Category Archives: Commentary

Investment Arbitration as a Check on Corruption: The Yukos Award

Posted on by
7

In a previous post on this blog, Sam raised the possibility that under the logic of World Duty Free v. Kenya, investment treaty arbitration rules might actually encourage state officials to engage in corruption, because corrupt acts by an investor (even when the state is also implicated) can be used to escape state liability in investment arbitration. Even if Sam’s point is true, however, it is important to acknowledge that investment arbitration can be a check on corruption in many instances. In fact, as the Yukos v. Russian Federation award issued against the Russian government this past summer demonstrates, Sam may be pointing out the exception, not the rule. Indeed, this $50 billion award – the largest international arbitration award in history – demonstrates the power of investment arbitration to bring corruption to light and act as an outside check on corrupt states. Continue reading →

Should Anticorruption Agencies Be Able to Veto Cabinet Appointments?: The Case of the Indonesian KPK

Posted on by
9

Independent anticorruption agencies (ACAs) have become a vital component for many countries in combating corruption. Generally, these ACAs function like independent police or prosecutors, taking on one or both of those roles in settings where the ordinary law enforcement apparatus cannot be relied on to investigate, arrest, and prosecute corrupt officials. In addition to these prosecutorial responsibilities, ACAs sometimes oversee asset disclosures, and may also perform a public education function. But for the most part, ACAs do not play a direct role in selecting or vetting senior political officials. Should they?

This question is not merely hypothetical: Indonesia recently elected as its new president Joko Widodo, a reform-minded candidate who promised “zero-tolerance towards corruption” during his campaign (see a previous post discussing his election here). Last month, President-Elect Widodo took the unprecedented step of submitting his list of proposed nominees for cabinet positions to Indonesia’s powerful Corruption Eradication Commission (Komisi Pemberantasan Korupsi or “KPK”) for evaluation–and approval–before the list of nominees was finally made public. The KPK rejected eight of his submissions, with the result that President Widodo delayed the announcement of his cabinet compositions until he replaced these eight candidates with other nominees approved by KPK. Four days later, Widodo announced his cabinet composition, which presumably did not include the eight individuals to whom the KPK objected.

While the decision to give the KPK a de facto veto over cabinet appointments is in some ways an encouraging development–one that many Indonesians might appreciate as brave, progressive move, which enlarges the power of the popular KPK–it is troubling in certain respects, and should prompt more careful scrutiny and regulation. Continue reading →

Learning from Disaster: Corruption and Environmental Catastrophe

Posted on by
7

One year ago, Typhoon Haiyan (known locally as Yolanda) struck the Philippines, claiming over 6,000 lives. In the aftermath, numerous reports emerged regarding the failure of the Philippine government to properly manage relief efforts and get foreign aid to victims. This past September, the Philippine Commission on Audit (COA) released its comprehensive–and damning–Report on the Audit of Typhoon Yolanda Relief Operations. According to the report, of the $15 million available in the Office of Civil Defense (OCD) quick response fund, and the $1 million in donations received by the National Disaster Risk Reduction Management Council (NDRRMC), not one cent was spent on the basic subsistence needs of typhoon victims, in clear violation of the statutory mandate of Republic Act 10352.

Elizabeth’s recent post highlighted some of the challenges involved in fighting corruption in a conflict zone. While a natural disaster like Typhoon Haiyan poses similar issues, the challenges–and the opportunities for effective response–differ in some important respects. On the one hand, in a natural disaster–as in a conflict situation–the chaos and breakdown of oversight, coupled with the dependence of victims on the resources, coordination, and capabilities of those in a position to provide relief creates a power imbalance that increases opportunities for corrupt actors. At the same time, although any individual natural disaster is unpredictable, the fact that such disasters will periodically occur is predictable (at least in certain disaster-prone areas), and this creates opportunities–which perhaps don’t exist to the same degree in the context of armed conflicts–to plan ahead: to take steps that can redress the potential power imbalance before the crisis occurs. Continue reading →

The UK Aid Impact Commission’s Review of DFID Anticorruption Programs Is Dreadful

Posted on by
2

Last week, the United Kingdom’s Independent Commission for Aid Impact (ICAI) released its report on the UK Department for International Development (DFID)’s efforts to fight corruption in poor countries. The report, which got a fair amount of press attention (see here, here, here, and here), was harshly critical of DFID. But the report itself has already been criticized in return, by a wide range of anticorruption experts. Heather Marquette, the director of the Developmental Leadership Program at the University of Birmingham, described the ICAI report as “simplistic,” “a mess,” and a “wasted opportunity” that “fails to understand the nature of corruption.” Mick Moore, head of the International Centre for Tax and Development at the Institute for Development Studies, said that the report was “disingenuous[]” and “oversimplif[ied],” and that it “threatens to push British aid policy in the wrong direction.” Charles Kenny, a senior fellow at the Center for Global Development, called the report a “wasted opportunity” that “has failed to significantly add to our evidence base,” largely because “ICAI’s attitude to what counts as evidence is so inconsistent between what it asks of DFID and what it accepts for itself.”

Harsh words. Are they justified? After reading the ICAI report myself, I regret to say the answer is yes. Though there are some useful observations scattered throughout the ICAI report, taken as a whole the report is just dreadful. Despite a few helpful suggestions on relatively minor points, neither the report’s condemnatory tone nor its primary recommendations are backed up with adequate evidence or cogent reasoning. It is, in most respects, a cautionary example of how incompetent execution can undermine a worthwhile project. Continue reading →

A Dull, Boring, Humdrum, Unimaginative, Prosaic Proposal to Combat Corruption

Posted on by
9

David took Alexander Lebedev and Vladislav Inozemtsev to task in a recent post for a scheme they proposed in an on-line issue of Foreign Affairs to combat corruption.  Ignoring the several international anticorruption conventions now in place and the slow but steady improvements these agreements have produced, the authors called for a brand new convention that would grant extraordinary powers to a supranational team of investigators, prosecutors, and judges to arrest, prosecute, and try those suspected of corruption no matter where they are.  The harebrained idea is so full of holes and so unrealistic that David labeled it “absurd,” a conclusion with which any serious analyst would surely agree.

In closing David urged the anticorruption community to stop advancing unrealistic, pie-in-the-sky proposals that waste readers’ time and scarce space in learned journals in favor of more realistic, if less catchy, ones.  In that spirit I offer the following dull, boring, humdrum, unimaginative, prosaic proposal — one not likely to capture the uninformed reader’s imagination or gain space in Foreign Affairs or another prestigious policy journal. On the other hand, my proposal will help crackdown on corruption, particularly corruption by powerful officials in developing states.  It is simple.  Developed nations should copy a program the British government began in 2006. Continue reading →

The StAR “Few and Far” Report, and (Conflicted) Reflections on Civil Forfeiture

Posted on by
6

A couple weeks back, Rick’s post on the US DOJ Kleptocracy Initiative’s settlement in the Obiang case prompted an interesting exchange among several contributors to this blog (including me) about the use of civil forfeiture proceedings to seize assets–suspected of being the proceeds of corruption or other illicit activity–without a prior criminal conviction. I recently had the opportunity to read the Stolen Asset Recovery Initiative (StAR)’s excellent new report, Few and Far, about recent developments in the asset recover field, and this report prompted me to reflect further on this issue. The Few and Far report is very positive about civil forfeiture, and recommends substantially expanding its use. To quote the report:

Both developed and developing countries need to ensure that they have a broad range of mechanisms in place, such as the ability[y] … to confiscate [assets] in the absence of a conviction. (p. 3)

Confiscation in the absence of a conviction (NCB confiscation) continues to be an effective mechanism for freezing and confiscating assets…. [H]owever, most OECD members have yet to adopt laws permitting the confiscation of assets in the absence of a conviction. (p. 43)

I want to use the Few and Far report to raise again an issue that I noted in response to Rick’s post on the Obiang case: I’m deeply conflicted about the use of non-conviction-based (NCB) civil forfeiture proceedings, and I think that perhaps the anticorruption community should engage in a bit more reflection about this mechanism, and how to ensure it’s not abused. Continue reading →

The End of a FIFA Fiefdom?

Posted on by
9

Allegations of corruption have dogged FIFA for years–particularly under the leadership of Sepp Blatter, who has been FIFA President since 1998–but with little impact. The buildup of controversy surrounding the bidding contest for the 2022 World Cup, however, may prove the tipping point in Blatter’s reign. Early last month, Michael Garcia, FIFA’s independent investigator and a former U.S. Attorney, submitted to FIFA’s Ethics Committee a 350-page report on corruption in the 2018 and 2022 World Cup bidding contests. The report purportedly details millions of dollars in bribes paid to FIFA executives in order for Qatar to host the 2022 tournament. A few weeks later, the chairmen of the Ethics Committee released a statement affirming that, in accordance with FIFA’s Code of Ethics, if Garcia initiates proceedings against specific individuals based on his report, only the final decisions (not the report itself or any other preliminary materials) will be made public.

The next day Garcia went rogue. He called publicly for the report’s widespread release (with appropriate redactions as necessary to protect sources). His call was quickly echoed by several members of FIFA’s Executive Committee, including Sunil Gulati, the head of US Soccer, Jordan’s Prince Ali bin al-Hussein, and CONCACAF President Jeffrey Webb. In addition to the revolt that may be brewing within, external pressures are mounting on FIFA as well, with calls for the release of Garcia’s report coming from Michel Platini, head of the Union of European Football Associations (UEFA), as well as U.S. Senator Bob Casey and the international NGO Transparency International. And in Switzerland, where FIFA is based, last April the Federal Council–apparently in direct response to concerns about Swiss-based international sports federations that have been “discredited repeatedly by corruption scandals”–reversed its longstanding position and declared that “private corruption will be prosecuted automatically, even where it does not lead to competitive distortions.”

All this activity is honing in on one specific question, which will likely be definitively answered at the June 2015 FIFA Congress: Will Qatar keep the 2022 World Cup? Continue reading →

Yet Another Misguided Proposal to Solve Corruption with an International Convention

Posted on by
1

Entrenched corruption is a frustrating problem, so it’s tempting to invent a new international regime that can take bold action against it without relying on or being encumbered by corrupt or incompetent domestic law enforcement. An article published last week in Foreign Affairs by Alexander Lebedev and Vladislav Inozemtsev, succumbs to that temptation by proposing a “universal anticorruption convention” as a solution to grand, systemic corruption (as distinct from low-level bribery). In broad terms, Lebedev and Vladislav envision a convention that would “clearly define the crime of corruption, codify the principles of good governance,” and “establish a supranational governing body, dedicated investigative and police forces, and a specialized court,” with signatories agreeing to “allow[] international investigators to act freely on [their] territory, and permit[] international prosecution of [their] citizens for corruption crimes.”

The article is short on details about these proposed institutions; the bulk of the article is devoted instead to the proposed convention’s enforcement mechanism. And there the proposal is quite radical: Signatories would be required to “radically curb their financial ties” with non-members, to “identify all assets controlled on their territories by the subjects of nonmember states (both individuals and companies)”–regardless of whether the assets are the proceeds of corruption–and, by an agreed deadline, to “monetize[e] and repatriate[e]” all of these assets. Under the convention, citizens of non-member states could not “open[] accounts in member countries’ banks, establish[] companies on their territories, [or] acquir[e] local real estate.” And member states would also be required to bar immigration from non-member states (at least of “young, independent people”), because the “freedom to leave” a corrupt state reduces the pressure to change from within.

I agree with Lebedev and Inozemtsev that grand corruption is a serious problem, and I commend them on their willingness to explore radical new solutions. But their proposal is absurd. I can’t imagine any state signing on to it, and I don’t think any state should. Their proposal would not only be ineffective. Its implementation would be catastrophic.  Continue reading →

Reflections on the Anticorruption Movement

Posted on by
4

The World Bank’s Integrity Vice-Presidency is celebrating its 15th anniversary.  It recently asked a number of individuals for their thoughts on the anticorruption movement over the past 15 years.  INT’s questions and my replies below.  Continue reading →

Corruption and the Revolving Door: Recent Discussions and Further Reflections

Posted on by
13

So-called “revolving doors” between government and the private sector raise the specter of potential corruption (if not in the strict legal sense, then in the broader sense), and some anticorruption advocates have called for much more aggressive restrictions on former government officials’ ability to work for the sectors they used to regulate. (See, for example, here, here, and here.) Though the concerns are legitimate, I argued in a post a little while back that the issue is much more complex: many of the concerns about the harms of the revolving door may be overblown, and revolving doors might in some cases have beneficial effects.

I thought I’d revisit the issue in light of two very interesting recent contributions on this topic: a blog post last week by Transparency International Programme Manager Dieter Zinnbauer on the pros and cons of the revolving door (along with a companion post on measurement issues), and an article by Wharton School Professor David Zaring. Mr. Zinnbauer concludes that the weight of the evidence suggests that the revolving door is indeed a serious problem, and that for the most part the costs outweigh the benefits; Professor Zaring reaches more or less the opposite conclusion.

Although I think the first half of Mr. Zinnbauer’s post is an excellent, succinct, evenhanded summary of the main issues, I respectfully disagree with the inferences that he draws from the existing evidence. That’s not to say that his conclusions are wrong, or that revolving doors are nothing to worry about. But when Mr. Zinnbauer says that “a much larger body of new evidence comes down quite distinctively on the negative impact of the revolving door,” I think he’s overstating his case. Here’s why: Continue reading →