Recovering Damages for Mozambican Victims of the Hidden Debt Scandal: Possible Suits in the United Kingdom

A recent post explained that Mozambicans harmed by the corruption behind the “hidden debt” scandal may well be able to sue the perpetrators for damages in the courts of many nations.  Mozambique, where the harm was suffered, and most probably France, Lebanon, Russia, Switzerland, the United Arab Emirates, and the United Kingdom, countries where one or more of the alleged perpetrators is located or does business.  The legal basis would be article 35 of the United Nations Convention Against Corruption.  It requires convention parties to open their courts to actions by corruption victims against “those responsible” for the corruption “in order to obtain compensation.”

The U.N. Office of Drugs and Crimes reports that all 187 parties accept the principle of compensation for corruption.  Suits for corruption damages are a relatively recent development, however, and in its latest review of the convention’s implementation, UNODC explains that establishing causation and proving damages remain to be elaborated through application of parties’ domestic law principles governing harm caused by intentional acts.  At the same time, it noted that in corruption damage cases article 35 mandates that these principles be interpreted broadly.  There need be no direct interaction between the perpetrators of corruption and the victim; nor is recovery limited to cases where the perpetrators foresaw the injury the victim would suffer.

In a just released paper, London barrister James Mather shows how English law would apply to claims Mozambicans brought for hidden debt damages in the United Kingdom. He opines that recovery could be had on the basis of an unlawful means conspiracy and perhaps too on the tort of bribery and dishonest assistance.  English law, he writes, incorporates the liberal principles of causation of damages enshrined in article 35. “The approach to the award of damages for conspiracy in particular is quite liberal in English law and extends to losses which cannot be strictly proved.”  English law also offers Mozambican claimants a procedural advantage.  Rather than each person having to file a separate suit, a group action could be filed with a single claimant suing on behalf of all those who suffered a similar injury.

Mather, a distinguished member of Serle Court in London, cautions that while based on what has been reported it would appear Mozambicans injured by the hidden debt scandal could recover damages in the United Kingdom, much factual research is required to be sure. His paper is an important step forward in seeing that those who suffered enormous harm thanks to the corruption behind the hidden debt scandal are made whole by the perpetrators.  Click on Mather paper to download a copy of his first-rate analysis.

Legal Remedies for Grand Corruption

In too many nations, ruling elites rob the populace on a grand scale, awarding friends and relatives lucrative government contracts, siphoning off revenues from oil and other natural resources, even writing checks to themselves on the central bank.  Curbing such “grand corruption” will require much: an active, informed citizenry; coordinated international action; vigorous diplomacy; shrewd application of international sanctions.

new volume from the Open Society Justice Initiative, pictured below, describes how civil society can mobilize courts of law in the struggle.  It recounts efforts that range from using international tribunals to force government to address corruption, as the Nigerian NGO SERAP’s case before the court of Justice of the Economic Community of West African States illustrates, to bringing suit against a kleptocratic ruler in a foreign jurisdiction, as Sherpa and TI-France did against Equatorial Guinean Vice President Teodoro Obiang, to the creative use of domestic law doctrines common to most legal systems to force wrongdoers to answer for their crimes in their own courts.

Grand corruption is behind many of the globe’s most pressing problems: massive environmental degradation, gross human rights abuses, large-scale emigration. Taming it must be a priority for the global community.  Legal Remedies for Grand Corruption offers an important set of tools for doing so.

Legal Remedies for Grand Corruption

Why Not Citizen Suits for Corrupt Procurements?

Beginning from the simple and indisputable premise that those harmed by corruption should be able to do something about it, Professor Abiola Makinwa of the Hague University of Applied Sciences develops a novel approach to attacking the ubiquitous problem of corruption in public procurement.  To appreciate it, take an example.  Suppose government awards a contract to a company to build a road so farmers in the region can more easily and cheaply bring their products to market.  Suppose further that thanks to corruption the road is either never built or it quickly becomes impassable.  Who suffers most from the construction company’s failure to perform the road building contract?  Who has the greatest stake in remedying the wrong? Continue reading

Public Trust Theory: A Way Citizens Can Combat Resource Corruption?

Public trust theory derives from the sovereign’s duty to act as the guardian of certain interests for the benefit of the nation as a whole. In the United States it serves as the basis for citizen suits to vindicate environmental rights, and it has been incorporated into the African Charter on Human and Peoples’ Rights which provides in article 21 that the wealth derived from a nation’s resources is for “the exclusive interest of the people . . . [and in] no case shall a people be deprived of it.”  Could it be used by civil society to combat grand corruption in the allocation of land and natural resources?

That is the question Elmarie van der Schyff, a professor of law at South Africa’s North-West University, addresses in a new paper prepared for the Open Society Justice Initiative’s project examining how civil society can help spark more anticorruption enforcement actions.  After carefully parsing South African law governing civil suits for damages, Professor van der Schyff concludes that “public-trust theory has a supportive role to play” in helping South Africans recover damages for injuries sustained when corruption infects the distribution or use of the nation’s natural resources.  Her thoughtful analysis shows how citizens of other states can use the principles that underlie the public trust doctrine to bring damage actions too.

Professor van der Schyff’s paper is the sixth in a series commissioned by the Open Society Justice Initiative on civil society and anticorruption litigation.  It follows earlier ones on i) standing by GAB editor-in-chief Matthew Stephenson, ii) civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta, iii) private suits for defrauding government by Houston Law School Professor David Kwok, iv) private prosecution in the U.K. by Tamlyn Edmonds and David Jugnarain, and v) damages for bribery under American law by this writer.

Should Other Countries Enact a False Claims Act?

For governments looking for a cheap, easy way to curb fraud and corruption in government contracts, the American False Claims Act seems like a no lose proposition.  It authorizes private citizens to file civil suits against companies they believe have cheated the federal government, and if their suit succeeds, the citizen is entitled to anywhere between 15 to 30 percent of any damages the government collects.  The offer of a reward creates an army of volunteer investigators and lawyers willing to invest their own time and energy into ferreting out fraud and corruption.  If they win the case, the government recoups most of its losses.  If they lose, the government isn’t out a cent.  The data suggests that False Claims Act suits have indeed been a bonanza for the U.S. government.  Recoveries in recent years have exceeded $2 billion per year with an average of $1.7 billion going to the government and the rest to citizen sleuths.

Before copying the False Claims Act verbatim, however, policymakers will want to consider University of Houston Law Center Professor David Kwok’s paper on why the statute seems to work well in the U.S., why an exact copy might not work so well elsewhere, and how it might be changed to fit countries where conditions differ from those in the United States.  The paper is the third in the series of papers commissioned by the Open Society Justice Initiative on civil society and anticorruption litigation, following earlier ones on standing by GAB editor-in-chief Matthew Stephenson and on civil society litigation in India by Vidhi Centre for Legal Policy Director Arghya Sengupta. As with those by Matthew and Arghya, David’s paper provides civil society activists and policymakers wanting to bolster the enforcement of anticorruption laws in their country much to deliberate on.

What Others Can Take from Anticorruption Litigation in India

As Ken Hurwtiz of the Open Society Justice Initiative explained here in February, the Justice Initiative has commissioned a series of papers on civil society and anticorruption litigation to, among other things, alert anticorruption activists and litigators in one country to legal developments in another they can adapt, if not borrow wholesale, for use in cases they are pursuing.

The second paper in the series, Arghya Sengupta’s “Anti-Corruption Litigation in the Supreme Court of India,” just released and now available on the JI web site, fills this bill admirably.   As Sengupta, Founder and Research Director of the Vidhi Centre for Legal Policy in Delhi, explains, there is much in the Indian experience of value to lawyers in other nations.  Since the late 1990s Indian courts have issued a series of extraordinary, precedent setting decisions to address the rampant corruption that infects India’s public sector.  In response to cases brought by civil society, they have ordered law enforcement authorities to investigate grand corruption cases they had been ignoring, appointed civil society monitors to ensure the investigations are faithfully conducted, and invalidated executive actions tainted by corruption.

Sifting through the massive number of precedents to find ones useful elsewhere would be a daunting task for the non-Indian jurist or researcher.  Sengupta’s paper makes it easy.  He organizes the cases by theme and summarizes the holdings of the key decisions.  He notes too where the courts’ decisions have had unintended effects and where critics argue that the cost of a court’s intervention may have exceeded the benefit. While litigators in other common law countries will find the paper an invaluable guide to cases they can lift directly, lawyers in civil law countries will be able to make great use of it as well, suggesting innovative arguments for a judicial solution to the chronic corruption problems affecting their nations.

Encouraging More Corruption-Related Litigation?

On June 28 the Oxford Institute for Ethics, Law and Armed Conflict and the Open Society Foundations’ Justice Initiative will, with the help of this writer, host a one-day conference at the Said Business School entitled Legal Remedies for Corruption to discuss ways civil society can stimulate corruption-related litigation – either by pressuring prosecutors to file more criminal cases or by bringing their own civil actions for damages.

The question mark in the title is for American readers who might be forgiven for asking why such a conference is necessary.  Isn’t there enough litigation already? The U.S. Department of Justice and Securities & Exchange Commission continue to vigorously enforce the Foreign Corrupt Practices Act, while the Justice Department’s Public Integrity Section continues to ferret out corrupt federal, state, and local officials.  In 2012, the last year for which data is available, the section charged more than 1,000 individuals with accepting bribes, criminal conflict of interest, and other corruption offenses. And private parties in the U.S. have also been willing to sue alleged bribe payers, with suits brought by a range of injured parties including competitors, suppliers, partners, shareholders, and employee-whistleblowers.  Even foreign governments have taken advantage of American law’s broad standing rules and generous theories of damages: One alleged bribe payer recently paid a company owned by the Government of Bahrain $85 million to settle a claim it had harmed the company by bribing one of its employees to secure a contract, while the government of Trinidad has brought an action under Florida’s version of the Racketeer and Corrupt Organizations Act against the companies that allegedly rigged bids on an airport construction project in Port of Spain.

It turns out that while there is a great deal of litigation — public and private — over bribery allegations in the United States, this is much less true in most of the rest of the world. Continue reading