Guest Post: The U.S. Retreat from Extractive Industry Transparency–What Next?

Zorka Milin, Senior Legal Advisor at Global Witness, contributes today’s guest post:

The US Department of the Interior recently took steps to halt its work on implementing a global transparency initiative for the resource sector, known as the Extractive Industries Transparency Initiative (EITI). This announcement came on the heels of the Congressional action repealing a related rule, adopted by the SEC pursuant to Section 1504 of the Dodd-Frank Act, that required oil, gas and mining companies to publish their payments to governments. The two issues are related but distinct. First, 1504 rule required US-listed companies to report payments they make to governments around the world. In contrast, the Extractive Industries Transparency Initiative (EITI) applies in those countries whose governments choose to join the initiative (including the US) and requires payments to be disclosed both by the recipient government as well as by all extractives companies that operate in that country. These differences in scope make the two transparency measures necessary complements to each other. EITI produces valuable information from governments about the payments they receive for their natural resources, whereas mandatory legal rules like 1504 are necessary to ensure meaningful and broad reporting from companies, including in those resource-rich countries such as Equatorial Guinea and Angola that are not part of EITI but are in desperate need of more transparency. Indeed, the US EITI experience shows that even in those countries that do commit to implementing EITI, EITI alone might not be enough to compel all companies to report, if it is not backed by domestic legislation.

Officials at Interior appear to be retreating from their ill-advised decision to effectively withdraw from EITI, but these mixed signals, especially when viewed together with the Congressional action, send a troubling message about the US government’s changing stance on anticorruption, and set back a long history of US leadership on these issues. Nonetheless, while these recent US developments are a setback from a US anticorruption perspective, the rest of the world is powering ahead with this much needed transparency. Continue reading

Guest Post: A Critical Evaluation of National Anticorruption Strategies

Mark Pyman, Senior Fellow at the London Institute for Statecraft, contributes the following guest post:

Many countries now have official “national anticorruption strategies” or similar plans; indeed some have had them for ten years. So surely there are insights to be had from reviewing the substantive content of a decent sample of them? Unfortunately, most of the existing analysis of national anticorruption strategies focuses not on substance, but only on process (things like stakeholder engagement, the drafting process, the need for realism, cost-benefit analysis, monitoring and evaluation, reporting, etc.) In fact, everything except substance. This is a shame.

In order to remedy this gap, I recently collaborated with the Norton Rose Fulbright law firm on a study of the substantive provisions of national anticorruption strategies in 41 countries that rank between 21 and 130 on Transparency International’s 2015 Corruption Perception Index (CPI). (We chose that range because we wanted to look at countries that have a significant corruption problem, but not those that are in the grip of deep, systemic corruption issues.) The report, published earlier this week, is available here. Our objective in conducting this review was to extract lessons that can help country leaders make better strategies in the future

So, what did we find? Continue reading

Reporting Corruption Easily and Safely: Papua New Guinea’s Phones Against Corruption Initiative

Nick Brown, head of Global Distribution for Mobimedia International, contributes the following Guest Post.

 Persuading corruption victims to complain remains one of the great challenges to combating corruption.  Policymakers can’t prioritize prevention efforts or know where to deploy enforcement resources if they don’t know who is demanding bribes where and from whom. But getting citizens to blow the whistle is no mean feat.  Citizens must be convinced it is worth the effort, that something will happen if they do speak up.  Citizens must also be assured they will be safe if they do, that the corrupters will not harm them or their loved ones, financially or physically.

With its “Phones Against Corruption” initiative, the Government of Papua New Guinea has hit upon a way that citizens can easily and safely report corruption complaints, and since its launch in 2014, with technical support from Mobimedia International and financial backing from UNDP and Australia, it has taken off.  Critical to its success is that it makes no technological or financial demands on PNG’s limited capacity.  It requires no more technological sophistication from citizens than the ability to send a text message, a form of communication widely used throughout the country. How does it work? Continue reading

Guest Post: Rolling Back Anticorruption

Laurence Cockcroft, a founding board member of, and current advisor to, Transparency International, contributes today’s guest post:

The global campaign against corruption has become a cornerstone of Western foreign and development policy for the last 25 years. This campaign built on a number of earlier measures, most notably the 1977 enactment of the US Foreign Corrupt Practices Act (FCPA), which criminalized foreign bribery by companies under US jurisdiction, but the campaign really accelerated beginning in the late 1990s. For example, while European countries had resisted adopting legislation similar to the FCPA for 20 years, this changed with the adoption of the OECD Anti-Bribery Convention in 1997, which was followed a few years later by the 2002 UN Convention Against Corruption. International financial institutions like the World Bank have become more aggressive about debarment of contractors found to have behaved corruptly, and we have also seen the proliferation of corporate-level ethical codes, promoted by organizations like the World Economic Forum and UN Global Compact, designed to prevent corrupt behavior.

More recent initiatives have pushed for greater corporate transparency. For example, in the United States, the Dodd-Frank Act ended the aggregation of corporate income across countries; an EU Directive promulgated shortly afterwards imposed similar requirements. More recently, an initiative to disclose the true beneficial owners of corporations and other legal entities, pushed by former British Prime Minister David Cameron, has already taken legislative form in the United Kingdom; beneficial ownership transparency is also the subject of an EU Directive, and was being promoted by the Obama administration. And although the so-called “offshore centers” have yet to embrace similar transparency of beneficial ownership, regulatory systems in these centers have been significantly improved. There have also been a number of important sector-level initiatives, particularly in the resources sector. These include the Extractive Industries Transparency Initiative (EITI)—which requires participating governments of mineral and energy exporting countries, as well as companies in the extractive sector, to commit to a process of revenue transparency—as well as national-level laws, such as Section 1504 of the Dodd-Frank Act, which impose so-called “publish what you pay” obligations on extractive firms.

Even more encouragingly, this gradually improving regulatory environment has been accompanied by growing public opposition to corruption, as reflected in large-scale demonstrations around the world. Crowds on the streets, for example, have recently supported the proposed prosecutions of the current and past Presidents of Brazil, and opposed weakening of anticorruption laws in Romania.

But in spite of public opinion, the forces opposed to anticorruption initiatives have never gone away. The arrival of President Trump has let many of them loose both inside and outside the United States: Continue reading

Guest Post: A Call for Higher Integrity Standards and Deeper Democratization

Jeroen Michels, Policy Analyst at the OECD, and Michael Johnston, the Charles A. Dana Professor of Political Science at Colgate University, contribute today’s guest post:

Many of the recent woes and challenges of democracies worldwide—such as fading policy consensus, populist discontent, and widening equality gaps—have been fueled, at least in part, by corruption and unethical practices (not all of which are currently illegal). The Panama Papers and similar leaks have dented the reputation of elected politicians, established firms, and respected countries. Soon after their term in office, some public sector leaders have taken up lucrative posts and board memberships in banks, lobbying firms, and multinationals, leaving voters disillusioned about political integrity and the intertwinement of elite networks across sectors in society. Less visible but equally harmful can be the ways in which narrow interests seek to influence public decision-making for their own profit. Inequalities in access to policymaking processes, often reflecting inequalities in wealth and status, often lead to decisions that benefit and further empower those narrow interests, which exacerbates inequalities and fosters the perception of politics as unfair or illegitimate. Against the backdrop of widening income gaps between the rich and poor, the abuse of power leading to a concentration of economic resources in the hands of fewer people is a worrisome prospect.

As a result, these legal and illegal forms of influence peddling corrode the meanings and mechanisms of democracy itself. As Professor Mark Warren has argued, corruption can be described as duplicitous exclusion: corruption undermines democracy by excluding people from decisions that affect them and in which they expect to have a voice. When people lose confidence that public decisions are taken for reasons that are publicly available and justifiable, and that those in official positions take citizen views and interests seriously, they often become cynical, expecting duplicity in public speech. This tarnishes all public officials, whether or not they are corrupt. And when people are mistrustful of government, they are also cynical about their own capacities to act in favor of the public good. Elections, for too many citizens, become a way to reject traditional democratic values and practices.

There are no quick fixes or easy remedies to this dilemma, but there are two things that activists and reformers must emphasize: Continue reading

Guest Post: The 2017 World Development Report’s Embrace of Anticorruption Incrementalism

GAB is pleased to welcome back Finn Heinrich, from Transparency International’s research team, who contributes the following guest post:

In January, the World Bank published its latest World Development Report (WDR)– this time focused on “Governance and the Law” and their role in effective development policies. The annual World Development Reports typically receive significant attention from the wider development community, and indeed there have already been a number of events (see here, here, and here) and reviews (see here and here) dedicated to the 2017 WDR. The reviewers generally agree that the report’s key points—that governance matters a lot for many development outcomes, that what matters are governance functions rather than specific institutional forms, and that effective governance often depends more on underlying power dynamics than on institutional forms or capacities—are important insofar as the World Bank’s explicit acknowledgement of them represents a big step for the bank, but otherwise nothing new. After all, initiatives such as Thinking and Working Politically and Doing Development Differently have propagated these insights for a while.

None of the existing reviews, however, engages with the question of the 2017 WDR’s implications for the anticorruption community specifically. Yet the report repeatedly emphasizes three dysfunctionalities of a governance system—exclusion, capture, and clientelism—all of which are “negative manifestations of power asymmetries,” and all of which can be thought of as forms of corruption. While these terms (especially “capture,” which ends up being the one the WDR uses most frequently) is still conceptually underdeveloped, the term helpfully focuses on systemic forms of corruption in public institutions (broadly defined), rather than on corruption as an individual exchange between two actors (such as bribery). Thus, the WDR emphasizes that combatting the corruption of policies and governance processes (i.e. corruption in its political, grand, and systemic forms, rather than a focus on street-level bribery) is at the heart of making development policies work. That the World Bank is taking this position in its flagship publication is no small accomplishment, especially given that 25 years ago the Bank shied away from even using the word corruption.

Where the WDR falls short, however, is to put forward operationally relevant insights on how to address the problem of capture of public institutions by private interests. It starts off well with acknowledging the importance of expanding participation in governance (“contestability”) and of changing the relevant actors’ incentives and belief systems. Yet the WDR’s real-life examples of anti-capture interventions, scattered throughout the report, largely refer to cases where minor nudges or other incremental adjustments slightly shifted preferences and therefore behavior. To be clear, many of these examples of anticorruption interventions are not widely known to the anticorruption community, making the WDR a treasure trove of empirical nuggets on accountability, transparency, and participation interventions. Nonetheless, the report is frustratingly silent on the question of how to proceed when fundamental dysfunctional power asymmetries need to be changed.

Perhaps, though, that aspect of the report is a feature rather than a bug: Maybe it is a reflection of a new humility on the part of the World Bank and other external development actors in terms of what role they can be expected to play in governance and anticorruption. Mushtaq Khan, for example, embraced the WDR as “the incrementalist’s manifesto,” arguing that external development agencies should focus on fixing those problems where the interests of reformers and powerful actors within the society align (see also here). Could it be that this incremental approach to anticorruption will yield more results over time than the many grand and ambitious initiatives which unfortunately have often fallen short of their marks?

France’s New Anticorruption Law — What Does It Change?

GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris office of Debevoise & Plimpton, who contributes the following guest post:

The ineffectiveness of French efforts to combat overseas bribery is well-known if not entirely understood. Put most simply, in the 17 years since France adopted comprehensive anti-bribery legislation, essentially similar to the U.S. Foreign Corrupt Practices Act (FCPA), France has not convicted a single corporation of classic overseas bribery under that legislation. This shortfall has been regularly documented in periodic reports by the OECD, and by NGOs such as Transparency International and others. Its causes are complex. They may include a simple deficit in willpower, but as others as well as I have pointed out, French criminal procedures, and in particular the difficulty of demonstrating corporate responsibility under French criminal law, impede effective prosecution.

Stung by the fact that four very large French companies entered into a variety of guilty pleas or deferred prosecution agreements (DPAs) with US authorities, pursuant to which these companies paid well over $2 billion in fines and other payments to the US treasury, in December 2016 the French legislature finally adopted a long-pending law, known as the Loi Sapin II, which progressively goes into effect during 2017. The law is unmistakably a reaction to US success in prosecuting French companies under the FCPA: it only applies to corporations, and only to allegations of overseas corruption or other crimes very similar to those prosecutable under the FCPA.

Several of new law’s provisions are unexceptional: it creates a new Anticorruption Agency, called the AFA, to replace an existing agency, known as the SCPC, which was widely viewed as ineffective; the law requires medium- and large-sized companies to adopt compliance programs pursuant to criteria to be developed by the AFA. (While the AFA can impose administrative sanctions for absent or deficient compliance programs, it will have no criminal investigative authority). The new law also slightly extends the territorial reach of French anti-bribery laws to make them applicable to companies that “carry out all or part of their economic activity on French territory,” and enhances whistleblower protection available under existing laws. But the Loi Sapin II’s most ambitious innovation by far is a series of amendments to the French Code of Criminal Procedure to permit negotiated outcomes generally similar to DPAs as practiced for many years in the United States, and since 2014 in the United Kingdom, that result in the payment of fines and other penalties but not in a criminal judgment. Under the new provisions, a French corporation may enter into an agreement, known as a “Judicial Convention in the Public Interest” (JCPI), under which the firm admits facts sufficient to show the commission of a relevant crime, and agrees to a fine that may be as high as 30% of the company’s annual turnover for the prior three years. The company may also agree to the imposition of a corporate monitor, to be supervised by the AFA. Continue reading