London Anticorruption Summit–Country Commitment Scorecard, Part 2

This post is the second half of my attempt to summarize the commitments (or lack thereof) in the country statements of the 41 countries that attended last week’s London Anticorruption Summit, in four areas highlighted by the Summit’s final Communique:

  1. Increasing access to information on the true beneficial owners of companies, and possibly other legal entities, perhaps through central registers;
  2. Increasing transparency in public procurement;
  3. Strengthening the independence and capacity of national audit institutions, and publicizing audit results (and, more generally, increasing fiscal transparency in other ways); and
  4. Encouraging whistleblowers, strengthening their protection from various forms or retaliation, and developing systems to ensure that law enforcement takes prompt action in response to whistleblower complaints.

These are not the only subjects covered by the Communique and discussed in the country statements. (Other topics include improving asset recovery mechanisms, facilitating more international cooperation and information sharing, joining new initiatives to fight corruption in sports, improving transparency in the extractive sector through initiatives like the Extractive Industries Transparency Initiative, additional measures to fight tax evasion, and several others.) I chose these four partly because they seemed to me of particular importance, and partly because the Communique’s discussion of these four areas seemed particularly focused on prompting substantive legal changes, rather than general improvements in existing mechanisms.

Plenty of others have already provided useful comprehensive assessments of what the country commitments did and did not achieve. My hope is that presenting the results of the rather tedious exercise of going through each country statement one by one for the language on these four issues, and presenting the results in summary form, will be helpful to others out there who want to try to get a sense of how the individual country commitments do or don’t match up against the recommendations in the Communique. My last post covered Afghanistan–Malta; today’s post covers the remaining country statements, Mexico–United States: Continue reading

London Anticorruption Summit–Country Commitment Scorecard, Part 1

Well, between the ICIJ release of the searchable Panama Papers/Offshore Leaks database, the impeachment of President Rousseff in Brazil, and the London Anticorruption Summit, last week was quite a busy week in the world of anticorruption. There’s far too much to write about, and I’ve barely had time to process it all, but let me try to start off by focusing a bit more on the London Summit. I know a lot of our readers have been following it closely (and many participated), but quickly: The Summit was an initiative by David Cameron’s government, which brought together leaders and senior government representatives from over 40 countries to discuss how to move forward in the fight against global corruption. Some had very high hopes for the Summit, others dismissed it as a feel-good political symbolism, and others were somewhere in between.

Prime Minister Cameron stirred things up a bit right before the Summit started by referring to two of the countries in attendance – Afghanistan and Nigeria – as “fantastically corrupt,” but the kerfuffle surrounding that alleged gaffe has already received more than its fair share of media attention, so I won’t say more about it here, except that it calls to mind the American political commentator Michael Kinsley’s old chestnut about how the definition of a “gaffe” is when a politician accidentally tells the truth.) I’m going to instead focus on the main documents coming out of the Summit: The joint Communique issued by the Summit participants, and the individual country statements. There’s already been a lot of early reaction to the Communique—some fairly upbeat, some quite critical (see, for example, here, here, here, and here). A lot of the Communique employs fairly general language, and a lot of it focuses on things like strengthening enforcement of existing laws, improving international cooperation and information exchange, supporting existing institutions and conventions, and exploring the creation of new mechanisms. All that is fine, and some of it might actually turn out to be consequential, but to my mind the most interesting parts of the Communique are those that explicitly announce that intention of the participating governments to take pro-transparency measures in four specific areas:

  1. Gathering more information on the true beneficial owners of companies (and possibly other legal entities, like trusts), perhaps through a central public registry—which might be available only to law enforcement, or which might be made available to the general public (see Communique paragraph 4).
  2. Increasing transparency in public contracting, including making public procurement open by default, and providing usable and timely open data on public contracting activities (see Communique paragraph 9). (There’s actually a bit of an ambiguity here. When the Communique calls for public procurement to be “open by default,” it could be referring to greater transparency, or it could be calling for the use of open bidding processes to increase competition. Given the surrounding context, it appears that the former meaning was intended. The thrust of the recommendation seems to be increasing procurement transparency rather than increasing procurement competition.)
  3. Increasing budget transparency through the strengthening of genuinely independent supreme audit institutions, and the publication of these institutions’ findings (see Communique paragraph 10).
  4. Strengthening protections for whistleblowers and doing more to ensure that credible whistleblower reports prompt follow-up action from law enforcement (see Communique paragraph 13).

Again, that’s far from all that’s included in the Communique. But these four action areas struck me as (a) consequential, and (b) among the parts of the Communique that called for relatively concrete new substantive action at the domestic level. So, I thought it might be a useful (if somewhat tedious) exercise to go through each of the 41 country statements to see what each of the Summit participants had to say in each of these four areas. This is certainly not a complete “report card,” despite the title of this post, but perhaps it might be a helpful start for others out there who are interested in doing an assessment of the extent of actual country commitments on some of the main action items laid out in the Communique. So, here goes: a country-by-country, topic-by-topic, quick-and-dirty summary of what the Summit participants declared or promised with respect to each of these issues. (Because this is so long, I’m going to break the post into two parts. Today I’ll give the info for Afghanistan–Malta, and Thursday’s post will give the info for Mexico–United States). Continue reading

Guest Post: High Level Reporting Mechanisms — A Promising New Tool To Fight Corruption

GAB is delighted to welcome back Gönenç Gürkaynak (Managing Partner at ELIG Attorneys-at-Law in Istanbul and 2015 Co-Chair of the B20 Anti-Corruption Task Force), who, along with his colleagues Ç. Olgu Kama (ELIG partner and B20 Anti-Corruption Task Force Deputy Co-Chair) and Burcu Ergün (ELIG associate), contributes the following guest post:

One of the most promising new tools for eradicating public sector corruption, especially in public procurement, is the so-called High Level Reporting Mechanism (“HLRM”), a concept that began under the 2012 G20 process and that has been advocated by various international institutions (mainly by the Basel Institute and the B20). An HLRM provides a reporting channel that companies can use to report corrupt behavior they encounter during a public process, such as a tender. An HLRM presents an alternative mechanism to companies who need to deal with corruption allegations swiftly, rather than waiting for the outcome of a criminal investigation. An HLRM can also provide an enforceable independent mechanism to resolve commercial disputes in countries where criminal law enforcement is unduly influence by politics. To be clear, an HLRM does not aim to replace formal, judicial reporting channels. Rather, the HLRM is used for rapid response and is advantageous particularly in situations where a swift clarification is critical for business, as when allegations of corruption affect a tender process that is still open. By quickly resolving such claims, an HLRM can both deter potential perpetrators and will generate more public trust in the procurement process. Continue reading

How Corruption Politics Facilitated Hungary’s Response to the Refugee Crisis

Politicians using xenophobia as a tool for their political benefit is unfortunately common; the past few years have seen populist, far-right parties across Europe take stances that involve stirring nationalist sentiments by portraying their countries as figuratively—and, in their eyes, sometimes literally—under attack by foreigners who have come to reside there. Still, even as those parties’ popularity increases, they have largely not yet succeeded in taking full control of government. Not so in Hungary, where Prime Minister Victor Orbán’s centralist, ultra-nationalist variant on the theme holds sway, and where the country’s escalating efforts to “keep Europe Christian” by excluding Syrian refugees (as well as many other predominantly Muslim migrants and refugees) are extreme even compared to its neighbors.

The reasons for Orbán’s rise to and maintain power are numerous and complex. What has largely gone overlooked in media reports so far, however, is the important role that corruption has played, first in helping Orbán to the premiership, and then in influencing his anti-refugee/migrant policy.

Continue reading

Should the TPP Address Corruption? If So, How?

The Office of the U.S. Trade Representative (USTR) says it is trying to include anticorruption pledges in the proposed Trans-Pacific Partnership (TPP) trade deal. According to USTR, it not only wants “commitments to promote transparency, participation, and accountability” in trade issues (commitments USTR claims it has already had some success securing recently), but also more general “commitments discouraging corruption . . . among public officials.” It’s not entirely clear what USTR means, particularly with respect to this latter suggestion that it is going to push for more general anticorruption pledges in the TPP. Maybe it doesn’t mean much – it might just be feel-good rhetoric, with little connection to what’s actually going on in the closed-door TPP negotiations. But suppose that USTR is sincere, and that it genuinely hopes to include some sort of anticorruption language in the final TPP deal. Is this a good idea? If so, what sorts of anticorruption commitments would be appropriate in a mega-regional trade agreement like the TPP?

The idea of incorporating anticorruption measures into trade deals is hardly novel. (See this panel summary for some high-level background). Last year, Colette’s post on this blog recommended adopting Transparency International’s suggested anticorruption measures for the proposed Transatlantic Trade and Investment Partnership (the T-TIP), though she also opposed addressing corruption through the multilateral WTO regime. Other commentators and civil society groups have pressed for the incorporation of anticorruption measures in other regional free trade agreements (for example, see here and here). With respect to the TPP, these prior discussions suggest several considerations that USTR negotiators should keep in mind if they are serious about pushing for more anticorruption language in this agreement: Continue reading

Dear Governments: Please Don’t Make Private Certification the Touchstone of an Adequate Anti-Bribery Program!!!

A little while back, I posted a couple of critical commentaries (here and here) about the efforts underway to develop an International Organization for Standardization (ISO) standard for corporate anti-bribery programs (ISO 37001), modeled on the already-existing UK standard developed by the British Standard Institute (BS 10500). (For those unfamiliar with these organizations or what they do, these standards are developed by a private consortium, and then private firms conduct–for a fee–audits of companies and provide a “certification” that the company is in compliance with the standard. These standards in the past have dealt with technical or quality control issues — the proposed anti-bribery standard is, to the best of my knowledge, the first ISO standard to deal with a legal issue of this type.) Without rehashing my earlier posts here, I raised questions both about how these certifications were supposed to work in practice, and about what they were for. I raised but dismissed the possibility that law enforcement might treat ISO/BS certification as an adequate indicator that a firm had a satisfactory compliance program (or that absence of ISO/BS certification as an indicator the compliance program was inadequate). I dismissed the possibility because lots of people (including those who work in the compliance certification business and those involved with the development of the ISO standard), assured me that such certification was not intended to have that kind of dispositive legal significance (even if it might be relevant to the law enforcement agency’s inquiry).

I would have left the matter there, and probably not written about it again, but for some remarks at last December’s World Bank International Corruption Hunters Alliance meeting. On a panel about “Fighting Transnational Bribery,” Detective Inspector Roger Cook, with the Operations area in the City of London Police’s Economic Crime Directorate, spoke with great enthusiasm about BS 10500, the model for the proposed ISO 37001. (This is perhaps unsurprising given that, as I just learned from his City of London police bio, he “contributed to the development and implementation of … BS 10500 and the developing ISO 37001.”) I don’t have a transcript or a video, nor am I a trained stenographer, but I tried to copy down Detective Inspector Cook’s remarks on this topic as close to verbatim as possible, and they went (according to my notes) more or less like this:

[If you’re a company, the BS 10500 standard] is going to give you a lot of comfort. Simply by getting accredited, then you have those adequate procedures that the UK Bribery Act requires companies to have [(that is, to satisfy the affirmative defense to the strict liability offense of failure to prevent foreign bribery)]. If the company has BS 10500 [certification], we’re not going to look much further, as long as they’re applying it properly. And an ISO standard [ISO 37001] is also in the works, about 18 months away. Think how good that would be, if every company going for a public contract were accredited. [We should] make that [certification] a condition for public contracts.

Now, Detective Inspector Cook was speaking in his personal capacity, not on behalf of the City of London Police or the British government. And he is not affiliated with the Serious Fraud Office (SFO), which has principal responsibility for bringing enforcement actions under the UK Bribery Act. But I nonetheless found these remarks quite troubling, so perhaps it’s worth restating the reasons why private anti-bribery certification or accreditation, according to something like the proposed ISO standard, should not be considered necessary or sufficient to establish the compliance defense under the UK Bribery Act, and should not be considered necessary or sufficient to engage in government contracting. Continue reading

Rescission of Contracts and Revocation of Licenses As Means to Combat Corruption

Article 34 of the UN Convention Against Corruption (UNCAC) generally requires that each State Party “take measures … to address the consequences of corruption.” In recognition of the fact that government contracts and licensing processes have been among the areas most prone to corruption and bribery–and of the fact that the threat of criminal punishment may not be a sufficient or even viable deterrent to such corruption–UNCAC Article 34 further declares that “States Parties may consider corruption a relevant factor in legal proceedings to annul or rescind a contract, withdraw a concession or other similar instrument or take any other remedial action.” Although that second sentence of Article 34 is not mandatory, State Parties–particularly demand-side countries with an unfortunate reputation for corruption in government contracting (such as Kenya, Guinea, Indonesia and Philippines) should adopt that principle into their national laws.

Law providing for the nullification of contracts or concessions procured through corruption would be a strong deterrent to bribe-paying by firms. Although such bribery is already illegal, in some cases criminal punishments are simply insufficient to deter corrupt practices conducted in demand-side countries. Often the threat of sanctions is low, and even though some companies have been hit with substantial sanctions, this loss has been mitigated by the profits acquired by the operation of the tainted contract or license. And a company might think twice before acceding to a bribe demand from a lower-level public official (or even a high-level official) if the company knows that, by paying the bribe, they may be putting the whole contract in jeopardy if the government later decides it wants to reneg on the deal. Moreover, if a demand-side country were to adopt a law that allows for nullification of any government contract or concession procured through corruption, it would send strong signals to that international community that this country will no longer tolerate these corrupt practices. Continue reading