Whistling in Chorus: The Potential Impact of the Rise of Parallel Prosecutions on Whistleblower Regimes

A few months ago, Chinese officials announced a number of new incentives for whistleblowers to come forward to disclose corporate wrongdoing: pledging to develop protection plans for whistleblowers when necessary to “prevent and end acts of retaliation” and increasing the rewards whistleblowers could potentially receive to approximately $33,000 for “actionable information” (with even greater sums available for “significant contributions of information”).  While these policies are fascinating in their own right, they also feed into a larger discussion that has been taking place both on this blog and in other forums, regarding what impact, if any, an increased commitment to anticorruption norms by demand-side countries may have upon the current anticorruption regime. A number of authors have already discussed this phenomenon both in broad strokes and specifically within the context of China’s increased enforcement of anticorruption laws (though some have suggested China’s recent, high-profile corruption prosecutions, including a $490 million fine of GlaxoSmithKline, may serve as a cover for protectionist policies).  One area that may warrant further consideration, however, is the likely impact that the rise of demand-side prosecutions and the resulting potential for parallel enforcement by demand-side and supply-side countries may have upon these states’ whistleblowing regimes.

While the ways in which the increased prevalence of demand-side corruption prosecutions will impact the interactions between supply- and demand-side countries’ anticorruption regimes remains unclear, this phenomenon seems likely to result in one of two possible outcomes with respect to states’ attitudes towards whistleblowers. First, countries may perceive some benefit to ensuring that they are the only–or, at the very least, the first–government to receive a whistleblower’s report.  Second, states may alter their whistleblowing policies to reflect the fact that whistleblowers can potentially report to, and be rewarded by, both demand- and supply-side countries.  While the impact of these different scenarios on the ways in which whistleblowing protections and incentives will develop over time may be quite different, both appear disadvantageous to states’ anticorruption efforts, to the whistleblowers themselves, or both.

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A Problematic Proposed Whistleblowing Law in Switzerland

Switzerland is currently not a particularly hospitable country for whistleblowers.  The anti-retaliation protections provided to potential whistleblowers are relatively sparse – individuals fired from their jobs can, at best, hope to receive up to the equivalent of six months of their salary rather than reinstatement – and there are few legislative incentives in place to encourage individuals to report corruption or other forms of corporate wrongdoing.  Moreover, not only are the country’s laws rather harsh when it comes to encouraging and protecting whistleblowers in the private sector, commentators have noted the “brutally hard line” that the Swiss government has taken in a number of high-profile whistleblower prosecutions.

Unfortunately, a proposed law which has passed the country’s Council of States and will be considered by its National Council, initially billed as an attempt to address ambiguities within the current whistleblower system, appears likely, if enacted, to make an already hostile climate for whistleblowers even worse.

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Guest Post: India’s Whistleblower Protection Act — An Important Step, But Not Enough

Christine Liu, an associate at Cravath, Swaine & Moore’s New York Office, contributes the following guest post:

As Raj noted in his last post, the recent election of Narendra Modi as prime minister of India demonstrates that the Indian population wants change and supports actions against corruption (as do recent polls, such as the Lowy Institute study, which found that 96 percent of Indians believe corruption is holding the country back, and 92 percent believe that reducing corruption should be one of the government’s top priorities). One of the most important obstacles to fighting corruption in India has been the lack of adequate whistleblower protections. Individuals reporting incidents of bribery or corruption faced numerous hurdles, including verbal threats, physical violence, and ostracism. Others encountered workplace retaliation. Confronted with these risks, many potential whistleblowers chose to remain silent.

But there are encouraging signs that this may change. On May 14, 2014, Indian President Pranab Mukherjee cleared the way for the Whistleblowers Protection Act. This action represents a much-needed change from the history of delay surrounding the original bill, which was first introduced in August 2010 and then took years to pass the two Houses of Parliament—it passed in Lok Sabha on December 11, 2011 and in Rajya Sabha on February 21, 2014. The new whistleblower law is a significant achievement. Nonetheless, the law has some important limitations, and there are outstanding concerns about whether the law will be enforced effectively and foster public confidence. Continue reading

Rethinking Kiobel: Is there Room for Human Rights in FCPA Enforcement?

Today is the one-year anniversary of the U.S. Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co. In its decision, the Court narrowed the admissibility of Alien Tort Statute (ATS) claims related to extraterritorial human rights abuses, ruling that such claims are not actionable unless the claim has a sufficient nexus to U.S. territory. What kind of nexus is enough for an ATS case arising from exterritorial conduct? For cases involving foreign multinational companies, such as the defendant Royal Dutch Petroleum in Kiobel, a “mere corporate presence” in the U.S. is not enough.

A striking feature of this holding is the clear contrast between how a “mere corporate presence” in the U.S. is not enough for an ATS claim based on extraterritorial conduct, but is sufficient for a Foreign Corrupt Practices Act (FCPA) prosecution. Although Royal Dutch Petroleum’s “mere corporate presence” in the U.S. was not a sufficient basis for an ATS claim, if these human rights abuses were tied to corruption for the retention or solicitation of business in Nigeria (and involved U.S. interstate commerce — a requirement not difficult for the DOJ and SEC to overcome), Royal Dutch Petroleum could be liable for FCPA violations. As a foreign multinational company, Royal Dutch Shell Company lists its shares on the New York Stock Exchange and prepares filings for the SEC. Such activity is sufficient for establishing FCPA jurisdiction.

This suggests a possible strategy for human rights advocates dismayed by the Kiobel decision: Perhaps it might be possible to more aggressively utilize FCPA enforcement for circumstances in which corporate accountability for human rights abuses is tied to bribery. Continue reading