Report on the OECD’s 6th Global Anti-Corruption and Integrity Forum

For the sixth year running the Organization for Economic and Cooperation is hosting a two-day conference on ethics and corruption.  This year’s theme is how corruption has eroded trust in government and is helping advance what Secretary General Gurria termed in his opening remarks the three destructive “isms” haunting the world today: populism, nationalism, and protectionism.

The organization’s members are 35 of the world’ s richest nations (all save Russia and the PRC), and despite extraordinary levels of wealth by any historical measure, and recent upbeat economic news, citizens across the 35 have soured on their governments.  Trust in government across the 35 is at a record low while cynicism and distrust in elected leaders is at an all-time high, and though the Secretary General put much of the blame for the current funk on the 2008 economic crisis and the still uneven and unbalanced recovery, corruption, he stressed, has done its part.  Revelations of wrong-doing at the highest levels of government coupled with the petty corruption that frustrates the delivery of basic government services has only deepened citizens’ suspicions in their government.  If OECD member states are to win back citizens’ confidence, and avoid those destructive “isms,” they cannot, he argued, ignore the corruption question.

For those unable to fund a trip to Paris or with a sponsor or client willing to foot the bill, the conference home page with the agenda is here.  Four things I found useful on day one: Continue reading

Improving Mutual Legal Assistance: Lessons from Asia

Back in 2014, Rick called for further analysis of mutual legal assistance (MLA) processes and potential reforms that would promote responsiveness to MLA requests in anticorruption cases (and others). As a follow-up, I wanted to highlight the findings of a recent report from the Asian Development Bank (ADB)/Organization for Economic Cooperation and Development (OECD) Anti-Corruption Initiative for Asia and the Pacific. The report, entitled “Mutual Legal Assistance in Asia and the Pacific: Experiences in 31 Jurisdictions,” provides examples of various obstacles to effective MLA, which I have sorted into two general categories: legal and practical. 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

Why the Repeal of the U.S. Publish-What-You-Pay Rule Is a Major Setback for Combating Corruption in the Extractive Sector

Bonnie J. Palifka, Assistant Professor of Economics at Mexico’s Tecnológico de Monterrey (ITESM) contributes today’s guest post:

Last Friday, following the U.S. House of Representatives, the Senate voted to repeal a Securities and Exchange Commission (SEC) regulation that required oil, gas, and minerals companies to make public (on interactive websites) their payments to foreign governments, including taxes, royalties, and “other” payments. The rule was mandated by Section 1504 of the 2010 Dodd-Frank Act, but had only been finalized last year. President Trump’s expected signature of the congressional resolution repealing the rule will represent a major blow to anticorruption efforts, and a demonstration of just how little corruption matters to his administration and to Congressional Republicans.

The extractive industry had lobbied against this rule, arguing that having to report such payments is costly to firms and puts them at an international disadvantage. Some commentators have supported their efforts, arguing, for example, that the Section 1504 rules are unnecessary because the Foreign Corrupt Practices Act (FCPA) already prohibits firms under SEC jurisdiction—including extractive industry firms—from paying bribes abroad. This argument misses the mark: The extractive sector poses especially acute and distinctive corruption risks, which the FCPA alone is unlikely to remedy if not accompanied by greater transparency. Continue reading

Equitable Sharing, Not Deference: How US FCPA Enforcers Should Accommodate Foreign Interests

Frederick Davis recently published two guest posts (see here and here) emphasizing some of the risks that arise when the US government pursues FCPA prosecutions against foreign corporations. He notes that European anticorruption administrators are regularly irritated by aggressive US action in this field and by the apparent discrepancy in the treatment of US and non-US corporations. He also notes that foreign corporations are reasonably worried about being charged twice for the same transgression: While European countries have addressed this concern through an international version of the double jeopardy bar (also known as ne bis in idem), that bar does not protect a corporation against a subsequent US prosecution. Moreover, as Mr. Davis notes, US enforcement agencies (as compared to their counterparts in Europe) have wider authority to charge, are more willing to assert power abroad, wield more procedural tools, and are less subject to judicial supervision in their charging and settlement decisions. To address these problems, Mr. Davis recommends, among other measures, that the US DOJ issue guidelines for when to defer to foreign judgments.

However, US deference to foreign judgments may not be the best solution. It could be true, as Mr. Davis worries, that US prosecutors are “becoming the ultimate arbiters” of foreign bribery cases (at least those involving multinational corporations). But if the US standard is indeed more stringent, then US hegemony could lead to more aggressive anticorruption prosecution across the board, a boon for anticorruption advocates. Since in certain situations competition among administrative and enforcement agencies can create a de facto “race to the top” in terms of standards, it might not be such a good idea for the US to adopt a more deferential posture toward foreign judgments in transnational bribery cases.

That’s not to ignore the significant problems that Mr. Davis describes. Given that the fines and other monetary penalties for corrupt business behavior can be enormous, US FCPA counterparts in other nations would be rightly dismayed if they lost out on the potential recoveries. If a Danish corporation listed on a US exchange bribes an official in Gambia, all three countries should be able to penalize the wrongdoers and share—though not necessarily equally—in the fines and other penalties recovered. If the penalties are appropriately distributed, we need not sacrifice the aggressive anticorruption regime of US hegemony. My response to Mr. Davis is that we need guidelines for distribution of recoveries, not necessarily guidelines for deferral to foreign judgments operating under differing, and less aggressive, standards.

Continue reading

When Should We Put Anticorruption Agencies in the Constitution?

To fight corruption more effectively, many countries have created specialized government institutions that focus primarily on corruption issues. Most common are specialized anticorruption agencies (ACAs) with investigative and/or prosecutorial functions, although some countries have also created specialized anticorruption courts, special coordinating bodies, or other entities. This trend has generated a great deal of debate, both about whether to create such specialized bodies at all and about how they should be designed (for example, whether ACAs should combine prosecutorial and investigative power). Absent from much of this debate, however, is a discussion of the means countries should use to create these specialized bodies—in particular, whether these specialized anticorruption bodies should be enshrined in the nation’s constitution, or should be created by ordinary law.

Anticorruption bodies vary quite a bit on the extent to which they are constitutionalized. Most existing ACAs and other anticorruption institutions—including many considered highly successful—are not mandated by the constitution. For example, Indonesia’s anticorruption agency (the KPK) and its anticorruption courts (the Tipikor courts) were created by ordinary legislation, as was Belgium’s anticorruption investigation body and Spain’s anticorruption prosecutor’s office. However, in other countries specialized anticorruption bodies are explicitly established (or required) by the constitution. For example, the Philippines’ anticorruption court, the Sandiganbayan, is enshrined in that country’s 1987 constitution. Indeed, the trend (if one can be discerned) seems to be in the direction of constitutionalization. Tunisia’s new constitution, adopted in 2014, includes a specialized anticorruption investigation body. Egypt’s 2014 constitution similarly includes a specialized anticorruption prosecutor. Mexico’s 2015 amendments constitutionalized three types of anticorruption agencies (investigative, prosecutorial, and judicial), as well as a coordinating body.

But should these agencies be constitutionalized? And if so, when? Continue reading

Laissez-nous Faire: France is Forgoing an Opportunity to Fight Corruption, But Maybe It is the Wrong One

In an ongoing exchange on this blog, Susan Hawley and Matthew Stephenson have debated the desirability and practicality of global standards for the settlement of foreign bribery cases (see here, here, here, and here). A key country at issue in this discussion is France, which has bucked the trend among its peer nations – including the U.S., the U.K., the Netherlands, Switzerland, and Germany – toward resolving foreign corruption cases through negotiated resolution. In fact, France has increasingly come under fire from organizations like the OECD, the EU, and Transparency International for its failure to hold corrupt companies accountable at all – over the past 16 years, the French government has not secured a single corporate conviction for overseas bribery. As Sarah convincingly argued on this blog, the reason is not that French companies are less corrupt or that French authorities are less capable, but rather that procedural barriers prevent productive investigation and resolution of cases. Primarily, the French civil law system lacks a settlement mechanism by which companies can negotiate lighter penalties in exchange for fines and cooperation. France is thus an important target for legal and policy reform affecting out-of-court settlement procedures.

Until very recently, the French government was poised to undertake such reform. Late last year, French Minister of Finance Michel Sapin developed legislation aimed at strengthening the fight against corruption. The draft version of Loi Sapin II, as it is known, contained provisions that put in place a new national anticorruption agency with investigative and oversight powers, enhanced compliance requirements, greater protections for whistleblowers, and stricter disclosure protocols for public officials. The most powerful and controversial element of Loi Sapin II, however, was the “convention de compensation d’intérêt public” (CCIP). Also known as a transaction pénale, the CCIP is a settlement mechanism modeled on the American deferred prosecution agreement (DPA). This tool would have allowed agreements between companies and the government, by which an accused corporation would institute compliance measures and pay fines (capped at 30% of average revenue over the preceding three years) in lieu of facing prosecution.

Just before the text of the law was formally presented, however, the Conseil d’État – the government body that must review draft legislation sponsored by non-parliamentarians before it can be introduced in Parliament – issued a negative opinion on the CCIP. When the text was submitted to the government on March 30, it did not include the transaction pénale. Procedurally speaking, the provision isn’t yet dead – it may still be reintroduced by members of Parliament. Nevertheless, the opinion of the Conseil d’État says a lot about France’s approach to anticorruption, trends in global enforcement, and the prospects for universal settlement standards in a world where legal cultures differ substantially.

Continue reading