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Neil Macaulay

The Inaugural World Bank Group Sanctions System Annual Report FY18 Reveals a Sharp Rise in Settlements

By | Human Rights, International Organisations, Rule of Law, United Nations | No Comments

The World Bank Group (WBG) has published for the first time a joint report showing the key figures for debarments, cross-debarments and referrals made in the FY2018 under the WBG Sanctions System. The report collates the figures for sanctions, in particular the number and length of debarments, imposed through the means of settlements with the Integrity Vice Presidency (INT), determinations by the Suspension and Debarment Officer (SDO) and the decisions of the Sanctions Board. In addition, the report also contains figures for the last five years that reveal the increasing use of settlements to deal with fraud, corruption, collusion and obstruction infractions under the Bank’s Sanctions System.

Sanction settlements have multiplied from just seven to thirty-nine cases per year between 2014 and 2018, whilst the number of sanctions issued through the SDO’s determinations have fallen over the same period from forty-five to twenty-four cases. Disposals by the Sanctions Board have remained fairly constant over the five-year period with an increase of just one to twenty cases.

Neil Macaulay, Co-Head of Chambers at Bretton Woods Law, believes the continuing sharp increase in settlements over the last year may be readily explained since the vast majority of the shortest periods of debarment have been imposed through negotiated settlements. In other words settlements have become more attractive to those entities facing the sanctions process as the periods of debarment being negotiated with INT are increasingly considered acceptable.

The report helps to puts some statistical flesh on the bones. Of the twenty-nine cases with the shortest periods of debarment, those from one year and six months and below, only one was a result of a determination of the SDO, four emanate from the Sanctions Board and twenty-four were achieved by negotiation settlement with INT.
Significantly these lower penalty settlements also include five cases of ‘conditional non-debarment’ which permit the entities concerned to remain eligible for World Bank funded work provided they engage in remedial integrity compliance work. The growing attractiveness of settlements and the arrival of a new Vice President at INT, Pascale Dubois, is likely to be more than co-incidental, as she is keen to express in the report the benefits of settling sanctions matters in terms of the saving of resources and certainty of outcome for both the investigated party and the WBG.

Those companies that self-report misconduct receive particular praise from Dubois in the following terms:
“For example, two INT cases this year led to settlements with a sanction of ‘conditional non-debarment’ which means the sanctioned company remains eligible to participate in WBG-financed projects as long as it complies with certain obligations. This incentivises good corporate behavior as the companies in these cases came forward voluntarily and disclosed their misconduct. This approach also enables the type of responsible corporate citizens the Bank wants on its projects to continue to be eligible to contribute to the Bank’s mission.”

Ms. Dubois’ plainly incentive words regarding self-reporting appear to be backed up by the reported figures. All five of the cases listed as resolved by conditional non-debarment were arrived at through settlement with INT.

By stark contrast nearly all the cases resulting in the longest periods of debarment emanate from either the Sanctions Board or the SDO. Of the thirty-one most severe sanctions awarded, upwards from three years to ten and a half years debarment, only three arise from settlements and the bulk are divided between the Sanctions Board with nine disposals and the SDO with nineteen.

Overall the WBG report is to be commended as it provides a welcome degree of transparency into the current trends in disposals of sanctions cases by the three distinct limbs that comprise of the WBG Sanctions System and points towards the likelihood of a more favourable debarment outcome through settlement than the alternatives, even taking into account the additional co-operation requirements INT may require under a settlement. It therefore enables those who may be subject to an investigation by INT to make a more informed approach as to the relative merits of settling the case early or running through the SDO/Sanctions Board process.

Any companies, directors, consultants or individuals requiring assistance in dealing with the WBG Sanctions System are welcome to contact the experts in the BWL MDB Team through enquiries@brettonwoodslaw.com

Access The full WBG report >

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Fighting Corruption is MY Responsibility: the Annual Report of the Asian Development Bank Office of Anticorruption and Integrity

By | Bribery, Corruption, Cross debarment, Debarment, Fraud, Multilateral Development Banks, Sanctions Board | No Comments

The Asian Development Bank (ADB)’s Office of Anticorruption and Integrity (‘OAI’) has released its 2016 Annual Report entitled Fighting Corruption is MY Responsibility (the ‘Report’).

OAI’s external mandate is carried out by its Investigations Division which reviews complaints and conducts investigations into allegations of integrity violations; the Due Diligence Unit undertakes its integrity due diligence functions, whilst the Review and Outreach Unit handles project procurement-related reviews and capacity development activities.

The ADB defines ‘integrity violations’ as any act which violates ADB’s Anticorruption Policy, including corrupt, fraudulent, coercive and collusive practices, the four sanctionable practices which are harmonised across other Multilateral Development Banks (‘MDBs’).

Somewhat surprisingly, the Report starts with the topic of Enhancing Tax Transparency in Asia and the Pacific. By approving an update to its Anticorruption Policy, the ADB has added its weight to the fight against tax secrecy, tax evasion and aggressive tax planning which erode domestic tax bases of the ADB’s developing member countries. That update will – according to OAI – support developing member countries to protect themselves against tax evasion, base erosion and profit shifting (‘BEPS’) and is significant because it is wider in scope than the traditional role of MDB anticorruption and integrity departments.

OAI reports that it had 211 open complaints from previous years and received 258 new complaints in the year 2016. Some 73% of the complaints received related to projects, 17 % to ADB staff and 10 % to ‘others’. The majority of complaints came to OAI via email, which is an indication both of the impact of technology on the operations of the Department and the ease with which complaints about companies and individuals may be made. From those, the focus of investigations was 53% on projects, 37% on ADB Staff with the remaining 10% falling within others. The sources of the complaints also makes for interesting reading, with 61% coming from parties external to the Bank and 35% from ADB staff, whilst only 2% came from audit reviews with the remaining 2% from anonymous sources. Despite these figures, the Report emphasises OAI’s proactive use of Project Procurement-Related Reviews (‘PPRRs’) of on-going ADB-financed projects. Once again, their scope is wide, for they seek to identify ‘noncompliance issues, irregularities, and integrity concerns, with respect to project procurement, disbursements, and delivery of project outputs’ and so firms which are working on Bank-financed contracts must remain diligent to ensure that staff and contractors continue to comply with the strict requirements that come with working with an MDB.

‘Fraud’ accounted for 73% of new investigations in 2016 and OAI explained that investigations into corruption, coercion and collusion remained low due to the difficulty in establishing these sanctionable practices. Indeed, it should be remembered that the threshold for an allegation of fraud within the MDB sanctions regime is extremely low: the mere inclusion of a CV for someone whom the company knows is unavailable or where it is reckless as to that availability may give rise to liability, sanction and extremely serious consequences for a company, including debarment.

OAI stated that it continued to fight corruption through both enforcement and prevention. In 2016, 138 entities, including 98 firms and 40 individuals were debarred as a result of integrity violations, bringing the cumulative total number of firms debarred to 1,261 by the end of the year. Indeed, under the agreement with other MDBs to mutually enforce each other’s debarment actions, the ADB cross-debarred 86 firms and 47 individuals and submitted 10 firms and eight individuals for cross-debarment to participating MDBs. Further, nine firms and one individual were conditionally non-debarred, whilst temporary suspension, a measure which was first introduced in 2013 in the ADB, was issued to one firm and one individual in the year 2016. OAI also completed 33 investigations where ADB staff were found to have engaged in integrity violations, 11 of whom received disciplinary sanction.

Surprisingly, OAI received a mere six appeals in 2016, involving just three firms and six indivduals; five of these and two pending from 2015 were denied because they did not meet the requirements for an appeal to be considered by the Sanctions Appeals Committee, a point which demonstrates the importance of engaging specialist counsel to advise on and prepare such matters.

OAI used its investigative findings to make recommendations in respect of preventive measures and by requiring subjects of investigations to improve their governance and integrity processes through conditional non-debarments, debarments with conditions and reinstatement processes.

The ADB views integrity violations as potential reputational risks and with that in mind, ADB project teams submitted 300 Integrity Due Diligence (IDD) advisory and review requests to OAI’s Due Diligence Unit, covering 644 entities. This was an 86% increase in the number of entities reviewed from 2015. OAI’s Due Diligence Unit was created in response to an increased need for ADB to evaluate and minimise integrity and reputational risks in its private sector projects, as well as taking into account its increased lending and development initiatives involving private companies; indeed, 52% percent of the total entities reviewed were actually identified by the Private Sector Operations Department.

In addition, there is a separate independent grievance process – ADB’s Accountability Mechanism – which receives complaints from entities which claim to have been adversely affected by an ADB-financed project which has resulted from the ADB’s noncompliance with its operational policies and procedures. The major areas of complaint are resettlement, compensation and land acquisition, and adverse environmental impacts.

The lawyers at Bretton Woods Law have unique and unparalleled experience of assisting companies and individuals with their interactions with the OAI. If you have any questions arising out of the issues raised in this article, do not hesitate to contact a member of the team via enquiries@brettonwoodslaw.com

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Uncontested Sanctions Proceedings – the SDO Option

By | Multilateral Development Banks, News, Uncategorized | No Comments

The World Bank’s Suspension and Debarment Officer takes into account “a past systemic deficiency of corporate controls” and “mitigating factors” in deciding the sanction against Berger Group Holdings, Inc.

1. In uncontested sanctions proceedings Berger Group Holdings, Inc. (“BGH”), the controlling affiliate of Louis Berger Group, Inc. (“LBG”), has accepted the sanction of a one-year conditional non-debarment recommended by Pascal Dubois, the World Bank’s Suspension and Debarment Officer (“SDO”) with effect from 29th January 2015.  LBG was sanctioned to a single year of debarment with conditional release after accepting making corrupt payments to government officials in Vietnam under two World Bank financed projects.  The amounts of the payments are not specified in the SDO’s publication of her decision.

2. Initially Dubois had recommended a sanction of two years conditional non-debarment against BGH, but took into account “additional mitigating factors” provided by the Company in their written Explanation, as allowed for under the Bank’s Sanctions Procedures, which effectively halved the period of sanction.  The published notice issued by Dubois office, the Office of Suspension and Debarment (“OSD”) includes the following:
“In determining this recommended sanction, the SDO took into account that, while the evidence did not support a finding that Berger Holdings was directly involved in the corrupt practices at issue, the evidence did support a finding that Berger Holdings bore a degree of responsibility for its failure to adequately supervise its subsidiary, particularly given the direction to Berger Holdings “members” to assist in Berger Holdings subsidiaries’ compliance efforts, as well as the apparent involvement of Berger Holdings executives in directing LBG efforts in Vietnam. In addition the SDO noted that while Berger Holdings’ failure of oversight might otherwise be seen as an isolated incident, the evidence relating to the history of fraudulent activity by Berger Holdings subsidiaries identified in 1990 and 2000 World Bank sanctions cases, a 2006 Asian Development Bank sanctions case and a 2010 Deferred Prosecution Agreement with the United States Department of Justice indicates a past systemic deficiency of corporate controls, warranting the recommendation of a conditional non-debarment.”

3. LBG had initially been subject to a recommendation of three years debarment by Dubois prior to submission of the written Explanation.  The notice explains the reduction of the recommended debarment period by two thirds in its case as follows: “In determining this recommended sanction, the SDO took into account, as aggravating factors, the involvement of LBG management in the misconduct and the fact that LBG engaged in a repeated pattern of misconduct. The SDO took into account, as mitigating factors, the fact that LBG terminated the employment of individuals responsible for the misconduct and that LBG has implemented an effective compliance program, without prejudice … The SDO also took into account INT’s representations as to extent of LBG’s cooperation during the course of the investigation, noting in particular that LBG (a) undertook a robust internal investigation of misconduct at the company, (b) voluntarily refrained from bidding on Bank-financed projects and (c) provided INT with extensive documentary evidence.

4. It is noteworthy that the earlier recommendation for LBG acknowledged the implementation of a compliance program, but did not include evidence as to the extent of its implementation. In this instance, it appears that the SDO was provided in the Explanation with sufficient evidence to determine that an ‘effective’ compliance program was now in place at the company.  These proceedings show the benefits to companies facing and admitting sanctions proceedings of making full use of opportunity provided by the written Explanation to the SDO together with supporting evidence to prove that the mitigating factors are present and thus convince the SDO to reduce the level of sanction.

5. The mitigating factors identified by the SDO mirror some of those provided for in the World Bank Sanction Guidelines. The guidelines indicate that significant reductions of up to 50% of the sanction period can be allowed when a company has taken voluntary corrective action, and up to 33% may be reduced for cooperation with the investigation. In exceptional cases an even greater reduction may be warranted. By contrast the Guidelines also set out the most common aggravating factors, such as Interference with the Investigation, which could increase the sanction by 1-3 years and a Past History of Adjudicated Misconduct, which brings a guideline 10 year increase.

6. The differing sanctions imposed against Berger Group Holdings Inc. and Louis Berger Group Inc. serve as a useful reminder that the individual culpability of each accused entity should be considered rather than a single sanction imposed against a whole group of companies. In this case the parent company received a significantly lesser sanction than its subsidiary on the basis that it bore a degree of responsibility for failing to adequately supervise Louis Berger Group Inc. and was not directly involved in the corrupt practices at issue.

7. Louis Berger included in its press release of 4 February 2015 the following reflection on the issue of allocating the sanction:
“While we believe it would have been more appropriate if the World Bank had sanctioned Louis Berger International or one of its subsidiaries that now owns the Asia operations where these activities occurred, today’s development is an important milestone in our five year reform program”.

8. These proceedings also highlight the option of utilizing the uncontested sanctions process in cases where a company prefers not to challenge the accusations or sanctions recommended by the SDO.  Other options that are usually considered include entering into a Negotiated Resolution Agreement with the Bank’s Integrity Vice Presidency (“INT”) – and on this issue see the recent article posted by the BWL MDB Team on this website – or having the case determined by the Sanctions Board, particularly if the misconduct allegation is disputed or the recommended SDO sanction is considered to be too severe.

Companies facing or fearing sanctions proceedings by one of the Multilateral Development Banks have a range of options available in dealing with those proceedings each of which has advantages and disadvantages and may wish to contact the BWL MDB Team of Neil Macaulay, Lee Marler, and Jazz Omari  through enquiries@brettonwoodslaw.com or on +44 (0) 20 7764 0745 for confidential advice and guidance in respect of the particular circumstances of their case.

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The World Bank’s willingness to use ‘show-cause’ letters

By | Multilateral Development Banks, News | No Comments

One of the options open to the World Bank’s Integrity Vice Presidency (INT) when investigating sanctionable practices of fraud and corruption is the issuance of a ‘show-cause’ letter to the suspected company. The ‘show-cause’ letter may be the first the company knows of the interest of INT, the World Bank’s policeman, in the company’s dealings within a World Bank funded project and may come as something of a bolt from the blue.

The consequences of the ‘show cause’ letter can be profound and need handling with real care to avoid any inadvertent prejudice being caused. High on the list of responses to be avoided is to ignore the letter altogether since silence or non response is treated by INT as acceptance of the allegation and the described facts contained in the letter which may be misleading or wrong.

A ‘show cause’ letter is most likely to arise in cases where INT believes that it already has sufficient evidence in hand without the need to conduct further investigation of the company’s books and records. This may very well arise where evidence has been given up by a third party such as a joint venture partner, competitor or a national prosecution authority. The letter will ordinarily describe the evidence in INTs possession and make out the alleged sanctionable practice(s) committed but not serve the copies of the actual evidence relied upon. The letter will have a time limit for response and generally indicates a willingness of INT to enter into the option of a negotiated settlement. Any response to the letter should set out fully where it is disputed and articulate why it is in error. However, whenever it is appropriate a prompt admission to the ‘show-cause’ letter would undoubtedly be treated as mitigation and reduce the length of debarment or otherwise limit the penalty facing the company.

A recent review of the World Bank’s Sanctions Board Decisions and Notices of Uncontested Sanctions Proceedings issued by the Bank’s Evaluations Officer has revealed a consistent reliance on ‘show-cause’ letters by INT over the past three years. Neil Macaulay of Bretton Woods Law believes the use of show cause letters is likely to be even more widespread than just those referred to in these reports since the recently released Report of the World Bank Office of Suspension and Debarment reveals that 39 out of 224 debarments were the result of negotiated settlement agreements with INT which by their very nature are more likely to be cases which the evidence of wrongdoing is strongest and most amenable to the ‘show cause’ route.

In those cases where INT believes it is ‘highly likely to be successful’ it may also request Early Temporary Suspension and continue its investigation for up to one year before referring the investigation to the Office of Suspension and Debarment otherwise the suspension will subside. If you have received a show cause letter or notice of Early Temporary Suspension and would like advice on the steps you need to take please contact Neil Macaulay for urgent assistance.

View Report from The World Bank Office of Suspension and Debarment >

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Strikes, immunity from suit and the recognition of unions at the European Patent Organisation.

By | IAL, International Administrative Law, News | No Comments

Following a string of strikes last year and May and April this year, a further planned strike at the European Patent Organisation (EPO) has been ruled out by its President and is likely to lead to further unrest amongst the staff at the Organisation. Under the internal law of the EPO which recognises the ‘right to strike’, any strike is subject to the ‘terms and conditions’ stipulated by the EPO’s President that cover such matters as the strike duration and the voting process. The President has acted to prohibit a three-day strike protest planned for later this month on the grounds that it would create confusion at a time when new staff representatives were being elected.

In a ruling on 14 January 2014 the District Court of The Hague ruled that the Trade Union of the European Patent Office (VEOB) and the Staff Union of the European Patent Office (SUEPO) are entitled to bring actions before the national court in their own right against the EPO and rejected the plea of immunity by the EPO. Whilst it was common ground between the parties that EPO itself was subject to “primary sources of law such as the customary international law, the fundamental rights acknowledged in international conventions and other universally recognised legal principles” the EPO put forward a primary line of defence that it has immunity of jurisdiction.

The Hague Court found that it did have jurisdiction to hear the claim in large part because the VEOB and SUEPO are not able to challenge decisions under the EPO dispute settlement scheme in the Service Regulations and furthermore rejected claims by the EPO that the VEOB and SUEPO could not bring actions in their own right. Once the two unions were established as legal entities the Court said “the right to take legal action independently arises automatically from this”. The Hague Court distinguished the ECtHR decision of 11 June 2013, case number 65542/12 (Mothers of Srebrenica) restricting the scope of that decision on immunity to apply to the UN specifically in the performance of its peacekeeping duties.

The two unions lost the claim on the merits that the EPO Service Regulations are excessively restrictive when judged against the relevant international treaties and customary law on the right to strike. It was decided that the remedy sought would only apply to that part of EPO in the Netherlands and create ‘a fragmentation of the Patent Office’ but Neil Macaulay of Bretton Woods Law believes the importance of the decision is that it demonstrates once again the unwillingness of the national courts to allow the immunity from suit to be relied upon by an international organisation in circumstances where the organisation has not provided an effective internal system of justice to resolve disputes; in this case those brought or taken by Staff Associations or Unions.

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The First Conference of the BWL International Administrative Law Centre of Excellence

By | Centre of Excellence, IAL, International Administrative Law, London, News | No Comments

Around fifty professionals working in the area of International Administrative Law congregated for the inaugural BWL Centre of Excellence Conference in the heart of London between the 17-18 October to hear and discuss a wide variety of presentations on the current legal issues facing international civil servants.

Delegates attended from around the globe to be updated and debate issues such as delay, human rights, immunity from suit, equality of arms, conflicts of interests and many other current big issues facing international civil servants.

Present at the conference were representatives and members of Staff Associations and Unions, managers and lawyers working for International Organisations, judicial representatives, academics and external legal practitioners specialized in the field of International Administrative Law.

Many of those attending joined the various committees that will now commence working to improve the quality and accessibility of International Administrative Law together with the sharing of best practices that currently exist within the many International Organisations.

The International Administrative Law Centre of Excellence is a registered community interest company established with a mandate to improve the state of International Administrative Law.

Following the success of this first assembly a second conference will be held in the autumn of 2014 in London.

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A District Court in Holland ‘sets aside’ the immunity of the European Patent Organisation

By | IAL, International Administrative Law, News | No Comments

An international civil servant has successfully begun a claim in the national courts in Holland after exposing the lack of access to justice provided by the European Patent Office and the International Labour Organisation Administrative Tribunal (ILOAT) in hearing his dispute.

In a ground-breaking and landmark ruling given on 16 July 2013 the District Court of The Hague (“the Court”) rejected an application by the European Patent Organisation (“EPO”) inviting the Court to rule that the Court was not competent and lacked jurisdiction to hear a complaint from a staff member because of the immunity from legal suit enjoyed by the International Organisation. The Court considered that in this ‘exceptional case’ the EPO’s immunity from the jurisdiction of the national courts could not be relied upon as it was disproportionate and therefore liable to be overruled by the Court.

The Court decided that the decision by the President of the EPO on the appeal by the staff member against the conversion of his disability pension into a disability allowance was a judgment by a non-independent court. Furthermore, whilst the right to appeal against the President’s decision to the ILOAT was to an independent and impartial tribunal the delay of 15 years waiting for the ILOAT to hear the case would deprive [the staff member] of a fair process and breached the employee’s human rights to have his civil rights determined by an independent court within a reasonable time.

The Court was not deterred by the fact that the EPO is not itself a party to the European Convention on Human Rights in reaching its decision, but referred to the fact that the EPO Service Regulations, which formed part of the staff members contract of employment, expressly applied human rights.

National courts have historically been reluctant to allow employment disputes by staff members against International Organisations such as the EPO to be brought before them and have generally upheld the immunity from suit that the organisations enjoy. This decision marks a welcome change in approach since no court could reasonably conclude that a delay of 15 years in hearing a case represents a system of justice let alone a trial within a reasonable time. Perhaps the most lamentable observation in the judgement was that there was no suggestion being put forward that the ILOAT was taking any measures to remedy these long waiting times for EPO employees. Regrettably it is considered that far from being an ‘exceptional case’ the lack of fairness and delay experienced by this staff member is one that is only too likely to be faced by many other staff members at the EPO and quite possibly some of the other 41,000 staff members working at other International Organisations who are compelled in similar circumstances to appeal to the ILOAT as well.

This case typifies the worst of the difficulties facing International Civil Servants seeking to air a grievance at the treatment they have received at work. In order to improve the standard of the internal justice systems of the many International Organisation Neil Macaulay and Lee Marler have founded the International Administrative Law Centre of Excellence. All those involved in internal justice systems who have an interest in finding ways to bring the systems up to date and compliant with modern human rights standards are welcome to join the Centre of Excellence and contribute to bringing about a new era of effective dispute resolution in International Organisations around the globe.

 

Read judgment

[seal] DISTRICT OF THE HAGUE
DISTRICT OF THE HAGUE SECTION

DISTRICT COURT OF THE HAGUE
District of The Hague Section

Case no.: 1223887/12-31860
16 July 2013

Judgment in respect of jurisdiction in the matter of:

The legal entity according to international public law the EUROPEAN PATENT
ORGANISATION, established in Munich (Germany), as well as Rijswijk (South Holland),
claimant in the procedural matter respondent in the principal proceedings, hereafter referred to as “EPO”, authorised representative: Mr G.R. den Dekker

and

[details omitted] respondent in the procedural matter
claimant in the principal proceedings, hereafter referred as [details omitted] authorised representative: [details omitted]

Proceedings

The District Court has considered the following documents:

  •   Summons dated 3 December 2012;
  •   Motion for the Dutch court to decline jurisdiction and transfer the case
  •   Response to the motion
  •   Evidence submitted.

Finally, a judgment was issued on the matter.

Facts
[details omitted] was appointed to the EPO on 1 January 1988 and was last employed as a researcher for the European Patent Office. [details omitted] is in a dispute with the EPO pertaining to amendments to his pension scheme.

The European Patent Office is a body of the EPO and is established, amongst others, in Rijswijk where [details omitted] performed his duties.

The Service Regulations for Permanent Employees – hereafter referred to as the Service Regulations – are applicable to [details omitted]’s employment contract. The Service Regulations provides, amongst others, for an incapacity for work scheme in the form of a disability pension. The following statement from the Board of the EPO, submitted at the meeting of 13 to 15 December 1994, applicable:

“The Administrative Council and the President of the Office note that when reviewing the law applied to EPO staff the ILO Tribunal considers not only the legal provisions in force at the European Patent Organisation but also general legal principles, including human rights.

The Administrative Council also noted with approval the President’s declaration that the Office adheres to the said legal provisions and principles.”

[details omitted] received a disability pension from 2003 due to his incapacity to work. [details omitted] has since left the employment of the EPO and has received financial compensation from [details omitted]. Furthermore, [details omitted] is also receiving a disability allowance of [details omitted] per month.

The European Patents Convention of 5 October 1973 and the European Patent Organisation’s Protocol on Privileges and Immunities of 5 October 1973 are applicable to the EPO, amongst others.

On the grounds of art. 13 of the Convention (former) employees of the EPO may submit disputes with the EPO to the Administrative Tribunal of the International Labour Organisation (hereafter referred to as: ILOAT). This appeal is only admissible when the interested party has exhausted all means of redress available to him pursuant to the Service Regulations, the Pension Scheme or the employment terms and conditions for other personnel.

[details omitted] submitted an appeal against the EPO decision to convert his disability pension into a disability allowance by email on 11 March 2008. The Internal Appeals Committee (hereafter referred to as the IAC) unanimously advised the President of the EPO on 9 August 2011 to allow the appeal virtually in full. Subsequently the President of the EPO, Mrs [details omitted] did not adopt a significant proportion of the advice of the IAC. On 27 February 2012 [details omitted] submitted an appeal against this decision to the ILOAT. On 15 June 2012 [details omitted] wrote to the registrar of the ILOAT by email asking how long the ILOAT procedure would take. In response to this email, the registrar to the ILOAT informed [details omitted] by email on 2 July 2012:

“Dear Mr [details omitted]

Complaint No. 3

I have your email of 15 June.
The duration of the exchange of written pleadings is, as usually, about one year.
However, as you are well aware we are facing a situation where out of 425 pending cases, 150 concerns the European Patent Organisation, THAT IS 35.4%.  This is obviously disproportionate in view of the fact that a total of 48,483 staff members have access to our Tribunal and the EPO has “only” 6,847 staff members.  In addition, of these 425 cases we have at the moment, 209 are ready to be dealt with by the Tribunal of which 101 are against the EPO, that is 48,3%. Considering that the Tribunal examines around 50 cases per session, including four or five against the EPO, you may have a correct idea of the conclusions one can draw from these facts.

Yours sincerely,
[details omitted] Registrar”

The ILOAT convenes two sessions per year, and therefore should the situation not change it would take around 15 years before [details omitted]’s case was heard by the ILOAT.

Application in this matter

The EPO’s application is, in brief, for the District Court of Hague to rule that it is not competent to hear this dispute, as it has no jurisdiction in this matter, given that the EPO has immunity and, on a subsidiary point, given the contents and scope of the claims by [details omitted], including, amongst others, the costs of the proceedings to be awarded against [details omitted].

The EPO is submitting the following as a basis for this application. The EPO is an intergovernmental organisation with 38 member states enjoying immunity on the grounds of the aforementioned Privileges and Immunities Protocol associated with the 1973 European Patents Convention. The EPO benefits from this immunity in the context of its official activities. According to this Protocol official activities are taken to refer, amongst others, to those activities which are strictly necessary for the administrative and technical implementation of its tasks as defined in the Convention. The work performed by [details omitted], carried out at the time for the EPO, fall under this. There is a special procedure for resolving disputes between the EPO and its (former) employees. An appeal against a disputed decision by the EPO should first be submitted to the President; should the latter determine there are no grounds for the dispute then the IAC shall be asked for advice. The President shall issue a decision with grounds after the IAC advice. An appeal against this may be submitted to the ILOAT. This course of proceedings is sufficient to be referred to as a fair process in the sense of art. 6 of the ECHR, to which the EPO is, furthermore, not a party. In addition to this the ILOAT is entitled to alter the time for the proceedings.

[details omitted] in this matter

[details omitted] submitted with grounds against [details omitted] that this, in brief, the 15 year procedural waiting time amounted to him being deprived of a fair process within a reasonable period by an independent and impartial court as granted to all under art. 6 of the ECHR. This therefore overrules the EPO’s immunity and this district court is therefore competent to hear this case.

Assessment of the matter

Given that the decision of the President of the EPO on the appeal of [details omitted] against the conversion of his disability pension into a disability allowance is a judgment by a non-independent court and that the judgment by the ILOAT on appeal is, in itself, both independent and impartial, yet were this to take 15 years it would deprive [details omitted] of a fair process. This would lead to the EPO’s immunity becoming disproportional and may therefore be overruled. Taken together this means that in this exceptional case that the court, which under normal circumstances would hear disputes pertaining to pension regulations, does have jurisdiction. Given that the EPO is also established in Rijswijk this district court is a competent court. This does not detract from the fact that this may create the possibility of the District Court of The Hague influencing the official activities of the EPO. This is, after all, the consequence of the immunity – which the EPO would in principal be awarded in these types of dispute – being set aside, but is something the EPO shall have to bear in this exceptional case.

Nor does this detract from the fact that the EPO is not a party to the ECHR; this matter is concerned with determining an individual’s civil rights by an independent court within a

reasonable time period and as such is a human right protected by the ECHR and – according to the aforementioned statement with the EPO’s Service Regulations – human rights are explicitly applicable to this matter.

Finally, it has neither been submitted nor has it become evident that the ILOAT is taking measures in order to shorten the waiting time for hearings involving employees of the EPO, and therefore [details omitted] may reasonably assume that the period taken to hear his case will be too long.

Taken together this leads to the conclusion that the submission in the procedural matter should be rejected. Having found against the EPO the latter shall be ordered to pay the costs of proceedings in this case.

Judgment

The District Court,

Rejects the submission on the procedural matter;

Orders that this judgment may be submitted to appeal;

Orders the EPO to pay the cost of proceedings incurred by [details omitted] estimated to amount to €500.00 in payment to his authorised representative;

Refers the principal proceedings to the case-list hearing of 13 August 2013 to hear the counter submission;

Reserves judgment on the other matters.

This judgment was issued by Mr R.J. ter Kuile, district court judge, and read out at a public hearing on 16 July 2013 in the presence of the clerk of the court.

[signatures]

Copy certified by the clerk of the district court for the district of The Hague [initials]

 

 

 

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Self-reporting corrupt misconduct – honesty is the best policy

By | Development Banks, Multilateral Development Banks, News, World Bank | No Comments

In its published announcement dated 24 July 2013 on the sanctioning of Sinclair Knight Merz Pty (SKM) the World Bank’s Integrity Vice Presidency has set what can be viewed as a benchmark new level of reduced punishment for those companies which uncover corruption within the business and then voluntarily report the matter to the Bank.

In this case the company avoided an immediate debarment from future Bank-financed projects after reporting ‘corrupt misconduct’ and ‘illegitimate payments’ by key individuals and senior managers at SKM. Instead the company and its parent companies Sinclair Knight Merz Management Pty Ltd and Sinclair Knight Merz Holdings Ltd have negotiated an agreement with INT which includes a conditional non-debarment for a period of two and a half years. This means the company can continue to bid for Bank financed projects and the debarment only comes into operation if the company fails to fulfil its obligations to improve its compliance program and cooperate with INT.

The World Bank announcement makes it clear that the Bank has reflected the high levels of voluntary cooperation by SKM with the imposition of a conditional non-debarment and is sending out a clear signal for other companies to self-report by this example. There is also an implied warning to those companies that have engaged in business with SKM that they may fall under the microscope because the cooperation received from SKM has enabled the Bank to ‘identify other potential targets for investigation’.

The Vice President of Integrity stated: “The World Bank took into account SKM’s cooperation and willingness to provide evidence in support of further INT investigations. The outcome of this case introduces a new standard of compliance by a company that opted for self-policing in response to the discovery of misconduct in its own ranks. By promptly self-reporting, committing to corporate transparency and their enforcement of disciplinary action against those responsible, SKM has practically demonstrated how to confront wrongdoing and commit to doing business with integrity.”

This case clearly illustrates the benefits of conducting a ‘thorough internal investigation’ when companies discover corrupt or fraudulent misconduct internally so that an informed decision can then be made on whether or not self-reporting is necessary and in the best interests of the company.

If you are a senior executive concerned that there may be matters that have occurred in your company that should be reported to the World Bank or any of the other Multi-Lateral Development Banks then contact Bretton Woods Law’s Neil Macaulay or Lee Marler for a confidential and legally privileged consultation to examine how best to protect the long term interests of your company.

To read the full press release click here.

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Fraud can be ‘reckless’ and doesn’t have to be successful

By | Development Banks, Fraud, Multilateral, Multilateral Development Banks, News, Sanctions | No Comments

The current definition of fraud being applied by the World Bank Group’s Sanctions Board is capable of a very wide interpretation and could lead to yet more companies and individuals facing debarment.

The present day version of ‘fraudulent practice’ being applied under the 2011 Procurement or Consultant Guidelines and Anticorruption Guidelines has clarified, simplified and possibly extended earlier definitions of this type of sanctionable practice and now includes “any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation”.

For the first time recklessness is expressed as an alternative way in which a company may commit a fraudulent practice, in other words the fraud need not be deliberate but includes the taking of a risk of misleading another party. Neither does a fraud (most commonly a misrepresentation of particular facts) need to succeed; the most recent definition now specifically includes ‘attempts to mislead’. It is also worth noting that the offence has been extended explicitly to include conduct or a misrepresentation that could lead to an obligation, such as having to perform works to a particular standard, being avoided.

Previous cases suggest that the submission of false performance and experience certificates or bolstered CVs as part of a contract bid is the most common way companies put themselves at risk of sanction for fraud; although of course the definition is sufficiently wide to cover a wide range of conduct throughout the execution of a contract. In the 2011 fiscal year the World Bank Group debarred thirty five companies and individuals from doing business on any of its projects that it finances around the world.

Companies and individuals need to be aware of the wide definition of ‘fraudulent practice’ to adhere to their compliance obligations. Bretton Woods Law view is that more companies face the prospect of debarment for a ‘fraudulent practice’ than for a corrupt one.

If you are concerned that you may have committed a fraudulent practice Bretton Woods Law can investigate the matter on your behalf, advise you in confidence whether you have a defence, such as bona fide mistake or “rogue employee,” and suggest how best to proceed.

Contact Bretton Woods Law: enquiries@brettonwoodslaw.com