Advice on avoiding sanctions and debarment
The MDB community is comprised in the main of the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), Inter-American Development Bank (IDB) and the World Bank Group. Each MDB is an international organisation created by treaty and each is mandated by its Member States to ensure that the funds that the organisations lend reach their intended destination. As such, each MDB has created an investigative office whose function it is to ‘police’ MDB funded projects in order to prevent or stop incidences of fraud, corruption, collusion and coercion (“the Sanctionable Practices”). The MDBs have all developed an internal ‘administrative’ apparatus for prosecuting companies and individuals accused of having engaged in Sanctionable Practices on MDB financed projects. Entities found guilty by the MDBs risk debarment (i.e., they will be prohibited from bidding on MDB funded projects for a period of time) and face referral to national prosecutorial authorities.
The following list of ‘Do’s and Do Not’s is intended to assist companies and individuals in their dealings with the MDBs:
Do remember that companies and individuals can be debarred either indefinitely or for a set period of time by the MDBs for engaging in Sanctionable Practices on projects that they finance.
Do recall that the default sanction for a company with no prior convictions by the MDBs is a three-year debarment with conditional release, which means that the company will not be released to bid again until it can demonstrate that it has improved its corporate compliance and governance position.
Do appreciate that most MDBs publish the names of those that they have debarred for fraud and corruption, which can have dire and long-lasting consequences for the reputations of those companies and will seriously harm its chances of winning work funded by non-MDB sources as well.
Do realise that the presumption of innocence does not apply and that the World Bank can impose a six-month ‘temporary suspension’ before even formally accusing a company of having engaged in a Sanctionable Practice.
Do be cognisant of the fact that the MDBs do not have any jurisdiction over public officials; just companies and individuals who have bid upon and who have been awarded MDB funded projects.
Do be aware that the jurisdiction of the investigative offices of the MDBs stems from the ‘triangular’ contractual arrangements between lender (MDB), borrower (usually a government) and the contractor (the successful bidder).
Do ensure that bids submitted on MDB financed projects are entirely accurate and defensible.
Do ensure that you are aware of the risks of doing business in certain countries and, to this end, do consult at a minimum Transparency International’s Corruption Perception Index.
Do avoid using agents in countries in which you operate and do undertake credible due diligence checks on the consultants and contractors that you engage.
Do train your staff routinely and regularly on how to identify and avoid being drawn in to a Sanctionable Practice, as well as the potential repercussions for doing so.
Do appreciate that some MDBs, most notably the World Bank, will enter into plea arrangements known as Negotiated Resolution Agreements, whereby any likely sanction will be reduced for a guilty plea and an undertaking to assist the MDB.
Do be aware of the 9th April 2010 Agreement for Mutual Enforcement of Debarment Decisions under which a company debarred for longer than one year by one MDB will be debarred by them all, which can and most likely will deter organisations, national aid agencies and government departments from dealing with you.
Do act swiftly and instruct a lawyer who has established expertise in MDB debarment work the very moment you appreciate that you are at risk of sanction. The earlier that a lawyer is engaged the better.
Do realise that a company’s corporate compliance structure should meet with the minimum requirements set by the World Bank’s Integrity Compliance Guidelines.
Do provide a copy of this document to your Compliance Officer.
The Do Not’s
Do not be tempted to engage in any form of Sanctionable Practices on MDB financed projects, for it is likely that your act or omission will be discovered.
Do not pay success fees, other similar commissions or facilitation payments, for the MDBs will treat such payments as bribes.
Do not inflate or otherwise alter CVs in bids submitted on MDB financed contracts, for this can and most likely will amount to a fraudulent practice.
Do not engage with investigative offices of the MDBs, such as the World Bank’s Integrity Vice Presidency (INT) unless you have first spoken with a lawyer qualified to advise on MDB debarment matters. The first approach from the MDB might be the issuance of an Audit Letter under which it requests sight of the company’s books and records pursuant to contractual obligations owed by the company to the borrower.
Do not allow yourself to be interviewed by MDB officers as a ‘suspect’ or ‘subject of an investigation’ in the absence of a suitably qualified lawyer instructed by you and do not disclose any documents.
Do not admit liability for a Sanctionable Practice until your lawyer has advised you on the merits and consequences of doing so.
Do not forget that the investigative offices of the MDBs regularly share information between themselves.
Do not forget that only the World Bank operates a quasi-judicial system for handling accusations of Sanctionable Practices, the other MDBs, such as the ADB, operate a ‘star-chamber.’
Do not consider entering into an MDB voluntary disclosure programme in the absence of first consulting a suitably qualified lawyer.
Do not forget that some MDBs, such as the World Bank, can sanction a company for a failure to co-operate with its investigators (known as an Obstructive Practice) such as where a company refuses to honour an audit clause in its contract with the borrower that permits MDB investigators to review its books and records.
All of the lawyers practising at Bretton Woods Law are experts in international organisations law, including the sanctions regimes operated by the various MDBs. They regularly accept instructions to defend companies and individuals accused by the MDBs of having engaged in Sanctionable Practices.
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