Model Language for an Anticorruption Citizen Suit Provision in Community Development Agreements

Community Development Agreements (CDAs) are contracts between extractive companies and the local communities that reside near their operations. The contracts are designed to funnel some of the financial and non-financial benefits of the project to those who are most likely to be negatively impacted by their inherent destructiveness. Some developing states require CDAs from extractive companies as a precondition for granting permits, and the World Bank publishes model regulations for CDAs—recommendations that hold significant sway for many developing states. The World Bank’s model regulations are often referenced, or adopted wholesale, by countries with capacity constraints.

The World Bank model CDA, and many of the existing national laws which govern CDAs, include required, substantive terms such as monitoring components, dispute resolution systems, etc. However, CDAs have not traditionally included provisions that might allow the contracts to be operationalized in the anticorruption fight. Building on the work of Abiola Makinwa and James Gathii, I have argued that CDAs should include anticorruption clauses that would give recognized community members the right to sue as third party beneficiaries in the case of corruption, and that the World Bank should amend its model CDA to include a third party beneficiary cause of action for corruption in the making or execution of a CDA.

While my previous post advocated for this reform in general terms, my objective here is to suggest specific language that the World Bank should incorporate into its model regulations. These provisions derive in part from recommendations of the Columbia Center on Sustainable Investment’s (CCSI) analysis of Emerging Practices in Community Development Agreements and transform the CDA into an anticorruption tool. The recommended provisions are as follows:

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The Curious Absence of FCPA Trials

As is well known, enforcement actions brought under the Foreign Corrupt Practices Act (FCPA) have expanded dramatically over the past decade and a half. With all this enforcement activity, someone unfamiliar with this field might suppose that the most important questions regarding the FCPA’s meaning and scope are now settled. But as FCPA experts well know, that is not the case; the realm of FCPA enforcement is a legal desert, with guidance often drawn not from binding case law but from a whirl of enforcement patterns, settlements, and dicta. As a result, many of the ambiguities inherent in the statutory language remain unresolved—even core concepts, such as what constitutes a transfer of “anything of value to a foreign official,” lack concrete legal decisions that offer guidance. While some claim that this ambiguity fades when the FCPA is applied to the facts at hand, past analysis shows that this may not always be the case.

The dearth of binding legal precedent in FCPA enforcement stems directly from the lack of FCPA cases that are actually brought to trial. Of course, most white collar and corporate criminal cases—like most cases of all types—result in settlements rather than trials. But a look at the major cases white collar cases going to trial in 2017, and the pattern of FCPA settlements, shows that FCPA trials are uniquely rare. In fact, FCPA cases are resolved through settlements more often than any other type of enforcement actions brought by the DOJ or SEC.

Why is this? Why are FCPA enforcement cases so rarely brought to trial, even compared to other white collar cases? The answer can help explain why FCPA case law is so sparse, and reveal whether this trend may change in the future.

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Internationalizing the Fight Against Corruption: The EU Mission in Kosovo

For countries saddled with a tight-knit, corrupt leadership class, what happened last week in Guatemala is cause for celebration.  There a normally meek judiciary slapped down the president’s effort to end a corruption investigation that threatens his rule.  What made the difference was the investigation is led by a United Nations entity created under an accord an earlier government had signed with the U.N.  The agreement, and the support it enjoys both in Guatemala and abroad, gave the nation’s Constitutional Court both the legal rationale and the backbone to tell the president that even he was not above the law.

Before corruption fighters embrace internationalization as the deus ex machina in the corruption fight, however, they will want to pay heed to another, far less publicized event, that also took place last week: publication of Joschka Proksik’s analyis of the European Union’s rule of law mission in Kosovo ( (published in this volume). As with Guatemala, the government of Kosovo agreed to share with an international agency the power to enforce the nation’s criminal law.  Unlike Guatemala, however, where the U.N. can only investigate allegations of criminal misconduct and domestic prosecutors and courts must take it from there, in Kosovo the EU’s power is unlimited.  EU personnel can at any time and for any reason investigate, prosecute, and judge whether a Kosovar has violated the nation’s criminal law — without any involvement whatsoever by local authorities.  Moreover, EULEX, as the mission is known, is far larger and far better resourced than the UN’s Guatemalan mission, staffed at its peak by some 1,900 international personnel at a cost of over €100 million in administrative expense alone.

Proksik interviewed dozens of current and former EULEX staff, analyzed data on investigations, prosecutions, and convictions, and perused pervious evaluations by the European Union and independent observers to determine what the progress EULEX has made in its almost nine-year life in realizing its core objectives of helping Kosovo’s judiciary and law enforcement agencies remain “free from political interference” and adhere to “internationally recognized standards and European best practices.”  Because his careful, balanced, professional assessment merits the attention of aIl looking for ways to help countries stuck with corrupt leaders, I won’t give away the bottom line.  But safe to say it forms an important counter to the Guatemala experience.

Proksik suggests some reasons why the results of internationalizing the corruption fight in the two countries differ so: EU’s large and unwieldy bureaucracy, the lack of a shared language between Kosovars and internationals, and the short-term secondments of many international staff.  As Matthew explained earlier this year, there are pros and cons to internationalizing, or outsourcing, the fight against corruption.  Given what a successful effort can achieve, understanding why the results in Kosovo have been so different from those in Guatemala is surely a topic worthy of sustained, careful attention.

Upcoming Conference on “Populist Plutocrats: Lessons from Around the World” (Sept. 23, Harvard Law School)

On Saturday, September 23rd, Harvard Law School, in collaboration with the University of Chicago’s Stigler Center, will host a one-day conference entitled “Populist Plutocrats: Lessons from Around the World.” The conference will focus on an important and dangerous phenomenon: political leaders who successfully exploit anti-elite sentiment in order to achieve power, but who, once in office, seem primarily interested in enriching themselves, along with a relatively small circle of family members and cronies. Many Americans might find that this description accurately captures President Trump, who campaigned as a populist, but who is governing as more as a “crony capitalist” plutocrat—or, some would allege, as a quasi-kleptocrat.

Americans seeking to understand the challenges our country is now facing might do well to look abroad. After all, while Trump’s leveraging of the power of the presidency for personal enrichment—enabled by anti-elite sentiment among his supporters—may well be unprecedented in modern U.S. history, it is not, alas, unprecedented in the modern world. Indeed, while every country’s experience is different, and we must always be careful not to overstate the parallels, many other democracies have had leaders who could be described as populist plutocrats, or even populist kleptocrats, in something like the Trump mold. While such resemblances have occasionally been noted (see, for example, here, here, here, and here), but there has not yet been much of a sustained attempt to understand populist plutocracy/kleptocracy and closely related phenomena in comparative perspective. The September 23 conference will seek to initiate more sustained exploration of these issues, and will also provide an opportunity for experts from other parts of the world–who have more experience with political leaders who combine populist rhetoric with self-interested profiteering and cronyism–to offer a distinct perspective on the challenges the United States is currently facing.

The conference will feature the following panels: Continue reading

Tracking Corruption and Conflicts of Interest in the Trump Administration–September 2017 Update

Last May, we launched our project to track credible allegations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests.Just as President Trump’s son Eric will be providing President Trump with “quarterly” updates on the Trump Organization’s business affairs, we will do our best to provide readers with regular updates on credible allegations of presidential profiteering. Our September update is now available here.

Although there was much in the news this past month about troubling reports that Donald Trump’s business organization was pursuing plans to develop a Moscow hotel while he was running for president (which we don’t include in our tracker because it seems to pertain exclusively to pre-election activity), there were relatively few new developments this month. We will continue to monitor and report on allegations that Trump, or his family and close associates, are seeking to profit from the presidency.

As we are always careful to note, while we try to sift through the media reports to include only those allegations that appear credible, we acknowledge that many of the allegations discussed are speculative and/or contested. We also do not attempt a full analysis of the laws and regulations that may or may not have been broken if the allegations are true. For an overview of some of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct, see here.

Internationalizing the Fight Against Corruption: the Guatemala Showdown

Guatemala shows how a beleaguered citizenry can fight a thoroughly corrupt leadership.  A joint United Nations/Guatemalan agency, known by its Spanish initials CICIG, has for several years been waging all out war against corruption in Guatemala (details here).  Besides winning corruption convictions against countless senior politicians and military leaders, its investigations led to the 2015 ouster of then President Otto Pérez Molina and Vice President Roxana Baldetti for orchestrating a massive corruption scheme in customs.  CICIG has been able to withstand the inevitable backlash that cases against the powerful generate thanks to a remarkable alliance between Guatemalans fed up with corruption and impunity and those in the international community willing to provide not only financial support but political backing too.

Fearing he is about to become the target of a CICIG investigation, Guatemala’s current president Jimmy Moralesis is testing the strength of the alliance. On August 26 he issued a decree expelling CICIG’s head, claiming the commission was compromising the country’s sovereignty.  Given Guatemala’s experience with foreign intervention, one would expect his claim to resonate, but so far outside far right circles it has gained little traction. The day after his order issued the Guatemalan Constitutional Court granted an amparo (protective order) staying the expulsion order pending a hearing on its lawfulness.  Guatemalans have taken to the streets, and commentators to the airwaves and op-ed pages, to protest Morales’ action.

International backers of CICIG have come to its defense too.  The U.N. Secretary General, the U.S. State Department, the European Union, and the Latin American Association of Ombudsmen have all denounced Morales’ order.  CICIG’s most important international ally may well be U.S. Congresswoman Norma Torres.  Guatemalan by birth, she is a leading voice on U.S. policy towards Guatemala, from shaping a responsible foreign assistance program, to devising a humane immigration policy, to supporting the fight against corruption. In an August 29 opinion piece in a Guatemalan daily (reprinted below in English) she not only strongly backed CICIG but reminded Morales his actions were putting millions of dollars of U.S. aid at risk. However much cheap demagoguery about foreign intervention and “Yankee imperialism” might undermine the credibility of CICIG’s other international supporters, the Congresswoman would seem immune.

Guatemala is a model for how a small country stuck with entrenched, powerful and corrupt leaders can mobilize international organizations, friendly governments, and key members of the diaspora to help purge the nation of corruption.  The outcome of the showdown between President Moralies and that alliance in Guatemala will be a critical test of the model’s viability.

Iván Velásquez and the Future of Guatemala
by Congresswoman Norma Torres

Like many chapines [Guatemalans] in Guatemala and abroad, I was shocked and dismayed by President Morales’s decision to declare Iván Velásquez “persona non grata.”  This decision is not only a devastating step back in the progress that has been made in anti-corruption efforts, it will delay justice in the important investigations and that are currently underway. It may also have lasting repercussions for Guatemala’s future by putting at risk millions of dollars in critical assistance. Continue reading

Guest Post: If You Were a G20 Leader for a Day…

Maggie Murphy, Senior Global Advocacy Manager for Transparency International, contributes today's guest post:

Remember the big headline from the recent G20 Summit in Hamburg, about what leaders are going to do to tackle corruption head-on?
No, we don’t either. Corruption remains a bit of an afterthought in G20 thinking on progressing the G20’s objective of “strong, sustainable, balanced and inclusive growth” (page 14 of the most recent Communiqué), despite the almost plaintive opening line in the current G20 Anti-Corruption Action Plan that “[r]educing corruption remains a top priority for the G20.”
Corruption should be preoccupying for G20 leaders. In the last 12 months alone, the presidents of G20 members South Korea and Brazil have been impeached (and Brazil’s current president is also facing corruption allegations) and the former Argentinian president was indicted for corruption.
Despite the lack of public emphasis on fighting corruption, the G20 does have well-functioning G20 Anti-Corruption Working Group (ACWG). The ACWG meets three times a year, works to biennial Action Plans, and advises G20 leaders on where to channel their energy in tackling corruption. The ACWG touches on a wide range of topics, from asset recovery, to open data, to the illegal trade in wildlife. The ACWG adopts principles, issues individual country guides, conducts self-assessments, and develops good practice, research, and toolkits on certain issues. The 60 documents the group has developed since 2010 can be found on a helpful but hidden website compiled by the German Ministry of Justice.
But we don’t hear much about the ACWG's work, even less its impact. Clearly it needs a shake-up.
As new G20 host, Argentina should lead the development and adoption of a new biennial Anti-Corruption Action Plan. But that would be simply more of the same. Is it time for the G20 ACWG to have a rethink? Continue reading