Tag Archive | "settlement"

Is less more? Settlement Agreements in the Fight Against Bribery of Foreign Public Officials

OECD Anti-Bribery Ministerial Meeting

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions[1] (the Convention) will celebrate its 20th anniversary at the end of this year. There is a consensus that the Convention has achieved an important change in the way that foreign corruption is perceived. Bribery is no longer seen as “business as usual” and there is a “higher level of consciousness on the part of the media and public opinion.”[2] It has also been successful making countries equip themselves with rules against international bribery. Perhaps one of the most important examples is how the Convention served as a catalyst for the adoption and refinement of systems of liability of legal persons.[3]While research conducted in 2014 by the OECD shows that “enforcement of anti-bribery laws has drastically increased since the entry into force of the Convention,”[4] more skeptic voices point out that active investigation and prosecution is weak or completely inexistent in most of the countries[5]. Recent developments show that more and more countries have introduced settlement procedures into their legal systems that allow the public prosecutor and the investigated company to reach an agreement and suspend charges provided that the company accepts a series of terms. These procedures have been used to resolve some of the most important enforcement actions not only in the United States but also in other jurisdictions, including in countries seen as weak performers under the Convention.

This subject raises various interesting questions related to the reasons, limits, and necessary safeguards that are inherent to negotiated settlements in bribery allegations. After providing background information on the way the Convention and related instruments operate, this article will discuss how more and more countries are introducing and using settlement procedures. The possible reasons will be analyzed as well as the main critiques. Finally, the article will discuss necessary safeguards to assure credibility, legitimacy and effectiveness of these proceedings.

Background

The Convention was signed in December 1997 and has been ratified by all 35 OECD member countries and 8 non-OECD countries.[6] Since then, several other international anti-bribery instruments and initiatives have been adopted,[7] but the Convention retains unique features including that it (1) specifically targets the “supply side” of bribes and, therefore, targets the behavior of companies that do business abroad and (2) established a control mechanism which seeks to monitor implementation efforts by member countries in a strict, comprehensive, and systematic way using mutual evaluation and peer pressure to induce compliance. The body that carries out the monitoring is the OECD Working Group on Bribery (the Working Group), a group composed of representatives from State Parties to the Convention. Today, the Working Group controls not only the implementation of the Convention but also compliance with the 2009 Anti-Bribery Recommendation (the Recommendation) and the Good Practice Guidance on Internal Controls, Ethics and Compliance,[8] two soft law instruments that were added to the body of OECD anti-bribery “rules.” In order to comply with the Convention, countries have to, first, adopt a robust regulatory system criminalizing foreign bribery, and second, equip themselves with the willingness and means to implement that system.

Research shows that over two-thirds of foreign bribery cases are settled out of court.[9] However, until 2014 only six member countries had concluded foreign bribery cases using settlement procedures.[10] In the U.S., these procedures usually take the form of a deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA). Appellations, requirements, and procedures vary between countries but the principle is the same: give enforcement authorities and private entities or individuals the possibility to reach an agreement and avoid prosecution.

Neither the Convention nor the Recommendation require parties to set up settlement procedures. Participation of member countries in the Working Group gives them the opportunity to take part in the examination of systems established in other countries and in discussions on best practices. Important events in the last year show how more and more countries are deciding to follow the example of their peers and adopt settlement procedures.

More countries are adopting settlement procedures

In August 2013 Brazil introduced the possibility of an out-of-court settlement called a “leniency agreement”[11] and the UK introduced DPAs into its legal system on 24 February 2014[12]. Since its introduction, it has been used three times to resolve bribery investigations. It’s most recent and probably most important settlement occurred in the Rolls-Royce case. With a total combined monetary sanction of $800 million,[13] the case entered into the list of the top five global foreign bribery enforcement actions. The company was under investigation in three jurisdictions, the U.S., the UK and Brazil, for conduct that occurred in several countries over decades. Additionally, on December 9, 2016, France adopted the “Loi Sapin II” that established the possibility of a “Public Interest Judicial Agreement,”[14] a settlement procedure very similar to the American DPA[15]. Finally, recent events in Argentina offer another interesting example.

In March 2017, the Working Group urged Argentina to comply with the Convention. In fact, Argentina has not yet established corporate legal liability and cannot, therefore, prosecute companies when foreign bribery allegations arise.[16] The draft bill on corporate criminal liability (the draft bill) was high on the political agenda, and the executive power transferred it to the legislative power for an opinion and possible amendments. In the meantime, the discovery of Odebrecht’s bribery scheme that touched 15 countries around the globe had deep effects, especially, in Latin America.[17] In June 2017, Argentina’s legislative body issued amendments to the draft bill introducing Section 37, which allows for “administrative collaboration agreements to be executed for events taking place prior to the enactment of the law.”[18] The bill not only introduces the possibility of a settlement procedure, but this procedure can be applied retroactively.

The retroactive application of law, especially in criminal matters, is usually exceptional. One cannot be held liable for something that was not considered illegal at the time the act was committed. A possible exception to this principle is when the law is more favorable to the prosecuted party.[19] The order of events that lead to the proposed amendments of Argentina’s legislative body gives the appearance that the possibility to apply Section 37 retroactively was introduced for the sole purpose of giving Odebrecht the opportunity to settle with the Argentinian authorities. This leads us to consider the adequacy of settlement procedures as a possible outcome of bribery investigations.

The pros and cons of settlement procedures in foreign bribery cases

Corporate structures and bribery schemes are becoming increasingly complicated and sophisticated. Settlement procedures, because they are of a voluntary nature instead of a punitive and imposed nature, have various advantages for public authorities as well as for the investigated companies. The prosecutor bears no burden of proof. Rather, the company must be willing to cooperate with the investigation and provide all necessary information, thus not only reducing important costs but also providing the authorities with crucial information that it might not obtain otherwise. A company’s reputation might be less affected by a settlement agreement than by a formal judicial conviction because, amongst other factors, the company only need agree to a set of facts and terms without having to accept actual culpability to conclude the settlement. In the same line, considering different legal traditions, a settlement agreement could have more success in countries that put more weight on individual criminal sanctions over corporate criminal sanctions.[20] However, the most important advantage for companies is likely that “[t]here is no set list of terms, and one of the attractions of DPAs is that bespoke terms can be created to suit a particular case, in a way that is not possible when a corporate is sentenced after a conviction.”[21] Because a settlement procedure is negotiated, a company could demand, for example, that it will not be barred from future public tenders or contracts already won.[22]

However, several critiques have emerged, concerning mainly two points. The first one is related to the non-criminalizing nature of settlement agreements. It is argued that criminal prosecution, not negotiation, is the adequate procedure to sanction important criminal acts committed by companies.[23] The second concerns the procedure itself. Because there is no actual judicial procedure and the negotiations are made between the prosecutor and the companies, the settlement may appear uncertain, illegitimate, and non-transparent.[24] Additionally, because bargaining power can vary greatly between companies the results of the agreements can also appear to unfairly favor big corporations.

As explained above, the majority of foreign bribery cases are concluded with a settlement agreement. Recent events exposed suggest a probable increase in this trend. The U.S. Department of Justice has even introduced a new “Pilot Program” [25] (the Pilot Program), which includes a whole new category of enforcement action, declination with disgorgement. This action is a highly simplified agreement. It can be used only when the company has voluntarily self-disclosed the acts committed and the investigations are closed without imposition of penalties despite violations of the Foreign Corrupt Practice Act. However, the company must agree to fully cooperate with the investigation, timely remediate the violations, and disgorge all profits made from the bribery.

Settlement procedures will therefore not only be more numerous, but it seems that new simplified forms might emerge. The Argentinian example shows, however, the important bargaining power that a corporation holds. This power has a stronger hold when it comes to settlement procedures in comparison to judicial procedures. It is thus vital that safeguards are installed and respected in order for the system to remain legitimate and effective.

Necessary Safeguards

In order to preserve justice and effectiveness, countries must ensure that the system is applied in a uniform way and that whatever enforcement actions public authorities use, those actions will deter companies from reiterating or committing acts of bribery. To that end, what matters is really what the company has to lose. If monetary and other forms of penalties under settlement agreements are higher than the benefits that the companies earn from corrupt transactions, then it is a deterrent enough. However, information about settlement procedures needs to be detailed and available in order to control for uniformity and effectiveness. The Working Group recommends that settlements should “respect the principle of due process, transparency and consistency […] the outcome of settlement negotiations should be made public, where appropriate and in conformity with the applicable law, especially the reasons why the settlement was appropriate, the basic facts of the case, the legal or natural persons sanctioned, the sanctions agreed, and the terms of the agreement.”[26] It seems that countries are on their way to adopting more detailed guidelines, principles, and sometimes rules to help inform prosecutors when they are concluding settlements.[27] However, guidelines are not binding upon prosecutors. In some countries, judges need to approve the settlement but this is not always systematic.

The Working Group, NGOs active in the anti-bribery sector, and the general public must not lose sight of these aspects and monitor closely the developments in this area in order to ensure that what has been accomplished by the existence of the Convention in the last 20 years will not be undermined by obscure procedures that can result in fake compliance.

 

Samantha Bloch is a LLM student at the University of Denver Sturm College of Law and a staff editor on the Denver Journal of International Law and Policy.

_______________________________________________________________________________________________________________________________________

[1] Convention on Combating Bribery of Foreign Public Official in International Business Transactions, Dec. 17, 1997, 37 I.L.M. 1 (entered into force Feb. 15, 1999).

[2] Nicola Bonucci & Patrick Moulette, The OECD Anti-Bribery Convention 10 Years on, Oecd Observer (Dec. 2007- Jan. 2008), http://oecdobserver.org/news/archivestory.php/aid/2475/The_OECD_Anti-Bribery_Convention_10_years_on.html.

[3] Org. for Econ. Co-operation and Dev. [OECD], The Liability of Legal Persons for Foreign Bribery: A Stocktaking Report, at 13, (Dec. 9, 2016), http://www.oecd.org/daf/anti-bribery/liability-of-legal-persons-for-foreign-bribery-stocktaking-report.htm.

[4] OECD, OECD Foreign Bribery Report: An Analysis of the Crime of Bribery of Foreign Public Officials, at 7, (Dec. 2, 2014), http://www.oecd.org/corruption/oecd-foreign-bribery-report-9789264226616-en.htm
http://dx.doi.org/10.1787/9789264226616-en [hereinafter OECD Foreign Bribery Report].

[5] Transparency Int’l, Exporting Corruption Progress Report 2015: Assessing Enforcement of the OECD Convention on Combating Foreign Bribery, at 7, (Aug. 20, 2015), https://www.transparency.org/whatwedo/publication/exporting_corruption_progress_report_2015_assessing_enforcement_of_the_oecd.

[6] Oecd, OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, http://www.oecd.org/corruption/oecdantibriberyconvention.htm (last visited Sep. 8, 2017).

[7] See, e.g., United Nations Convention Against Corruption, adopted Oct. 31, 2003, 2349 U.N.T.S. 41 (entered into force Dec. 14, 2005); The Wbg and the United Nations Office on Drugs and Crime [UNDOC], Stolen Asset Recovery Initiative, G20 Anti-Corruption Working Group, https://star.worldbank.org/star/about-us/g20-anti-corruption-working-group(last visited Sep. 10, 2017).

[8] OECD, Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions (With Amendments Adopted by Council 18 February 2010 to Reflect the Inclusion of Annex II, Good Practice Guidance on Internal Controls, Ethics and Compliance) (Nov.25, 2009), http://www.oecd.org/corruption/oecdantibriberyconvention.htm.

[9] OECD Foreign Bribery Report, supra note 4, at 19.

[10] Id. at 20.

[11] Felipe Rocha dos Santos, Felipe Rocha dos Santos: New Guidance for Brazil Anti-Corruption Settlements, The Fcpa Blog (Sep. 7, 2017, 7:18 AM), http://www.fcpablog.com/blog/2017/9/7/felipe-rocha-dos-santos-new-guidance-for-brazil-anti-corrupt.html.

[12] Serious Froud Office, Deferred Prosecution Agreements, https://www.sfo.gov.uk/publications/guidance-policy-and-protocols/deferred-prosecution-agreements/.

[13] Press Release, U.S. Dep’t of Just., Rolls-Royce Plc Agrees to Pay $170 Million Criminal Penalty to Resolve Foreign Corrupt Practices Act Case- Company Agrees to $800 Million Global Resolution with Authorities in the Unites States, The United Kingdom and Brazil, DOJ Press Release 17-074 (Jan 17, 2017), https://www.justice.gov/opa/pr/rolls-royce-plc-agrees-pay-170-million-criminal-penalty-resolve-foreign-corrupt-practices-act.

[14] Cyrille Mayoux, Loi Sapin II: Le Nouvel Arsenal Répressif, Uggc Avocats (Feb. 14, 2017), https://www.uggc.com/2017/02/14/loi-sapin-ii-nouvel-arsenal-repressif/, (Called in French a “convention judiciaire d’intérêt public”, translated by us).

[15] Stephanie Faber, New French Anti-Corruption Law “Sapin II”, The Anticorruption Blog (Jan. 4, 2017), http://www.anticorruptionblog.com/france/new-french-anti-corruption-law-sapin-ii/.

[16]Press Release, OECD, Argentina Must Urgently Enact Corporate Liability Bill to Rectify Serious Non-Compliance with Anti-Bribery Convention (Mar.24, 2017), http://www.oecd.org/corruption/argentina-must-urgently-enact-corporate-liability-bill-to-rectify-serious-non-compliance-with-anti-bribery-convention.htm.

[17] Michael Griffiths, The Odebrecht Fact Sheet, Global Investigations Rev. (Apr. 18, 2017), http://globalinvestigationsreview.com/article/1129308/the-odebrecht-fact-sheet.

[18] Baker McKenzie, Draft Bill- Corporate Criminal Liability, Lexology (June 21, 2017), https://www.lexology.com/library/detail.aspx?g=487a884e-d97a-4fba-b795-c3e7f6d5d5f1.

[19] Editors, Today’s Law and Yesterday’s Crime: Retroactive Application of Ameliorative Criminal Legislation, 121 U. Pa. L. Rev. 120, 120 (1972).

[20] Bonucci & Moulette, supra note 2.

[21] Ben Morgan, Joint Head of Bribery and Corruption, Serious Froud Office, Speech at a Seminar for General Counsel and Compliance Counsel from Corporates and Financial Institutions Held at Norton Rose Fulbright LLP, https://www.sfo.gov.uk/2017/03/08/the-future-of-deferred-prosecution-agreements-after-rolls-royce/.

[22] https://www.reuters.com/article/us-argentina-odebrecht/argentina-bans-brazils-odebrecht-from-new-projects-for-12-months-idUSKBN19O2JV.

[23] Ben Morgan, supra note 21.

[24]Rocha dos Santos, supra note 11.

[25] Dep’t of Just, Crim. Division, The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance (April 5,2016), https://www.justice.gov/criminal-fraud/pilot-program.

[26] OECD Foreign Bribery Report, supra note 4, at 20.

[27] See, e.g., Rocha dos Santos, supra note 11; Serious Froud Office, supra note 12; U.S. Dep’t of Just, Crim. Division, The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance (April 5,2016), https://www.justice.gov/criminal-fraud/pilot-program.

Posted in 1TVFA Posts, 2Featured Articles, DJILP Staff, Samantha BlochComments (0)

Sources: Fox News, LA Times, Washington Post

News Post: Israel Continues Settlement Building

Sources: Fox News, LA Times, Washington Post

Sources: Fox News, LA Times, Washington Post

Since 1967, Jerusalem has been part of the disputed territory between Israel and Palestine.  Israel captured the city and annexed the area to solidify its control of the holy city. Despite Israel’s annexation, Jerusalem has not been internationally recognized as Israeli territory or as the claimed future capital of Palestine. On September 27, Israel approved plans to build 1,100 housing developments in Gilo, a Jewish enclave in east Jerusalem.  The approval came the week after Palestine sought a bid for membership in the United Nations. The construction plans met a waive of disapproval, not only from Palestine, but also from the Mideast “quartet” – the United States, United Nations, European Union, and Russia.

Following Palestine’s bid for UN membership last week, the quartet called for Israel and Palestine to resume peace talks for the first time in over three years. The quartet set a negotiation date between the two belligerent states for the end of 2012.  The Obama Administration has continually disapproved of Palestine’s bid for UN membership, and Secretary of State Hillary Rodham Clinton recently released a statement contending that Israel’s approval of such housing units in East Jerusalem is “counterproductive to our efforts to resume direct negotiations between the parties.” The Obama Administration was “deeply disappointed” by Israel’s announcement of the development plans.

The United Nations and European Union have also criticized the development plans. Richard Miron, the spokesman for UN special coordinator for the Middle East peace process, stated that the proposed development “sends the wrong signal at this sensitive time.” EU’s foreign policy chief, Catherine Ashton, also issued a statement that Israel’s decision “should be reversed.” The Mideast quartet has called for peace settlements between the two states, however Palestine has demanded that all of Israel’s construction immediately halt in order for any peace talks to resume between the two countries. Saeb Erekat, the chief Palestinian negotiator, calls Israel’s development project “1,100 no’s to the resumption of peace talks.”

Israel refuses another construction freeze, which it did last year after Palestine’s pleas. Israeli Prime Minister Benjamin Netanyahu downplayed the decision and argued that “[w]e build in Jerusalem. Period, the same way Israeli governments have been doing for years, since the end of the 1967 war. We build in Jewish neighborhoods. The Arabs build in Arab neighborhoods. That is the way the life of this city goes on and develops for its Jewish and non-Jewish residents alike.” Israel has also defended the construction from a logistical point of view, asserting that Jerusalem’s “housing crunch” has made the new construction a necessity. The expansion will include government buildings, a school and an industrial park.

Israel’s current construction plans disregard to the “Roadmap” endorsed by the UN Security Council in resolution 1515 in 2003. The Roadmap “constitutes a negotiating framework for the resolution of the Israeli-Palestinian conflict.” Many argue that Israel’s planned housing developments in east Jerusalem would undermine peace talks as outlined in the agreed upon Roadmap and therefore would violate international law via Israel’s treaty with Palestine. UN representative Richard Miron stated that “[s]ettlement activity is contrary to the Roadmap and to international law and undermines the prospect of resuming negotiations and reaching a two-state solution to the conflict.” While Israel may have valid reasons for its new housing units in east Jerusalem, its proposed construction has not met the approval of many international authorities and its plans will be faced with criticism going forward. Israel appears to be steadfast in its construction plans and will continue to build despite resistance from the international community.

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