerns about the Australian legal system’s approach to corporate criminal liability (an issue that is important in, but not limited to, the corruption context), last April the Commonwealth Attorney General of Australia, Christian Porter, announced that the Australian Law Reform Commission (ALRC)—the Australian Federal Government’s highly influential law reform agency—would conduct an inquiry into this issue. The Terms of Reference required the ALRC to review, among other things, the policy rationale behind Australia’s current framework for imposing criminal liability on corporations, as well as the availability of alternate mechanisms for attributing corporate criminal liability. This past November, the ALRC released a 279-page Discussion Paper that thoroughly canvasses potential approaches to reforming Australia’s corporate criminal liability regime; the ALRC is currently receiving comments on that paper, which are due at the end of this month (January 31, 2020), and after considering these submissions, the ALRC will release its final report by April 30, 2020.

The ALRC paper covers many issues, but perhaps the most fundamental concerns the basic rules for attributing criminal responsibility to the corporation. The ALRC, and the Australian government, faces a choice among several plausible alternatives: Continue reading →

The OECD Convention’s Article Prohibiting the Politicization of Foreign Bribery Enforcement Is in Desperate Need of Clarification

Posted on by
2

Article 5 of the OECD Anti-Bribery Convention provides that the policing of foreign bribery by Convention Parties shall not be influenced by (1) “considerations of national economic interest,” (2) “the potential effect upon relations with another State,” or (3) “the identity of the natural or legal persons involved.” Collectively, these mandates are known as the “Article 5 factors.” Article 5 is intended as a safeguard against the politicization or instrumentalization of foreign bribery laws. It is therefore vital to impartial foreign bribery enforcement, as well as to the integrity of foreign bribery enforcement generally.

The most well-known instance of an alleged Article 5 breach is the United Kingdom’s decision in 2006 to stop investigations into bribes paid by BAE Systems to public officials in Saudi Arabia. Then-Attorney General Peter Goldsmith argued that this decision was justified because the investigation could have damaged national security interests, as Saudi Arabia had threatened to end counterterrorism cooperation with the UK if the investigation continued. Goldsmith expressly denied that terminating the investigation for this reason constituted a breach of Article 5 because, as he put it, the decision to join the OECD Convention didn’t mean that the UK had “agreed to abandon any consideration of national security. [The Convention] certainly doesn’t say that and I don’t believe that’s what we could have intended or any other country could have intended.” The UK’s decision to suspend the BAE investigation, though challenged in court, was ultimately upheld.

More recently, the OECD has called attention to two other potential Article 5 breaches. First, an OECD news release stated that Turkey’s Article 5 compliance was in doubt due to inexplicably low level of foreign bribery enforcement, which the release suggested might be partly due to improper economic or political considerations. Second, another OECD news release raised concerns that Canada may have breached Article 5 by cancelling investigations into allegations that SNC Lavelin had bribed Libyan officials—a decision that observers believed was motivated by a desire to protect Canada’s national economic interests.

While it is encouraging to see the OECD adopt a more assertive approach to recognizing Article 5 breaches than it has in the past, these statements serve as stark reminders that there is not really an effective means for enforcing Article 5. And unfortunately, the uncertainty surrounding the meaning of Article 5 complicates the task of achieving Article 5 compliance. Continue reading →

Providing Reparations to the Victims of Foreign Bribery: What Criteria Are Appropriate?

Posted on by
2

It is widely agreed that foreign bribery is capable of causing harm to a range of different victims, including the governments whose officials are bribed (the so-called “demand-side countries”), and the citizens of those countries. Yet traditionally, when supply-side countries (those with jurisdiction over the firms that paid bribes abroad) reach settlement agreements with corporate defendants in these cases, the fines and penalties collected—which can sometimes run into the tens or even hundreds of millions of dollars—go to the supply-side government treasuries, a fact that has attracted considerable discussion and criticism.

In recent years, we’ve started to see some changes in the approach taken by supply-side governments on this issue, with the United Kingdom being particularly active. On several notable occasions, the UK’s Serious Fraud Office (SFO) has included in its settlement agreements with corporate defendants specific provisions to remediate the victims of foreign bribery. Importantly, such remediation (not just in the UK case, but more generally) can take two forms, which are often unhelpfully conflated:

  • In some cases, the resolution of a bribery case may include compensation to identifiable victims, if it can be shown that the victims suffered a direct loss, the value of which can be reasonably estimated. The victim might be a foreign government itself. For example, the 2015 deferred prosecution agreement negotiated between the SFO and Standard Bank included a payment to the Tanzanian Government, because in that case an agent of Standard Bank had used money to which the Tanzanian government was entitled in order to pay an illegal bribe. The payment to the Tanzanian government in the settlement agreement was compensation for this loss.
  • In many cases, though, the harm done by foreign corruption is more diffuse, the victims are difficult to identify individually, and the monetary value of the harm inflicted is impossible to calculate. Nonetheless, even though traditional victim compensation is not possible in these cases, it is still possible, and often desirable, for a portion of the fines and penalties collected from the responsible corporation to be directed toward improving the lives and livelihoods of the population victimized by the misconduct—perhaps by making a payment to the government of the demand-side country, possibly earmarked for a specific purpose, or perhaps by donating money to charities, or by purchasing assets that benefit the public, or even by making payments directly to citizens. Though these sorts of payments are also sometimes described as “victim compensation,” I prefer the term reparations, which makes clear that these payments are not “compensation” in the traditional, narrower sense, but rather payments intended for the benefit of a general populace or society at large. An example of this sort of reparations payment can be found in another case involving the SFO and Tanzania, this one the SFO’s 2010 settlement agreement with BAE Systems for illegal commissions that the company had paid to an intermediary in connection with the sale of an aircraft radar system to the Tanzanian government. (Technically, BAE admitted and was penalized for an accounting offense—failing to keep accurate records of the payments—rather than the underlying bribery.) The settlement required BAE systems to pay approximately £30 million for the purpose of buying educational materials in Tanzania. There is no evidence to suggest that BAE System’s misconduct in connection with the radar system sale caused any damage, let alone £30 million worth of damage, to Tanzania’s education system. So this payment was not “victim compensation” in the narrow sense, but rather an effort to offset some of the damage BAE’s wrongful conduct had done at a more general, societal level.

The legal mechanisms for determining compensation awards, though imperfect, are relatively straightforward. Determining an award of reparations is much more complicated, because (almost by definition) it will not be clear exactly who suffered due to the act of foreign bribery, nor how much loss was suffered, nor how that loss should be recouped. (While the United Kingdom does have “compensation principles” in place which are intended to provide a guiding framework for remedial awards in foreign bribery cases, these principles are phrased at too high a level of abstraction to be much use.) One question that will need to be addressed, and the one I want to focus on here, is whether there must be some kind of nexus between the harm caused by a particular act of bribery and the proposed reparations. Of course, as I have explained, reparations are distinct from compensation, and will not require a showing of a quantifiable harm to an identifiable victim. But does the reparations payment need to have any strong connection—in sector, location, or amount—with the harm plausibly caused by the defendant’s act of bribery? Continue reading →

The Australian Government Shows Us How Not To Create an Anticorruption Agency

Posted on by
2

Two recent polls of the Australian public make two things quite clear: the Australian people have little trust in their federal politicians, and they want a federal anticorruption agency to investigate misuse of public office. This is perhaps not surprising given the string of scandals that have come to light in the past few years (see, for example, here, here, and here). And ordinary citizens are not alone: a survey of government workers found that thousands believed they had witnessed acts of corrupt behavior, particularly cronyism and nepotism. And a group of 34 former Australian Judges, including a former Chief Justice of the High Court, have published an open letter to Prime Minister Scott Morrison stating that Australian trust in federal politics is at an all-time low due to perceptions of corruption, and that a federal anticorruption agency is the necessary response. 

It is therefore unsurprising that the proposed creation of a federal anticorruption agency has emerged as a salient issue in the upcoming federal elections, to be held on May 18 (one week from tomorrow). The Morrison government initially dismissed the idea, but in December 2018 changed its tune and announced that, if the Liberal Party (Morrison’s party) wins the election, the government would create a Commonwealth Integrity Commission with two separate divisions: a law enforcement integrity division and a public sector integrity division. The former would have the power to investigate police officers and other law enforcement personnel, while the latter would have the power to investigate politicians.

Unfortunately, while a federal anticorruption agency is an idea whose time has come, the Morrison government’s proposal suffers from four key shortcomings: Continue reading →