Market for Bundles: A New Stage of Foreign Anti-Bribery Enforcement

Market for Bundles: A New Stage of Foreign Anti-Bribery Enforcement

Market for Bundles: A New Stage of Foreign Anti-Bribery Enforcement

Branislav Hock

Catching and punishing corrupt companies using civil and criminal law has been a dominant strategy to curb transnational bribery. Yet, it has largely been a business lobby that stood behind the internationalization of anti-bribery enforcement. Most notably, following the ‘Watergate’ scandal and the adoption of the Foreign Corrupt Practices Act (FCPA), the American business lobby worked hard to subject non-American businesses to similar standards.

They were successful. The OECD Anti-Bribery Convention and the extraterritorial jurisdiction introduced under the 1998 amendments to the FCPA have changed the playing field. The US authorities have sanctioned more non-American businesses for their overseas bribes than companies based in the United States (see Hock). More recently, other enforcement authorities have started enforcing their own anti-bribery laws. Consider SBM Offshore, Telia Company, and Rolls-Royce, which all entered into global foreign bribery settlements,  and agreed to pay fortunes to US, UK, Brazilian and Dutch authorities. These global settlements indicate that the time when the US was the only enforcer of foreign anti-bribery laws has passed. The enforcement landscape is undeniably becoming global.

Foreign bribery cases often include largely un-related acts of bribery

We need to rethink our assumptions about foreign anti-bribery enforcement. Most notably, prosecutors, practitioners, and researchers – in building up their strategies, compliance programs and theories – might assume that foreign bribery cases are those that include largely homogenous acts of bribery. For example, common sense may indicate that a bribery scheme related to a project in Indonesia is substantively different from a scheme related to another project in Saudi Arabia, especially when there is a gap of 15 years between the schemes. Yet, this premise should not be taken for granted.

My own research shows that many foreign bribery cases bundle unrelated acts of bribery. National enforcement authorities such as the United States Department of Justice (DOJ) have made anti-bribery bundling not a mere theory. At the end of 2014, Alstom—a French-based corporate group that designs, constructs and provides services related to power generation facilities, power grids and rail transportation systems—settled with the DOJ (see press release). The group was willing to pay a $772 million fine for its alleged role in schemes that involved the bribery of government officials in countries around the world, including Indonesia, Saudi Arabia, Egypt, the Bahamas and Taiwan.

Alstom agreed to pay despite the fact that several of the schemes had happened up to sixteen years before the settlement. For example, Alstom pleaded guilty to violating the books and records and internal controls provisions of the FCPA even in cases where it was not necessary for it to comply since it had delisted from the New York Stock Exchange. In other words, it is very likely that Alstom might have been able to successfully defend in court some of the allegations that it instead settled.

Large corporations “love” anti-bribery bundles

Large corporations keep buying these settlement bundles. Bundling proved worthwhile not only to the French giant. Siemens, Daimler, Total, and other non-US corporate groups priced the possibility to defer their prosecution by reaching a negotiated bundle. These businesses did not mind that parts of these bundles were controversial. In other words, being without corporate sins is perceived as extremely valuable, even if it requires paying for allegations that could have been defended in front of courts. The key issue is to avoid criminal prosecution.

Some could say that bundling undermines the rule of law elements, including the accountability of government, fundamental rights and access to justice. Indeed, anti-bribery bundling implies that a statute of limitation, evidentiary difficulties and jurisdictional limitations may not matter so much. So why would businesses want national enforcement authorities to sell bundles?

Large corporations will press states to cooperate

Think twice. History shows that once the FCPA enforcement was unavoidable, American businesses wanted everyone to comply with the US standard. But businesses face a new challenge: they can be prosecuted and sanctioned in multiple jurisdictions. As this is costly, their second-best option is to buy a global anti-bribery bundle that protects them from such overlapping prosecutions. Indeed, recent foreign anti-bribery settlement bundles such as Telia Company and Rolls-Royce indicate that US, UK, Dutch and other enforcement authorities can act more as team-mates than competitors. But this does not always happen. If the historical pattern is anything to go by, businesses will again need to lobby states to cooperate more closely and negotiate bundles together once and for all.

This internationalization of foreign anti-bribery enforcement goes way beyond the problem of jurisdictional overlaps. It is also a problem of substance. Ignoring the bundling of bribery schemes could foster doubts about our ability to fully understand the dynamics of foreign anti-bribery enforcement. Just as at the time when businesses lobbied for the introduction of international anti-bribery conventions in 1990s, such as the OECD Anti-Bribery Convention, it may be again a business lobby that will attempt to change the wheels of commerce. In doing so, they will press states to cooperate more closely in tackling transnational corruption and bribery. Hopefully, the thriving trade in buying a good ethical standing will pass part of its revenues to society at large.

Dr Branislav Hock is a lecturer in Counter Fraud Studies at the University of Portsmouth. He is also a member of the European Compliance Center.