Guest Post: The UK’s Compensation Principles in Overseas Corruption Cases–A New Standard for Aiding Victims of Corruption?

GAB is delighted to welcome back Susan Hawley, Policy Director at Corruption Watch, to contribute today’s guest post:

The issue of whether money from foreign bribery settlements should go back to the people of affected countries has generated a fair amount of heat over the years. Back in 2013, the World Bank’s Stolen Asset Recovery Initiative (StAR) asked whether countries whose people were most harmed by corrupt practices were being left out of the bargain in foreign bribery settlements. According to the StAR study, out of the $6 billion in monetary sanctions imposed for foreign bribery in 395 settlements between 1999 and 2012, only 3.3%, or $197 million, had been returned to the countries where the bribes were paid. Those statistics have provoked considerable controversy, as has the question whether the UN Convention Against Corruption (UNCAC) requires states parties to share money from foreign bribery settlements with affected countries. Yet the fact remains that when the huge fines paid by US and European companies for bribing officials in developing countries go into the treasuries of the US and Europe, while the people of those countries affected by that bribery get nothing, this creates a serious credibility and legitimacy problem for the international anticorruption regime.

For that reason, the UK enforcement bodies’ publication, this past June 1st, of joint principles to compensate overseas victims of economic crime is a welcome development, and provides another opportunity to think again about what is possible and what is desirable in terms of compensating the people of affected countries when companies get sanctioned for paying bribes. The UK Compensation Principles were first mooted and drafted at the 2016 London Anti-Corruption Summit; that Summit’s Joint Communique recognized that “compensation payments and financial settlements … can be an important method to support those who have suffered from corruption,” and led nine countries (though only four from the OECD) to commit to develop common principles for compensation payments to be made “safely, fairly and in a transparent manner to the countries affected.” The UK’s new principles are an effort to fulfill that Summit commitment. They commit the UK’s enforcement bodies to:

  • Consider compensation in all relevant cases;
  • Use whatever legal means to achieve it;
  • Work cross-government to identify victims, assess the case and obtain evidence for compensation, and identify a means by which compensation can be paid in a transparent, accountable and fair way that avoids risk of further corruption; and
  • Proactively engage where possible with law enforcement in affected states.

Interestingly, these principles have been in informal operation since late 2015, which helps shed some light on how these principles are likely to operate in practice. Continue reading

What’s Left Out of “Left Out of the Bargain”

A couple months back I finally had a chance to read the Stolen Assets Recovery Initiative (StAR)’s latest report, Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery. It’s a very useful report (though a lot of the preliminary material is pretty dull, but fortunately fairly skimmable). The key descriptive finding is that “significant monetary sanctions have been imposed [in foreign bribery cases] with hardly any of the respective assets being returned to the countries whose officials have allegedly been bribed.” The overall tenor of the report is that this is a problem. Although the report uses careful, measured language, I interpreted it as as a call for more aggressive action to force companies that admit to foreign bribery to pay significant fines, penalties, or other damages to the countries in which the bribery took place (either to those countries’ governments, or to NGOs or special funds). The report discusses, and seems to endorse, a range of related measures designed to further this overarching goal.

I’m sympathetic with StAR’s objectives, and with the idea that more can and should be done to help the victims of corruption. But the Left out of the Bargain report suffers from a number of serious flaws—chief among them the failure to give more than cursory attention to the possible adverse incentive effects of promoting duplicative enforcement or substantial redistribution of settlement proceeds. Continue reading