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Today’s guest post is from Valentina Lana, a lawyer and lecturer at Sciences Po, and Michel Sapin, who served in multiple senior positions in the French government, including as Minister of Finance from 2014-2017 and Minister of the Economy in 2016-2017, and who was the principal author of the Loi Sapin II, the French anticorruption law.
Since the OECD Anti-Bribery Convention entered into force back in 1999, France has been a member, and as such France committed to adopt and enforce an effective legal framework to detect, punish, and deter transnational bribery. Yet in October 2012, when the OECD’s Working Group on Bribery released its Phase 3 report on France’s compliance with its obligations under the Convention, France received very poor marks. The report emphasized the Working Group’s “serious concern” about the paucity of enforcement proceedings addressing foreign bribery by French entities, expressed its disappointment in France’s failure to address key legal obstacles to holding companies liable for foreign bribery, and the insufficient penalties. In short, while France had laws on the books that supposedly criminalized foreign bribery, in practice France was doing very little to make those laws meaningful in practice.
The highly critical Phase 3 report served as a wake-up call for French policymakers. But it was not only this very public and embarrassing OECD criticism that prompted France to act. French companies that issued securities in the United States also found themselves targeted by the U.S. Department of Justice for alleged violations of the U.S. Foreign Corrupt Practices Act (FCPA). Many French firms and government officials bristled at what seemed like the intrusive and extraterritorial prosecutions by the U.S. government. But in high-level conversations between leading figures from the two countries, the U.S. representatives made clear their position that they were pursuing these cases, even though France might seem to have a greater interest, because France couldn’t or wouldn’t prosecute foreign bribery cases involving French companies vigorously and effectively. “We are doing your job,” was the basic position of the U.S. representatives.
There was also pressure for reform from the French business community. This at first seems counterintuitive, given that companies are generally reluctant to accept more stringent regulations. But business operators in France perceived that France needed to promote a more transparent, corruption-averse environment, in order to increase the attractiveness of France for investors and shake off France’s bad reputation as an unfair business environment where bribes would count more than skills, experience, and competence. Though one might think that French firms would care only about domestic corruption, in fact many business leaders embraced the idea that taking a stronger stand against foreign bribery—and embracing legal reforms that would elevate France to the level of countries like the US or the UK, at the forefront of the fight against transnational corruption—would help improve France’s reputation and overall business environment.
These factors contributed to an environment that enabled reformers, particularly those in the French Ministry of the Economy, to act. In 2016, the French parliament adopted a crucial set of reforms contained in a law known as the la loi Sapin II (the Sapin II Act). This broad law covers more than just the fight against corruption; it contains a range of provisions intended to improve France’s attractiveness to local and foreign investors through greater transparency and modernization of economic life. But several of the Act’s most important reforms were motivated by, and targeted toward—the fight against corruption, including transnational corruption, a fact acknowledged symbolically by the date of the Act’s adoption: December 9th, UN International Anti-Corruption Day.
Among the Sapin II Act’s key measures, three can be considered as essential to driving France’s progress on anticorruption: Continue reading
Frederick Davis, a member of the New York and Paris Bars and a Lecturer in Law at Columbia Law School, contributes today’s guest post:
As recently as a few years ago, posts in this space by me and others bemoaned the striking inability of French authorities to prosecute French companies involved in global corruption. In the first fifteen years after France criminalized overseas bribery (thereby meeting its obligations under the OECD Convention on Combatting Bribery for Foreign Officials that France had signed in 1997), not a single French company had been convicted of this crime. This was attributed to the difficulty of pinning corporate criminal responsibility on corporations, as well as to limits in French criminal procedures that rendered its prosecutors unable to move as quickly, efficiently, and effectively as their U.S. counterparts. French deficiencies included the lack of both “sticks” (the credible threat of significant sanctions) and “carrots” (the ability to offer a deferred prosecution agreement (DPA) in exchange for self-disclosure and cooperation). The result: a number of iconic French companies reached negotiated outcomes with the U.S. Department of Justice (DOJ), and paid well over US$2 billion in fines and other payments to the U.S. government.
Resisting populist demands for retaliation, France instead changed its criminal procedures and enforcement institutions to address the challenge. The most notable changes include the creation of a National Financial Prosecutor’s Office with nationwide responsibility for many economic crimes, the creation of the French Anti-Corruption Agency to enforce compliance regimes, and the passage of the so-called Loi Sapin II, which increased penalties for financial crimes and introduced a French-style DPA called a Judicial Convention in the Public Interest. In addition to these reforms, France’s highest court has clarified the laws on corporate criminal responsibility, and in an unprecedented decision ruled that a parent or successor corporation remains criminally responsible for acts of an acquired entity even the acts took place prior to the acquisition.
The results of these reforms have been nothing short of remarkable: Continue reading
“Corruption’s War on the Law” is the headline on an article Project Syndicate just published. There former French magistrate and corruption fighter Eva Joly recounts the fate of those who have dared to confront powerful networks of corrupt officials and those who corrupt them. Maltese investigative journalist Daphne Caruana Galizia was murdered by accomplices of those she was investigating. So was Rwandan anti-corruption lawyer Gustave Makonene. So too was Brazilian anticorruption activist Marcelo Miguel D’Elia.
After a second attempt on his life, Nuhu Ribadu, first chair of Nigeria’s Economic and Financial Crimes Commission, the country’s premier anticorruption agency, famously remarked:
“When you fight corruption, it fights back.”
In her article, Mme. Joly, who received numerous threats for investigating and ultimately convicting senior French officials for corruption, explains that violence is just one way corruption “fights back.” The most recent head of Nigeria’s EFCC was arrested and detained on trumped up charges of corruption. Ibrahim Magu has been suspended from office pending further proceedings, proceedings unlikely to be held this century.
At the same, Nigerian anticorruption activist Lanre Suraju is, as this blog reported last week, being charged with “cyberstalking” for circulating documents from a court case that implicate associates of the current Attorney General in a the massive OPL-245 corruption scandal. This form of intimidation, which Nigerians have dubbed “lawfare,” has now been exported to Europe. Italian prosecutors are being subjected to both criminal charges and administrative action for having the nerve to prosecute one of Italy’s largest companies for foreign bribery (here).
President Biden has declared the global fight against corruption to be a national priority, and he will shortly host a democracy summit where Brazil, Italy, Malta, Nigeria, and Rwanda will be represented at the highest level. Might he remind them which side of the fight they should be on?
Nation-building has long been a popular project—albeit a controversial one—among Western nations. Nation-building is a complicated activity, one that requires balancing such a wide variety of considerations, and making hard choices about what areas to prioritize. As a result, anticorruption is sometimes neglected or ignored in the nation-building process. This, however, is a mistake. Unchecked corruption can have devastating effects on nation-building. And while contemporary critics make this point in the context of modern nation-building initiatives, such as U.S.-led efforts in Afghanistan, there are also compelling historical illustrations of how tolerance of corruption can help derail the nation-building project. One such lesson comes from the French experience during the First Indochina War.
Though France had held on to Vietnam with ease from the mid-nineteenth century to the early days of World War II, the post-war era spelled trouble for the French Empire in Southeast Asia. The Viet Minh, a burgeoning nationalist force led by Ho Chi Minh, challenged French colonial dominance in the region, eventually securing the support of China and the Soviet Union. By the early 1950s, France’s military campaign against Ho’s guerrilla forces was flailing. So, rather than trying to continue to hold Vietnam as a colonial territory, French leaders decided to create an independent Vietnamese state. In attempting to build this new country, however, French leaders turned a blind eye to a corruption scheme—the so-called “Piastres Affair”—that would gravely weaken this enterprise.Continue reading
I don’t make a practice of responding to opinion columns in mainstream newspapers, especially when they’re not specifically or primarily about corruption. But the opening of Bret Stephens’ piece in yesterday’s New York Times caught my eye, mainly because the column used corruption in the Greek health care system as the “hook” for an argument that President Biden’s ambitious plans for an expanded social safety net will lead to American decline. Here’s how Stephens opens his column:
Years ago, Alexis Tsipras, the party leader of Greece’s Coalition of the Radical Left, surprised me with a question. “Here in the United States,” the soon-to-be prime minister asked me over breakfast in New York, “why do you not have this phenomenon of passing money under the table?”
The subject was health care. Greece has a public health care system that, in theory, guarantees its citizens access to necessary medical care.
Practice, however, is another matter. Patients in Greek public hospitals, Tsipras explained, would first have to slip a doctor “an envelope with a certain amount of money” before they could expect to get treatment. The government, he added, underpaid its doctors and then looked the other way as they topped up their income with bribes.
Take a close look at any country or locality in which the government offers allegedly free or highly subsidized goods and you’ll usually discover that there’s a catch.
What is the point of opening with this anecdote (other than not-so-subtly alerting the reader that the author is the sort of important person who has chit-chats with world leaders)? The implication, so far as I can tell, seems to be that countries that provide free or heavily subsidized social welfare benefits tend to be more corrupt.
There is, however, an important problem with this argument: It’s not true.Continue reading
There is no longer any doubt that corruption does enormous harm – to individuals, businesses, governments, and whole societies. Nor is there any dispute that those harmed should have a right to recover damages for their injuries. In drafting the UN Convention Against Corruption, governments agreed quickly and without dissent upon what is now article 35. It requires parties to ensure their domestic law permit any person or entity harmed by corruption to “initiate legal proceedings against those responsible for the damage to obtain compensation.”
Yet what evidence there is shows article 35’s promise remains largely unfulfilled.
For the UN Office on Drugs and Crime and the StAR Initiative, I am examining just how far there is to go for that promise to be met. With their resources and the help of the International Bar Association, I have reviewed the case law in close to one-third of the 187 UNCAC states parties. The most common victim recovery cases I find are those where a government agency or state-owned corporation has recovered damages when an employee took a bribe. In a few, courts have also awarded damages to third-parties harmed by the bribery. There are in addition a miscellany of actions I am still digesting covering actions by the competitors of a bribe-payer, consumers, and NGOs.
Below are the bribery victim cases I have located to date. A second post will review the other cases. Reader contributions and comments warmly solicited.Continue reading
TI France is moving to block an audacious, underhanded move by the Gabonese government to frustrate the confiscation of hundreds of millions in assets stolen from its citizens. The assets are likely to be confiscated as part of the proceedings known as Bien Mal Acquis (wrongfully acquired assets), where French prosecutors are investigating the ruling families of Gabon, Equatorial Guinea and the Republic of the Congo for buying hundreds of millions of euros of French real estate and other properties with corrupt monies. In 2017, in the first case to go to trial, €150 million in French assets were confiscated from Equatorial Guineans First Vice President Teodorin Obiang (here).
Apparently anticipating a similar result, the Gabonese government recently joined the proceedings as a partie civile or civil party. Under French law, if a court orders the confiscation of the Gabonese ruling family’s assets, the Gabonese government would then have a claim to some if not all of the assets under the theory it is entitled to recover damages suffered by the ruling family’s corruption. A just and reasonable outcome were a democratically elected government committed to its citizens’ welfare in power.
Tragically, for the Gabonese people this is not the case. The same family responsible for stealing the nation’s wealth, the Bongos, remains in power. TI France has now moved to have the government’s claim to be a civil party dismissed. This should be an easy decision for the presiding magistrate given how well the Bongo family’s corruption has been documented.
The continued active participation of civil society in the landmark Bien Mal Acquis case shows how critical it is that anticorruption NGOs to represent those like the citizens of Gabon, Equatorial Guinea, and the Republic of the Congo where their governments make it impossible for corruption victims to bring cases on their own. The TI Press Release on its move to strike the Gabonese government as a civil party is here. The origins of Bien Mal Acquis and its lessons are discussed here.
For today’s guest post, GAB is delighted to welcome back Frederick Davis, a member of the New York and Paris Bars and a Lecturer in Law at Columbia Law School:
Commentators have aptly observed that US prosecutions of firms for foreign bribery and similar crimes has developed into a “US model of corporate crime deterrence,” a model that is based on aggressive pursuit of corporate entities to induce them to cooperate by “detecting, reporting, and helping prove” criminal acts by individuals in return for a negotiated resolution of the criminal charges against the corporation itself, one that avoids a corporate criminal conviction.
Earlier posts on this blog by myself and by others have noted the absence of this model in France, and the relative ineffectiveness of French prosecutors in pursuing corruption and other forms of corporate crime, in significant part because of the difficulty of proving corporate criminal responsibility under French law. As I noted last year, though, efforts by the Legislature to provide new investigative and prosecutorial tools, by the National Financial Prosecutor to use them, and by the courts in clarifying the principles of corporate criminal responsibility have produced encouraging results. French prosecutors have pursued, and French courts have convicted, both French and non-French corporations for serious crimes. On November 25, 2020, the French Supreme Court (Cour de Cassation) took an important additional step by ruling, for the first time, that in an acquisition situation the successor corporation will generally be criminally responsible for acts committed by the acquired company. The decision closes a significant gap in French corporate criminal deterrence, and will have an immediate and positive impact on corporate criminal investigations in France. Continue reading
GAB is pleased to welcome back Frederick Davis, a lawyer in the Paris and New York offices of Debevoise & Plimpton and a Lecturer at Columbia Law School, who contributes the following guest post:
For approximately two decades, at least since 2000, France—a signatory to the 1997 OECD Anti-Bribery Convention — has had laws on the books that emulate the U.S. Foreign Corruption Practices Act (FCPA) by criminalizing bribes to foreign public officials. For most of that time, these laws were not effectively enforced: During the first 15 years after France prohibited foreign bribery, not a single corporation was convicted in France. The reasons for this—previously discussed on this blog by me and others—included the low maximum penalties applicable to corporations, imprecision in French laws relating to corporate criminal responsibility, lengthy investigations (often lasting over a decade) run by investigating magistrates, and the virtual absence of any possibility of a negotiated outcome. In the absence of French enforcement of its laws against foreign bribery, the U.S. Department of Justice (DOJ) took it upon itself to investigate and prosecute a number of French corporations for FCPA and other violations. These enforcement actions, which were typically resolved by guilty pleas or deferred prosecution agreements (DPAs), netted aggregate fines and other penalties of over $2 billion, not a penny of which was paid to France.
This situation provoked widespread discussion and debate in France, and eventually led to a number of changes in its criminal procedures. Among the most important were the creation, in 2013, of a National Financial Prosecutor’s office (PNF) with nationwide authority to prosecute a variety of financial crimes, and the adoption, in December 2016, of the so-called Loi Sapin II, which overhauled many of the criminal laws relating to corporate and financial crime, increasing corporate penalties, adopting a new settlement procedure called the Convention Judiciaire d’Intérêt Public (CJIP) closely modeled on the US DPA, and creating a French Anticorruption Agency (AFA) to supervise newly-mandatory corporate compliance programs and issue guidelines for corporate behavior. These reforms have already produced some impressive results, including major settlements (sometimes in cooperation with other countries like the US and UK) with large French and multinational companies (see, for example, here, here, and here).
An interview published this past April with Jean-François Bohnert, who has served since October 2019 as the National Financial Prosecutor, sheds some light on how France’s recent legal and institutional reforms are transforming its enforcement of its laws against foreign bribery and other complex corporate crime. In that interview, M. Bohnert understandably focused on his office’s successes; he was particularly proud of the number of cases his office had handled with a relatively small staff. But to my mind, by far the most interesting and important thing that came out of this interview was the fact that, of the 592 cases handled by the PNF in 2019, 81% were so-called “preliminary investigations” managed exclusively by the PNF, while only 19% were led by investigating magistrates. To someone unfamiliar with the French legal system, the significance of this statistic may not be readily apparent, but in fact it suggests an important change in the French approach to corporate misbehavior. Continue reading