Guest Post: Lessons from the Campaign for the UK Bribery Act

Today’s guest post is from Robert Barrington, who is currently Professor of Anti-Corruption Practice at the University of Sussex’s Centre for the Study of Corruption, and who previously worked for Transparency International’s UK chapter (as Director of External Affairs from 2008-2013, and as Executive Director from 2013-2019).

The United Kingdom Bribery Act (UKBA) was enacted into law just over a decade ago, on April 8th 2010. This overhaul of UK law on transnational bribery was the culmination of a dozen years of vigorous campaigning by civil society advocacy groups, including Transparency International’s UK chapter (TI-UK). I was TI-UK’s Director of External Affairs for the final couple of years of that campaign, and I thought it might be helpful to reflect on some of the key lessons we learned in the course of the campaign for the UKBA. I explored these issues at greater length in a lecture marking the tenth anniversary of the UKBA, but in this post I want to focus on three of the most important lessons that we learned from the campaign for the UKBA, lessons that I hope will be useful to other civil society organizations engaged in similar campaigns elsewhere. Continue reading

Possible Reforms to Australia’s Approach to Corporate Criminal Liability: “Failure to Prevent”, Strict Liability, or Something Else?

Many of the most significant bribery offenses, both domestically and internationally, involve corporations. When, and under what conditions, should the corporation itself—as opposed to, or in addition to, the individual employees involved in the wrongdoing—be held criminally liable? The attribution of criminal liability is sometimes thought to be conceptually or philosophically problematic: As Baron Thurlow LC once observed, a corporation has “no soul to be damned and no body to be kicked.” Yet it is clear that corporations can do wrong, and the prospect, and extent, of corporate criminal liability can have significant impacts on corporate behavior. Various legal systems have developed different approaches, but in some jurisdictions there has been considerable dissatisfaction with the status quo, and agitation for reform.

Australia is one such jurisdiction. In response to concerns about the Australian legal system’s approach to corporate criminal liability (an issue that is important in, but not limited to, the corruption context), last April the Commonwealth Attorney General of Australia, Christian Porter, announced that the Australian Law Reform Commission (ALRC)—the Australian Federal Government’s highly influential law reform agency—would conduct an inquiry into this issue. The Terms of Reference required the ALRC to review, among other things, the policy rationale behind Australia’s current framework for imposing criminal liability on corporations, as well as the availability of alternate mechanisms for attributing corporate criminal liability. This past November, the ALRC released a 279-page Discussion Paper that thoroughly canvasses potential approaches to reforming Australia’s corporate criminal liability regime; the ALRC is currently receiving comments on that paper, which are due at the end of this month (January 31, 2020), and after considering these submissions, the ALRC will release its final report by April 30, 2020.

The ALRC paper covers many issues, but perhaps the most fundamental concerns the basic rules for attributing criminal responsibility to the corporation. The ALRC, and the Australian government, faces a choice among several plausible alternatives: Continue reading

Guest Post: New OECD Report Highlights the Importance of Non-Trial Resolutions in Foreign Bribery Cases

Today’s guest post is from Senior Legal Analyst Sandrine Hannedouche-Leric, together with Legal Analysts Elisabeth Danon and Brooks Hickman, of the OECD Anti-Corruption Division.

 In December 2016, Brazilian, Swiss, and US authorities announced that the Brazilian construction giant Odebrecht would pay a combined fine of USD 3.5 billion as part of a coordinated resolution of foreign bribery allegations—the largest foreign bribery resolution in history. Like many foreign bribery cases concluded in the last decade, the Odebrecht case was resolved outside a courtroom. In fact, non-trial resolutions, also referred to as settlements, have been the predominant means of enforcing foreign bribery and other related offences since the OECD Anti-Bribery Convention entered into force 20 years ago.

The OECD Working Group on Bribery recently published a report on Resolving Foreign Cases with Non-Trial Resolutions. The report develops a typology of the various non-trial resolution systems used by Parties to the Convention, and sheds light on the operation and effectiveness of these systems. It also looks at the challenges they raise for law enforcement authorities, companies and other stakeholders in the resolution process. The data collected for the Study confirms and quantifies the widely-recognized fact that settlement, rather than trial is the dominant mechanism for resolving foreign bribery cases. The report finds that close to 80% of the almost 900 foreign bribery cases concluded since the OECD Anti-Bribery Convention came into force have been concluded through non-trial resolutions, and among the three most active enforcers of foreign anti-bribery laws—the United States, Germany, and the United Kingdom—this percentage rises to 96%. Non-trial resolutions have been responsible for approximately 95% of the USD 14.9 billion (adjusted to 2018 constant US dollars) collected from legal persons sanctioned to date. Additionally, the report finds that coordinated multi-jurisdictional non-trial resolutions have been on the rise over the past decade. Such coordination, which would not be possible through trial proceedings, has permitted the imposition of the highest global amount of combined financial penalties in foreign bribery cases. Eight of the ten largest foreign bribery enforcement actions involved coordinated or sequential non-trial resolutions involving at least two Parties to the Convention.

The study was launched last month during the OECD Global Anti-Corruption and Integrity Forum, in a panel discussion moderated by the Head of the World Bank’s Integrity Compliance Unit. Building on the Study’s key findings, law enforcement officials from Brazil, France, the United Kingdom and the United States discussed the challenges associated with non-trial resolutions based on their first-hand experience, and explained why the use of these instruments will likely continue to grow in the future. In particular, they discussed how non-trial instruments can help overcome procedural hurdles and fundamental differences between legal systems and cultures, and thus facilitate cross-country coordination in the resolution of foreign bribery cases. (The video of the session is accessible online. See the section “Watch Live” for Room 1 starting at 8:13:00).

Brazil: A Model for International Cooperation in Foreign Bribery Prosecutions

Much ink has been spilled celebrating the extraordinary crackdown on corruption in Brazil over the past few years (including on this blog). Headlined by the massive Operation Car Wash (Portuguese: Lava Jato)—in which officials received nearly $3 billion in bribes to overcharge Petrobras, Brazil’s state-controlled oil company, for construction and service work—high-profile corruption investigations have swept through Brazil, threatening to upend its reputation as a bastion for unchecked graft. Although corruption in Brazil remains a serious problem, the extensive investigations have worked to elevate the nation as an inspiration for countries looking to address their own corrupt political systems and hoping to become “the next Brazil.”

In addition to the headline-grabbing investigations targeting the upper echelons of the Brazilian government, Brazilian authorities have also worked closely with U.S. authorities investigating bribery activity in Brazil, leading to significant penalties both under Brazilian law and under the U.S. Foreign Corrupt Practices Act (FCPA). This is a significant development, because it demonstrates the possibility for close collaboration on cross-border bribery cases between a developed country (usually on the “supply side” of transnational bribery cases) and a developing country (on the “demand side”). Commentators have complained that too often supply-side enforcers like the United States take an outsized role in transnational bribery cases, with the countries where the bribery takes place doing too little. Other commentators have cautioned that an increase in prosecutions by other countries, in the absence of some sort of global coordination mechanism, may lead to races to prosecution or to over-enforcement. China’s nearly $500 million fine of British pharmaceutical giant GlaxoSmithKline in 2014 for bribing Chinese doctors and hospitals was emblematic of these fears, providing an example of an aggressive, unilateral approach to demand-side enforcement – while putting DOJ in the unfamiliar position of pursuing FCPA violations as a cop late to the scene.

Through its recent enforcement actions, Brazil has provided a different model. While there have been successful joint enforcement actions in the past—such as the Siemens case—the recent series of coordinated U.S.-Brazil actions exhibit how developed and developing countries can work together in anti-bribery enforcement, sharing in the investigative responsibilities, negotiations with companies, and even the financial returns.

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Mixed Messages from the UK’s First Contested Prosecution for Failure to Prevent Bribery

In February 2018, the UK secured its first ever contested conviction of a company for “failure to prevent bribery.” Under Section 7 of the UK Bribery Act (UKBA), a company or commercial organization faces liability for failing to prevent bribery if a person “associated with” the entity bribes another person while intending to obtain or retain business or “an advantage in the conduct of business” for that entity. Following an internal investigation, Skansen Interior Limited (SIL)—a 30-person furniture refurbishment contractor operating in southern England—discovered that an employee at its firm had agreed to pay nearly £40,000 in bribes to help the company win contracts worth £6 million. Company management fired two complicit employees and self-reported the matter to the National Crime Agency and the City of London police. The Crown Prosecution Service ultimately charged SIL with failing to prevent bribery under Section 7. Protesting its innocence, SIL argued that the company had “adequate procedures” in place at the time of the conduct to prevent bribery; SIL, in other words, sought to avail itself of the widely-discussed “compliance defense” in Section 7(2) of the UKBA, which allows a company to avoid liability for failing to prevent bribery if the company can show that it “had in place adequate procedures designed to prevent persons associated with [the company] from undertaking” the conduct in question.

The case proceeded to a jury trial. The verdict? Guilty. The sentence? None. In fact, SIL had been out of business since 2014, so the judge had no choice but to hand down an absolute discharge—wiping away the conviction.

The hollow nature of the government’s victory has led some commentators to call the prosecution “arguably unprincipled” or even a “mockery of the UK criminal process.” Indeed, the bribing employee and the bribed individual had already separately pleaded guilty to individual charges under UKBA Sections 1 and 2, respectively, and the remaining shell of a corporation had no assets or operations. Other commentators pointed out that precisely because the company was dormant it would have been unable to enter into a deferred prosecution agreement (DPA), lacking assets to pay financial penalties or compliance programs to improve. Putting aside arguments about the wisdom or fairness of pursuing a prosecution in these circumstances, the SIL case sheds light on Section 7(2)’s “adequate procedures” defense. While the UK government has secured a few DPAs for conduct under Section 7—beginning with Standard Bank Plc in 2015—SIL is the first case in which the Section 7(2) “adequate procedures” defense was tested in front of a jury.

While the government argued that it prosecuted the case primarily to send a message about the importance of anti-bribery compliance programs, the UK government’s actions in the SIL case ultimately sends mixed messages to companies and may have counterproductive effects. Continue reading

The Curious Absence of FCPA Trials

As is well known, enforcement actions brought under the Foreign Corrupt Practices Act (FCPA) have expanded dramatically over the past decade and a half. With all this enforcement activity, someone unfamiliar with this field might suppose that the most important questions regarding the FCPA’s meaning and scope are now settled. But as FCPA experts well know, that is not the case; the realm of FCPA enforcement is a legal desert, with guidance often drawn not from binding case law but from a whirl of enforcement patterns, settlements, and dicta. As a result, many of the ambiguities inherent in the statutory language remain unresolved—even core concepts, such as what constitutes a transfer of “anything of value to a foreign official,” lack concrete legal decisions that offer guidance. While some claim that this ambiguity fades when the FCPA is applied to the facts at hand, past analysis shows that this may not always be the case.

The dearth of binding legal precedent in FCPA enforcement stems directly from the lack of FCPA cases that are actually brought to trial. Of course, most white collar and corporate criminal cases—like most cases of all types—result in settlements rather than trials. But a look at the major cases white collar cases going to trial in 2017, and the pattern of FCPA settlements, shows that FCPA trials are uniquely rare. In fact, FCPA cases are resolved through settlements more often than any other type of enforcement actions brought by the DOJ or SEC.

Why is this? Why are FCPA enforcement cases so rarely brought to trial, even compared to other white collar cases? The answer can help explain why FCPA case law is so sparse, and reveal whether this trend may change in the future.

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Guest Post: How Will Nationalist Election Outcomes in the US and UK Affect Foreign Anticorruption Enforcement?

Professor Rachel Brewster of Duke Law School and Mat Tromme, Project Lead & Senior Research Fellow at the Bingham Centre for the Rule of Law, contribute today’s guest post, which is based on discussions at a recent Bingham Center-Duke Law School FCPA Roundtable:

In the past year, we have twice seen voters make a significant turn toward nationalism. In June 2016, in a move that was largely motivated by protectionist views, the UK voted to leave the EU, and in November, the United States elected Donald Trump, who campaigned on an “America First” promise. What do these developments mean for US and UK enforcement of their respective laws against overseas bribery (the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act (UKBA), respectively)? Many worry that, insofar as government leaders view anticorruption laws as harming their country’s international competitiveness (a dubious assumption), then nationalistic fervor can lead to weaker enforcement. This is a reasonable concern in both countries—but a more careful analysis of the situation suggests uncertainty is greater in the UK than it is in the US.

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Guest Post: An Exercise in Underachievement–The UK’s Half-Hearted Half-Measures To Exclude Corrupt Bidders from Public Procurement

GAB is delighted to welcome back Susan Hawley, policy director of Corruption Watch, to contribute today’s guest post:

A year ago, in May 2016, the UK government gathered 43 nations around the world together at the London Anti-Corruption Summit to show their commitment to fighting corruption. The resulting declaration made a number of bold promises. One of the most important—though not one that grabbed a lot of headlines—was the announcement that corrupt bidders should not be allowed to bid for government contracts, and the associated pledge by the declaration’s signatories that they would commit to ensuring that information about final convictions would be made available to procurement bodies across borders. Seventeen signatories went further, making specific commitments to exclude corrupt bidders, while six countries pledged to establish a centralized database of convicted companies as a way of ensuring procurement bodies could access relevant information. (Three other countries committed to exploring that possibility.)

The London Anti-Corruption Summit was right to be ambitious about focus on this issue in its declaration. Research shows that the risk of losing business opportunities such as through debarment from public contracts ranks has a powerful deterrent effect—equal to that associated with individual executives facing imprisonment, and much greater than one-off penalties such as fines. Yet debarment of corrupt companies for public contracting is quite rare. The OECD Foreign Bribery report found that while 57% of the 427 foreign bribery cases it looked at spanning 15 years involved bribes to obtain government procurement contracts, only two resulted in debarment. Even the US which has a relatively advanced debarment regime and which debars or suspends around 5000 entities a year from public procurement, appears to debar very few for foreign bribery and corruption. And the UK does not appear to have ever excluded a company from public procurement, despite laws in place since 2006 that require companies convicted of corruption and other serious crimes to be excluded from public contracts.

Did the London Anti-Corruption Summit mark significant turning point in the UK’s approach to this issue? Having persuaded 43 countries to sign a declaration that included a commitment to exclude corrupt bidders, did the UK have its own bold new vision to implement that commitment domestically? Unfortunately, the answer is no. Continue reading

Guest Post: Corporate or Individual Liability? Converging Approaches to Fighting 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:

Combating international corruption has come a long way in the last decade. More and more jurisdictions are adapting and updating their legal systems in an effort to eradicate impunity for corruption crimes. Yet an important question persists: Who should be held primarily liable for corruption crimes, the individual or the company? The US and European countries have traditionally provided diverging answers to this question, but there now seems to be some evidence of an emerging convergence, though a consensus is yet to be reached.

In the United States—the pioneering legal system in terms of fighting international corruption—although individuals can be charged with violations of the Foreign Corrupt Practices Act (FCPA), it is the companies that are primarily held liable for FCPA violations. The US embraces a broad notion of corporate criminal liability, based on the principle of respondeat superior (the employer is responsible for the acts or omissions of its employees) and the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have employed this theory as the basis for FCPA settlements with scores of corporations, raking in hundreds of millions of dollars in fines. However, there have been relatively few FCPA cases brought against individuals. This may be due in part to the fact that it is often difficult to attribute a corrupt act to any one specific individual, though it may also be due to the DOJ’s and the SEC’s traditional focus on going after the “deep pockets” of the corporations that come under their scrutiny.

In contrast to the US, the focus of criminal law in continental European systems has typically been on the culpability of individuals; thus, the introduction of the concept of “corporate criminal liability” is a relatively new development. Traditionally, the continental European systems have taken the view that criminal punishment can only be imposed on grounds of personal culpability, and that organizations cannot be held liable under criminal law (societas delinquere non potest). To that end, some European jurisdictions have preferred imposing administrative liability on corporations for actions that are considered to be administrative (rather than criminal) offenses.

In terms of deterring corrupt acts, a broad notion of corporate criminal liability goes a long way. The willingness of US authorities to impose significant fines on corporations provides powerful incentives for corporations to self-police. Furthermore, the threat of criminal FCPA sanctions—and the associated “moral sanctioning” of criminal liability—may have a more powerful effect on corporations than would similar fines imposed as administrative sanctions. On the other hand, the threat of corporate criminal liability is likely not sufficient, on its own, to foster a compliance culture within an organization. In a legal environment in which individuals face a credible threat of prosecution for their personal roles in organizational corruption, corporations could maintain a stronger culture of compliance as the employees themselves would be legally responsible for their misconduct and therefore less likely to engage in (or turn a blind eye to) corrupt practices.

Even though significant differences remain among jurisdictions, it is an encouraging development that there now seems to be gradually converging views regarding corporate criminal liability among these different legal systems. Continue reading

Guest Post: Limited Corporate Criminal Liability Impedes French Enforcement of Foreign Bribery Laws

Frederick Davis, a lawyer in the Paris office of Debovoise & Plimpton, contributes the following guest post:

The U.S. Foreign Corrupt Practices Act (FCPA), adopted in 1977, prohibits bribery of foreign public officials. In 2000, France adopted its own law on foreign bribery, which generally prohibits the same conduct. Yet despite the similarity of the laws on the books, the FCPA has been vigorously enforced, with scores of settlements and large fines imposed on corporations, while in France, not a single corporation has been convicted of foreign bribery under the 2000 law—even though since that law’s passage, four large French corporations have entered into negotiated agreements with US authorities to settle alleged FCPA violations, paying more than US$3 billion in fines and other penalties. What explains this difference in enforcement?

While suspicions lurk that French authorities may not be terribly serious about fighting overseas corruption, the more plausible explanations lay the blame on other aspects of the French legal system. One difficulty is that French criminal investigations proceed very slowly, often taking ten years or longer. (At least some of the French corporations that negotiated outcomes with the U.S. DOJ were investigated for the same conduct in France; it’s likely that the U.S. authorities declined to defer to a French investigation without having any idea when it might end, or what the result would be.) Second, as Sarah Krys and Liz Loftus have pointed out in an earlier posts on this blog, France lacks a mechanism permitting a negotiated corporate outcome comparable to the “deferred prosecution agreements” and “non-prosecution agreements” (DPAs and NPAs) that the US authorities routinely used to resolve FCPA cases against corporations; even a corporate “guilty plea” is difficult and very rarely used in France. Just as important, though, and perhaps not sufficiently appreciated, is the difference between the two countries’ laws concerning corporate criminal responsibility, and the incentives those laws create for corporate decision-makers: Continue reading