The School of Tomorrow Conference series was initiated by Beaconhouse in 2000, and the recent event focused on seeking inspiration and equilibrium in a new age. The conference took place at the Pak-China Friendship Centre in Pakistan’s capital and involved more than 40 panel discussions. Alex sat on two panels: “The China Pakistan Economic Corridor and the Future of the Region: Socio-cultural and Economic Perspectives” and “Global Media in a Post-Truth Era”. As a barrister who specialises in international corruption and Multilateral Development Banks (‘MDBs’) sanctions cases, Alex gave his perspective of the impact which the recently established Beijing-based Asian Infrastructure Investment Bank (‘AIIB’) has had on the balance of power in the International Financial Institution (‘IFI’) arena. Specifically, he analysed the result of the AIIB-part-funded projects in the region on the MDB landscape and the traditional balance of power comprising the US-dominated World Bank, the European-dominated International Monetary Fund (IMF), and the Japanese-dominated Asian Development Bank (ADB). To a certain extent, the AIIB together with the Shanghai-based New Development Bank (NDB) suggests a new age in the world of MDBs in which China has a pivotal role, resulting in a number of opportunities for Pakistan and the surrounding region to make the most of the opportunities which an increasingly globalised world has to offer. Alex identified corruption and transparency as the two biggest challenges in this context. Alex also discussed the vital role of the judiciary and the Law in general in light of recent political events such as the US election and the High Court judgment at the end of 2016, concerning the UK Government’s capacity to trigger Article 50 – or ‘Brexit’ – after which the British press attacked its judges.
The Asian Infrastructure Investment Bank (‘AIIB’) is the latest Multilateral Development Bank (‘MDB’) to join the ranks of the other long-established MDBs such as the African Development Bank (‘AfDB’), Asian Development Bank (‘ADB’), the European Bank for Reconstruction and Development (‘EBRD’), the Inter-Amerian Development Bank (‘IADB’) and the World Bank (‘WB’). In furtherance of this objective, the AIIB has announced that it will voluntarily and unilaterally enforce debarment decisions of the other MDBs within its own sanctions regime. Although not yet formally a signatory to the Agreement on Mutual Enforcement of Debarment Decisions (the ‘Agreement’) dated 9th April 2010, the effect of the AIIB’s decision is to render any debarment decisions of the other MDBs which qualify for cross debarment, also applicable at the AIIB, such that nearly one thousand companies which find themselves debarred by the other MDBs will also be ineligible to bid on contracts at the AIIB.
This unilateral action is, of course, likely to be a precursor to the AIIB becoming a formal signatory to the Agreement whereupon decisions within the sanctions regime of the AIIB which qualify for cross debarment will also have effect at the other MDBs. However, whilst the AIIB recognises the harmonised sanctionable practices contained in the Agreement (i.e. ‘fraudulent’, ‘corrupt’, ‘collusive’ and ‘coercive’ practices), it also casts its net wider than the other MDBs by listing three further prohibited practices, namely, ‘obstruction’, ‘theft’ and ‘misuse of resources’.
This announcement comes not long after President Jin Liqun of the AIIB stated publically at the European Financial Forum that he viewed the role of the AIIB as being that of steward of taxpayers’ money from many different countries – a position which requires the highest bar for integrity and compliance.
The AIIB has appointed Hamid Sharif to the post of Director General of its Compliance, Effectiveness and Integrity Unit (‘CEIU’) which has been set up to lead the charge against corruption on bank-financed projects. Sharif notes that:
“AIIB’s institutional arrangements creates increased accountability and transparency because I report directly to our Board of Directors as the head of the integrity unit. This creates an open channel that will improve the bank’s ability to react and deal with any suspicions of corruption or unethical behaviour in our projects”.
On 8th December 2016, the AIIB published its Policy on Prohibited Practices (the ‘Policy’) in which it made it clear that all parties are “to adhere to the highest ethical standards” whilst also creating the authority for the conduct of investigations by an Investigations Officer into allegations of prohibited conduct by parties who engage with the Bank. In the context of the AIIB Policy, ‘party’ means any party (and its respective officers, employees and agents), who:
- in the case of a Project financed by a Sovereign-backed Financing, is involved in such Project, including, inter alia, recipients of Financing, beneficiaries of technical cooperation, bidders, suppliers, contractors, subcontractors, consultants, sub- consultants, service providers, applicants, concessionaires and financial intermediaries; or
- in the case of a Project financed by a Non-sovereign-backed Financing, is involved in such Project, including, inter alia, borrowers, sponsors, recipients of Financing, beneficiaries of technical cooperation, bidders, suppliers, contractors, subcontractors, consultants, sub-consultants, service providers, applicants, concessionaires, financial intermediaries, guaranteed parties, and investee companies; or
- contracts with the Bank for advisory services to be performed by the Bank.
- contracts with the Bank in relation to the Bank’s corporate procurement or any other matter not covered by the preceding three clauses, except for Bank Personnel.
Given the very significant impact that cross debarment can have on the ability of a company to do business, parties which find themselves under investigation, or which receive a Statement of Charges from an Investigation Officer or a Notice of Administrative Action from the Sanctions Officer should recognise that the way in which such matters are handled at the early stages can have a lasting impact on the case and a company’s future.
The lawyers at Bretton Woods Law are uniquely placed to deal with investigations, negotiated resolution agreements (‘NRAs’) and sanctions proceedings within the regimes of the multilateral development banks.
Bretton Woods Law
Earlier this month, a delegation of seven barristers from different sets of Chambers including Alex Haines from Bretton Woods Law and Bar Council representatives including the Chairman of the Bar, travelled to Seoul and Shanghai for a four-day business development mission. The delegation spent two days in Seoul on 4th and 5th April, where it was joined by four barristers from the Korean Exchange Programme for young lawyers, who were spending two weeks in Korean law firms. On 6th and 7th April, the delegation moved onto Shanghai for the second part of the mission.
Bar Council business development missions are aimed at promoting barristers’ expertise as advocates in international dispute resolution and at raising awareness of the ability of foreign law firms and clients to instruct the Bar directly. All business development missions organised by the Bar Council provide a platform for barristers to network with local lawyers and better understand the local markets, and build relationships with local bar associations with a view to exploring opportunities for further collaboration. Given the ever increasing link between the rise in barristers’ income from international work and the challenges faced by the profession domestically, it has never been as important as it is today to generate new connections and consolidate existing relationships. In the case of China, the Bar Council has been running a training scheme for Chinese lawyers since 1986. This mission was also the third to Seoul since 2011, meaning that there was already a solid connection between the Bar and its counterparts in South Korea and China.
Monday, April 11, 2016 | 12:30 PM – 2:00 PM
Seminar Room 110, Furman Hall, 245 Sullivan Street
IO Immunity: Access to Justice Denied?
International Organisations (“IOs”) enjoy jurisdictional immunities before domestic courts. The effect of such immunities is that, generally speaking, national courts refuse to adjudicate disputes where an IO is sued, and where that IO refuses to waive its immunity from suit. Traditionally, IO immunities have been absolute, and generally speaking domestic courts refuse to pierce it. This means that often, individuals and private parties who may have a grievance against an IO, in seeking a remedy, are left to the mercy of the IO’s internal justice system, or to alternative forms of dispute resolution such as arbitration, which can be expensive and opaque.
In this presentation, I will first, highlight the kinds of disputes that may arise between IOs and private parties. Second, I focus on disputes between IOs and its staff, a common occurrence, showing that such employees may often be left without a remedy. Given that such cases arise frequently, this is a fertile ground to analyse how the principles on IO immunities are developing and work in practice. Finally, I discuss the ongoing Haiti litigation, and the case law from the European Court of Human Rights regarding the right to access to courts and its bearing on IO immunity. I will conclude by making observations whether or not these decisions have succeeded in enhancing access to justice.
Following the successful appeals to the European Bank for Reconstruction and Development Administrative Tribunal (“EBRDAT”) in the cases of Kominek & Others v EBRD (see: EBRD 2013/AT/01 and EBRD 2013/AT/02), Neil Macaulay and Alex Haines of Bretton Woods Law (“BWL”) have secured another victory in the case of Grassi v EBRD (see: EBRD 2016/AT/01). On the 18th January 2016, the EBRDAT allowed Mr Grassi’s (“Appellant”) appeal against the 9th September 2015 decision by the EBRD President adopting the recommendation of the Bank’s Grievance Committee (“GC”). The GC, which sits as the body of first instance in the Bank’s internal justice system and below the EBRDAT, had recommended not to exercise its jurisdiction over all the elements contained in the Appellant’s ‘Request for an Administrative Review Decision’ (“RARD”) on the basis that it had been submitted outside the relevant procedural deadline, and was thus time-barred. The time limit for the submission of the Appellant’s RARD landed on a non-working day (i.e., Saturday) but was submitted the next working day (i.e., Monday). The EBRDAT found that, contrary to the GC’s recommendation and contrary to the Bank’s arguments, the Appellant’s RARD had, in fact, been timely submitted on the Monday, even if, strictly speaking, it came after the Saturday deadline. The EBRDAT had “no hesitation to ‘remedy’ the anomaly in the Grievance Procedures by way of a liberal interpretation” (see: paragraph 33 of the judgment).
The EBRDAT’s judgment adopted the arguments raised by the Appellant, and relied, inter alia, on best practices of other Multilateral Development Banks (“MDBs”) (e.g., the International Monetary Fund (“IMF”) and the African Development Bank (“AfDB”)). The rules of procedure at the Administrative Tribunals of a number of international organisations allow, as do many national systems, for the filing of a grievance on a ‘next working day’, thus preventing the unfair situation that had arisen in the Appellant’s case. The Bank had argued that the procedural rules should be interpreted strictly, despite the apparent prejudice in this case. The EBRDAT, however, relied on a judgment from the Administrative Tribunal of the International Labour Organisation (“ILOAT“) (see: Judgement No. 2882, at consideration 6) and further found that “the Bank’s interpretation is exceedingly pedantic and formalistic, and would unduly hinder the Staff Member from defending his right effectively” (see: EBRD 2016/AT/01, at paragraph 33).
In its judgement, the EBRDAT also took into account of the contra proferentem rule, natural justice, and fairness as a principle of international administrative law. Although the EBRDAT did not take the case of Kominek into account because its facts were different, that case also resulted in the EBRAT criticising the Bank for complicating matters unnecessarily: “Voluminous arguments and numerous documents have been submitted to the Judges, who have read them and concluded that this matter has been treated by the Bank as exceedingly complex when it is in effect quite simple. Indeed, it seems important that ordinary Staff Members perceive that the options for vindicating their rights are straightforward, lest they be intimidated by the ostensible prolixity (and attended costs) of the grievance system” (see: EBRD 2013/AT/01, at paragraph 21).
The latest EBRDAT decision is a victory for common sense: it remedies an exceedingly pedantic and formalistic approach depriving staff members from effectively defending their rights naturally, justly and fairly; it provides useful guidance for the GC on how to interpret the Bank’s internal laws; and it reaffirms the application of general principles of international administrative law to the internal law of the Bank with a view to filling its lacunas.
The BWL IAL team can be contacted at email@example.com
The African Development Bank with BWL Assistance Settles Sanction Case with Hitachi Ltd of Japan
The African Development Bank (“AfDB”) has today announced in Abidjan that it has entered into a Settlement Agreement with Hitachi Ltd of Japan, which brings to an end the three-year investigation undertaken by the AfDB’s Integrity and Anti-Corruption Department (“IACD”). IACD had alleged that two Hitachi companies – the German based Hitachi Power Europe GmbH (“HPE”) and its South African subsidiary Hitachi Power Africa (Pty) Ltd (“HPA”) – had engaged in sanctionable practices in order to be awarded in South Africa in 2007 the AfDB financed Medupi Power Station Boiler Works Contract.
BWL’s Lee Marler, Neil Macaulay and Alex Haines have represented IACD in this matter for the past two years and an international BWL team instructed by IACD (and comprised of Marler, Macaulay, Alan Sarhan and Ayman Daher (the latter two from BWL Canada)) will now proceed to assist Hitachi Ltd in fulfilling its settlement obligations to the AfDB.
The full text of today’s AfDB press release reads as follows:
“Abidjan, Côte d’lvoire Wednesday, 2nd December 2015 – The African Development Bank Group (“AfDB”) announces that on 2nd November 2015 it concluded a Settlement Agreement with Hitachi, Ltd. (“Hitachi”) of Tokyo, Japan.
The Settlement Agreement follows a three year investigation by the AfDB’s Integrity and Anti-Corruption Department (the “IACD”) into allegations of sanctionable practices by certain Hitachi subsidiaries on the AfDB financed Medupi Power Station Boiler Works Contract in the Republic of South Africa. The IACD alleged that at the material time Hitachi Power Europe GmbH (“HPE”) based in Germany and its South African subsidiary, Hitachi Power Africa (Pty) Ltd (“HPA”), engaged in sanctionable practices in order to be awarded the boiler works contract.
The AfDB acknowledges that Hitachi and its affiliates co-operated fully and openly with the IACD investigation, and that Hitachi was determined throughout to maintain its good relations with the AfDB and to protect the integrity of the Medupi project. Despite their differences, both parties shared a desire to resolve the current difficulties by way of settlement.
Due in part to the high level of assistance provided to the IACD by Hitachi, the AfDB has agreed to impose the sanction of debarment for twelve months with conditional release upon HPE and HPA, the two companies at the centre of the IACD investigation. Debarment will be terminated as soon as Hitachi enhances its integrity compliance programme to the standard set by the AfDB’s Integrity Compliance Guidelines. Moreover, Hitachi has voluntarily agreed (1) to make a substantial financial contribution to the AfDB, which will be used to fund worthy anti-corruption causes on the African continent; and (2) to co-operate with the IACD on a variety of matters, including enhancing where necessary its existing integrity compliance programme referenced above.
“The sanctions imposed under the settlement agreement reflect the level of cooperation provided by Hitachi, Ltd. in the investigation of the Medupi matter, for which the IACD is grateful”, said Anna Bossman, Director of the IACD. “Hitachi has shown by its actions that it is committed to doing business in an ethical manner and the IACD believes in giving credit for such dedication. As I have said before, the IACD is ever willing to resolve amicably allegations of sanctionable practices with companies that show a sincere commitment to integrity, who collaborate in the resolution of allegations and who elect to enhance their compliance polices and procedures.”
On 30th October 2007, Eskom awarded the AfDB financed Medupi Power Station Boiler Works Contract for the design, manufacture, supply, erection and commissioning of six coal fired steam generator units at its Medupi plant at Lephalale in the Limpopo Province of South Africa to the consortium of HPE and HPA. Mr Johann Benöhr led the IACD investigation with support from Ms Funmilayo Akinosi and Mr Simeon Obidairo. Lee Marler, Neil Macaulay and Alex Haines of Bretton Woods Law, London represented the IACD.”
Separately, Hitachi Ltd also settled on 28th September 2015 with the United States’ Securities and Exchange Commission (“SEC”) and its press release of the same day, in which it acknowledged the assistance provided by IACD and by implication BWL, reads as follows:
“Washington D.C., Sept. 28, 2015 — The Securities and Exchange Commission today charged Tokyo-based conglomerate Hitachi, Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when it inaccurately recorded improper payments to South Africa’s ruling political party in connection with contracts to build two multi-billion dollar power plants.
Hitachi has agreed to pay $19 million to settle the SEC charges.
The SEC alleges that Hitachi sold a 25-percent stake in a South African subsidiary to a company serving as a front for the African National Congress (ANC). This arrangement gave the front company and the ANC the ability to share in the profits from any power station contracts that Hitachi secured. Hitachi was ultimately awarded two contracts to build power stations in South Africa and paid the ANC’s front company approximately $5 million in “dividends” based on profits derived from the contracts. Through a separate, undisclosed arrangement, Hitachi paid the front company an additional $1 million in “success fees” that were inaccurately booked as consulting fees without appropriate documentation.
“Hitachi’s lax internal control environment enabled its subsidiary to pay millions of dollars to a politically-connected front company for the ANC to win contracts with the South African government,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division. “Hitachi then unlawfully mischaracterized those payments in its books and records as consulting fees and other legitimate payments.”
According to the SEC’s complaint filed in U.S. District Court for the District of Columbia:
- Hitachi was aware that Chancellor House Holdings (Pty) Ltd. was a funding vehicle for the ANC during the bidding process.
- Hitachi nevertheless continued to partner with Chancellor and encourage the company to use its political influence to help obtain government contracts from Eskom Holdings SOC Ltd., a public utility owned and operated by the South African government.
- Hitachi paid “success fees” to Chancellor for its exertion of influence during the Eskom tender process pursuant to a separate, unsigned side-arrangement.
Hitachi’s misconduct violated the books and records and internal accounting controls provisions of the federal securities laws, specifically Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934.
Without admitting or denying the SEC’s allegations, Hitachi agreed to a settlement that would require the company to pay a $19 million penalty, and it would be permanently enjoined from future violations. The settlement is subject to court approval.
The SEC’s investigation was conducted by Jon Jordan and Thierry Olivier Desmet of the FCPA Unit in Miami with assistance from Kathleen Strandell, David S. Johnson, and Matthew P. Cohen. The SEC appreciates the assistance of the Justice Department’s Fraud Section, the Federal Bureau of Investigation, the Integrity and Anti-Corruption Department of the African Development Bank, and the South African Financial Services Board.
“We particularly appreciate the assistance we received from the African Development Bank’s Integrity and Anti-Corruption Department and hope this is the first in a series of collaborations,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.””
BWL barristers are renowned experts in the sanctions procedures operated by the world’s multilateral development banks (“MDB’s”), such as the African Development Bank (“AfDB”), the Asian Development Bank (“AsDB”), the Inter American Development Bank (“IADB”) and the World Bank Group.
Lee Marler, BWL’s co-head of Chambers, is quoted as saying that “we are very proud to be IACD’s standing counsel and we are delighted to have assisted the Department these past years in bringing the Medupi case to a successful conclusion, but we are equally proud to be able to represent our other clients before the anti-corruption units, sanctions boards and committees of the other MDBs. Our strength is our depth of knowledge and unparalleled experience, for at BWL we prosecute for the AfDB but defend everywhere else and it is this rich mix that serves to ensure that we give balanced and objective advice to all of our MDB clients”.
The BWL MDB team can be contacted at firstname.lastname@example.org
All members of Bretton Woods Law, London (“BWL”) are delighted to announce that Bretton Woods Law Canada (“BWLC”) opened its doors to clients in Montreal’s fashionable and avant-garde ‘old quarter’ on Monday, 12th October 2015. Ayman Daher and Alan Sarhan are the two partners leading the efforts of this new and dynamic law firm, which has a specialisation within Canada and elsewhere on governance, compliance and business risk, as well as the traditional Public International Law practice areas normally associated with BWL.
Ayman and Alan, who are supported internationally by the team at BWL, are highly talented and accomplished lawyers at the Quebec bar, who have unparalleled experience within Canada in dealing with anti-corruption issues within large multinational North American companies, including defending companies accused by the Multilateral Development Banks (e.g., African Development Bank (“AfDB”), the Asian Development Bank (“AsDB”) and the World Bank Group) of having in engaged in sanctionable practices on MDB financed projects.
With comprehensive assistance provided as necessary from BWL barristers, BWLC will advise and help Canadian and other companies in all aspects of anti-corruption work, including the design and implementation of ‘gold standard’ integrity compliance programmes.
To learn more about BWLC and to view the profiles of Ayman and Alan, visit our sister website at www.brettonwoodslaw.ca
Posted by: Lee Marler and Neil Macaulay – BWL’s Co-Heads of Chambers
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, Jazz Omari and Alex Haines through email@example.com or on +44 (0) 20 7764 0745 for confidential advice and guidance in respect of the particular circumstances of their case.
- Companies and individuals that are accused by the Multilateral Development Banks (“MDBs”), such as the African Development Bank (“AfDB”), the Asian Development Bank (“AsDB”) and the World Bank Group, of having paid bribes in order to be awarded MDB financed contracts around the world or who have engaged in other sanctionable practices (e.g., fraud, collusion, coercion or obstruction) on MDB financed projects often face a difficult, yet significant decision at a relatively early stage of proceedings: do they (1) deny the allegations and fight the case within the respective sanctions regime of the accusing MDB; (2) accept the allegations but seek to be judged by the relevant sanctions board, committee or commissioner; or (3) do they seek to enter into some form of settlement with the relevant bank or banks. In the experience of the BWL MDB Team (henceforth “BWL”), especially of late, the answer very much depends upon the MDB involved and of course the underlying facts of the actual case.
- With one or two exceptions, the anti-corruption offices of the MDBs are extremely keen (some might argue too keen) to convince companies accused by them of misconduct to enter into settlement agreements, for such agreements (1) resolve the case in the absence of it being tested before a properly constituted sanctions board, committee or commissioner, and with few if any rights of redress or appeal; (2) provide a fertile ground for the gathering of additional evidence and intelligence to be used by the relevant MDB against other companies; (3) raise in some cases revenue for the MDB; and (4) save the anti-corruption offices from doing their jobs, as they place the burden and cost of detection and investigation upon the company.
- There are of course pros and cons for entering into a settlement agreement that on its face resolves the difficulties confronted by a company embroiled in a dispute with an MDB anti-corruption office. The advantages in theory are that (1) the company accused of engaging in a sanctionable practice will receive a reduced period of debarment if it accepts its guilt or possibly ‘does not admit nor deny’ its culpability; and (2) it will not be sanctioned further by the MDB for any past inculpatory matters that emerge as a consequence of doing the work required by the MDB under the terms of the agreement (e.g., additional investigation of MDB financed contracts). The disadvantages are that (1) the obligations imposed upon the company are onerous (e.g., (a) the imposition of an MDB approved integrity compliance program; (b) the conduct of a Red Flag Review of MDB financed contracts awarded to the company under which the company or its representative seeks to identify indicators of sanctionable practices; (c) undertaking investigations of those contracts that emit, for example, indicators of sanctionable practices; and (d) on-going collaboration obligations, including informing on other companies); (2) implementing the obligations is expensive and time consuming; (3) the sanction in the case of the World Bank’s Integrity Vice Presidency (“INT”) risks being longer than that initially recommended by Pascale Dubois, the World Bank’s Chief Suspension and Debarment Officer in any Notices of Sanctions Proceedings (“NoSPs”) issued by her office or imposed after a plea or contest by the World Bank’s Sanctions Board; (4) INT in particular may veto a company’s choice of law firm or lawyers to undertake the settlement obligations that it is required to undertake and pay for (at least in Europe, legal assistance of one’s own choosing has been regarded for some time as a basic human right see e.g., article 6(3)(c) of the European Convention on Human Rights (1950) (“ECHR”)); (5) the work of any third party Compliance Monitors appointed under direction from the MDB to verify Integrity Compliance Program (“ICP”) implementation is not necessarily confidential and may be shared with national prosecutors and regulators; (6) no immunity is offered by INT (the situation is entirely different at other MDBs) from referral to national law enforcement and prosecutorial agencies (“Criminal Referrals”); and (7) Criminal Referrals of third parties often exposes the company to the risk of identification and prosecution. INT is unusual, if not unique, as it insists that it is obliged to leave open the possibility of making Criminal Referrals in a settlement agreement and will not therefore countenance negotiating such a provision out of the agreement, despite the merits of doing so (Is it prudent, sensible or even commercially expedient to enter into an NRA with INT under which one may be obliged to disclose incriminating evidence that could be referred on for prosecution before the criminal courts?).
- The anti-corruption office of the AfDB is the Integrity and Anti-corruption Department (“IACD”), which is led by Anna Bossman, a Ghanaian law graduate and former Deputy Commissioner of the Ghanaian Commission on Human Rights and Administrative Justice. Clair Wee, a Singaporean commercial lawyer and long standing counsel to the AsDB runs the AsDB’s Office of Anti-corruption and Integrity (“OAI”) and the ‘sanctioning arm’ of the World Bank’s Integrity Vice Presidency (“INT”) is run by Steven Zimmerman (a former US Federal Prosecutor) and managed by Leonard McCarthy (a former South African prosecutor and Head of the now disbanded Scorpions). Other smaller and viable anti-corruption offices do exist within other MDBs (see e.g., the Office of the Chief Compliance Officer (“OCCO”) at the EBRD, the Office of Institutional Integrity (“OII”) at the IADB and the Group Integrity Office (“GIO”) of the Islamic Development Bank), but this note will in the main deal only with the ‘Big Three’ and will not concern itself with the offices of organizations that operate less mature sanctions regimes, such as the Fraud and Investigation Division (“IG/IN”) of the European Investment Bank (“EIB”).
- INT is by far the largest anti-corruption office within the MDB community in terms of budget and numbers, and not surprisingly it has traditionally been seen as the ‘big kid on the MDB block’, but of late it is being surpassed and outpaced in BWL’s view by the smaller, less bureaucratic and more commercially focused offices operated by the AfDB and the AsDB. It would appear to BWL that IACD and in particular OAI want to see companies reformed and thereafter succeeding commercially, and be able to work on AfDB and AsDB projects and thereby assist in fulfilling the mandates of those organizations. IACD and OAI seem to appreciate that the root cause of corruption in their respective countries of operation is corrupt public officials who seek to extort bribes from foreign companies and it would seem by their actions that they do not want to drive those companies into bankruptcy. It occurs to BWL that IACD and OAI grasp the very simple point that there is little to be gained from debarring reforming or reformed companies and their subsidiaries for often long periods, when those same companies are best placed to deliver AfDB and AsDB projects in often challenging environments. The risk of adopting an overzealous or aggressive debarment strategy is that all the large and capable companies are prevented from bidding on MDB financed projects, leaving those projects to the mercy of the less well qualified.
- INT’s version of a settlement agreement is known as a Negotiated Resolution Agreement (“NRA”), which in itself amounts to an oxymoron, as the title creates the false impression that a meaningful dialogue occurs between the parties, when it does not. In BWL’s experience, INT has a set template for a NRA and it will not waiver much, if at all from its standard terms and conditions. Unlike with IACD and OAI, there is precious little in the way of negotiation and all that seems to be open for debate with INT is the terms of the actual sanction. This lack of lack of negotiation has much to do with the fact that the ‘deck is stacked’ from the outset against companies accused by INT of misconduct; there exists an inequality in the bargaining positions of the parties, for accused companies seeking a non-contentious resolution may already be subjected to and suffering from Early Temporary Suspension (“ETS”), which is the process at the World Bank by which companies are prohibited from bidding on World Bank financed projects before INT has even concluded its investigation (the legitimacy of ETS and temporary suspension more generally at the World Bank is arguable and potentially open to contest on the basis that it offends the presumption of innocence – a fundamental human right in civilised rule of law systems (see e.g., article 6(2) of the ECHRs) – and causes financial loss and reputational damage to companies that have not been found culpable of or admitted any wronging). In contrast, IACD calls such agreements what they actually are: Settlement Agreements and, as one would expect, the terms and conditions are open for reasonable discussion and debate. OAI does not have a formalised settlement procedure, preferring instead to deal with each case on its individual merits and there is much to be said for this flexible approach.
- BWL barristers are regularly called upon to (1) defend companies and individuals who have been accused by INT, IACD and OAI of having engaged in sanctionable practices on World Bank, AfDB and AsDB financed contracts respectively; and (2) approach those offices with a view to agreeing disclosure protocols that will facilitate voluntary disclosures. It is fair to say that in our experience, IACD and OAI approach settlement negotiations in an entirely different manner to INT. The former and in particular OAI adopt a strategic and commercial attitude, which properly reflects their position within an international financial institution that lends to States in need of assistance. Whereas INT in contrast aligns itself far more with US law enforcement and behaves in a quasi prosecutorial role, which is undoubtedly due to the fact that INT is run and led by former prosecutors and staffed by inter alia former police officers. It appears to BWL that IACD and OAI are focused on the respective mandates of their institutions, whereas INT seems to concentrate more on the need for punishment of those that it perceives have transgressed the World Bank’s rules. INT operates undeniably within an administrative and contractual structure with a mandate to ensure that World Bank funds reach their intended destination and it is arguable that its quasi-law enforcement stance is ultra vires and open to contest.
- One thing is for sure, a company must in BWL’s view tread with caution before going down the path of an NRA with INT, for it would certainly appear of late that the disadvantages outweigh the advantages of such an arrangement. Companies and individuals are better advised in general to consider either accepting the sanction recommended by Pascale Dubois in any NoSP issued by her office or taking their chances and fighting the merits of the case before the World Bank’s Sanctions Board, as it is more than likely that the company will receive a lesser penalty and avoid the burdens associated with an NRA, including the risk of Criminal Referrals. In contrast, it is BWL’s experience that a company or individual can walk with far more confidence towards a settlement with IACD or OAI, for those offices and their respective staff – due mainly to their professional backgrounds – do not see themselves and nor do they behave as an arm of law enforcement. Unlike their colleagues in INT, IACD and OAI officers do not, at least to BWL’s knowledge, participate in, for example, searches of premises undertaken under warrant by national law enforcement bodies.
- Another certainty is that a company that is deciding whether to go or has decided to go down the route of a settlement agreement must be represented and advised by lawyers who actually know what they are doing. This seems self-evident, but BWL often encounter the aftermath of companies who have been poorly advised and who have taken decisions that prove to be regrettable. Companies should do their due diligence before instructing advisers and taking advice from them to ensure that they (1) are qualified and are acting as lawyers, and can assert legal professional privilege; (2) have real and verifiable experience of defending entities accused by the MDBs of sanctionable practices and not merely experience of designing and implementing integrity frameworks; and (3) are not MDB appeasers, in the sense that they are not advocating whole scale capitulation and disclosure of incriminating material. Companies and individuals should only engage competent and MDB experienced lawyers who will if necessary fight for their clients and give sound advice, which may be to reject a settlement and proceed to contest the accusations, both on jurisdiction and on the merits.
- So to answer the question, the BWL MDB Team would advise companies and if needs be individuals – at least at present – to actively consider pursuing settlements with IACD and OAI, content in the knowledge that those offices will act reasonably towards them, but that care should be adopted when contemplating settling with INT. Do not misunderstand us, as we do not want to create the impression that settlements with INT cannot be achieved, for they can, provided of course that the conditions are right (and BWL can assist in shaping those conditions), but caution with INT is and should presently remain the operative word.
The dedicated BWL MDB Team is presently comprised of the following BWL barristers: Lee Marler, Neil Macaulay, Jazz Omari and Alex Haines and the team can be contacted at firstname.lastname@example.org or by telephone at +44 1245 351073.