US Supreme Court Restricts the World Bank Group’s Immunities

By | International Organisations, Multilateral Development Banks | No Comments

The Supreme Court of the United States has rejected the stance taken by the International Finance Corporation that it holds an absolute immunity from legal suit. The IFC had relied on a complete immunity to prevent a legal action being brought against it by a group of local fishermen, farmers and villagers from Gugarat, India. Mr Budha Ismail Jam and others claim that a power plant financed by the IFC had caused widespread and harmful pollution of the air, land and water in the surrounding area.

The IFC, part of the World Bank Group, argued that it’s immunity provision, under which it is granted the same immunity from suit as that of foreign states, should be interpreted as an “absolute immunity”. It also argued that a flood of foreign plaintiff litigation and exposure to money damages would be the undesirable result of anything less than absolute immunity. The Supreme Court took the view these concerns were “inflated”. It also noted that other international organisations such as the UN and IMF had specified absolute immunity from judicial process in their charters, which was not the case for the IFC.

Neil Macaulay, Co-Head of Chambers at BWL, believes this was a particularly bad decision for the World Bank Group, which has always strenuously sought to maximise its immunities from legal suit. Mr Jam and his neighbours have now exposed a clear chink in the World Bank Groups armour. However the ruling does caution that “restrictive immunity hardly means unlimited exposure to suit for international organisations”. There are still many hurdles that Mr Ram and his fellow petitioners must yet clear before the restricted immunity can be pierced in the lower courts. Overall however the clarification of the limits of the World Bank’s immunities for its commercial activities is to be welcomed.  The decision is also likely to increase accountability of the World Bank’s activities through the availability of judicial scrutiny by the national courts and draw greater attention from the international media on the social and environmental impact of its projects.

For the full decision see here.

Fraud dominates investigations at the Asian Development Bank 

By | Banques de développement, International Organisations, Multilateral Development Banks, News | No Comments

The Office of Anticorruption and Integrity at the Asian Development Bank has just released a pie-chart that provides valuable insight into the focus of its ongoing investigations into sanctionable practices. The key takeaway from the chart is that fraud, running at three quarters of all investigations over the last ten months, overwhelmingly makes up the largest slice of the investigative pie and corruption is the smallest slice at only two percent.

These ADB figures for 2018 are generally consistent with long term trends across the MDBs where corruption cases may grab the headlines but in the vast majority of instances it is fraud that lies at the core of most of the enforcement action brought by their integrity offices.

One question thrown up by the figures for corporates bidding on MDB funded projects to consider is whether they are matching this fraud risk with an equal proportion of their compliance efforts. Neil Macaulay, Co-Head of Chambers at Bretton Woods Law, believes there is a danger that the scale and nature of the risk of committing fraud can easily be underestimated by corporates when setting up their anti-bribery and corruption programs. Given that the base sanction for fraud and corruption violations are the same, with a three-year debarment start point, this could be a costly misjudgement.

MDB investigators routinely focus on procurement frauds as they are generally more widespread and easier to identify and prove than other sanctionable practices such as corrupt bribe payments, which by their nature are more likely to be concealed. Typically, an MDB procurement fraud, known as a misrepresentation, might involve misconduct through a wide range of means including; failure to declare an agent or commission payments, embellished c.v. qualifications or performance track record, forged bid securities, false invoicing and mis-description of joint venture responsibilities. This list is by no means exhaustive and misrepresentations can occur at all stages of the bidding and contract execution processes and the misstatement usually appears on the face of the available project records, which help to explain why fraud carries the greatest risk of debarment and sanction in MDB funded projects.

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

By | International Organisations, Multilateral Development Banks, News | 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 >

Bretton Woods Law holds a Staff Rights Workshop in Vienna

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

On Friday 14th September, Ludovica Moro of Bretton Woods Law delivered a one-day workshop to the Staff Council of the United Nations Office in Vienna (“UNOV”). The attendees included staff representatives and employees of the United Nations Office on Drugs and Crime (“UNODC”) and of the International Atomic Energy Agency (“IAEA”).

The workshop focussed upon the latest changes within the United Nations’ internal justice system regarding UN salaries and entitlements. Of particular interest was the relevant recent jurisprudence of the Dispute Tribunal (“UNDT”) and Appeals Tribunal (“UNAT”) in the cases of Mirella et al. v SG, 2018-UNAT-842 and Lloret Alcaniz et al. v SG, 2018-UNAT-840.

The workshop considered the change in the approach of the UNAT judges with respect to the first tier judgments of the UNDT alongside other landmark cases regarding staff acquired rights. The discussion also included a comparison of the tests applicable to distinguish fundamental rights of employment from non-essential rights at the International Labour Organisation Administrative Tribunal (“ILOAT”), the World Bank Administrative Tribunal (“WBAT”) and the influence of these tribunal decisions on the UNAT judgments. The interactive discussion also included the new UN compensation package and the Global Service Delivery Model for the UN Secretariat. Ludovica addressed various strategies available to staff associations in conducting meaningful negotiations with management on staff rights and for the coordination of effective class actions.

Finally, the workshop concluded with a practical exercise on how to deal with the most recurring staff complaints from a staff representative’s perspective.

Ludovica and the Bretton Woods Law International Administrative Law (IAL) team have recently signed a Memorandum of Understanding with the Staff Associations of the IAEA, UNODC and UNIDO to assist with the delivery of our expert legal services in the Vienna area.

Any International Organisation Staff Association or Staff Union wishing to enquire how the BWL IAL Team can assist them in providing advice, representation or a bespoke workshop is welcome to contact us through enquiries@brettonwoodslaw.com in the first instance.

Enhancing Children’s Rights in South Asia

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

Whilst attending Law Asia’s Annual Conference in Colombo, Sri Lanka last summer, BWL’s Counsel, Rule of Law and Human Rights expert, Antje Kunst, met with the Rainbow Foundation Baddegama, an NGO which works with children with disabilities, their parents, as well as children in care, with the aim of creating opportunities for peer support. Through the Head of that NGO, Antje had the pleasure of getting to know a respected Buddhist monk who is engaged with such issues. The trio came up with the idea of bringing Janis McDavid, a young German student and motivational speaker who was born without arms and legs, to Sri Lanka.

Their goal was to change the perception of Sri Lankans towards children with disabilities and to advance their rights under international law, including the UN Convention of the Rights of the Child. The timing could not have been better, as Sri Lanka had just ratified the UN Convention on the Rights of Persons with Disabilities (UNCRPD)[1]

A few months later the team was joined by Lalith Ganhewa, a Sri Lankan radio journalist and producer from Berlin and the President of Lanka Help e.V. Deutschland, a humanitarian organisation helping inter alia persons with disabilities in Sri Lanka. After months of hard work involving civil society (e.g., NGOs, academia, media, business etc.), the government of the Southern Province and members of the diplomatic and donor community in Sri Lanka, a tour was organised. In December 2016 and January 2017, Janis delivered motivational speeches to Government officials, NGO representatives, youth leaders, university students, business leaders and other citizens, some senior officials within Embassies and the UN, as well as conducting interviews with the media.  The tour, in respect of which Antje played a crucial coordination, communication and planning role, was very successful.

In March 2017, a second tour took place and Janis provided a motivational speech before the Sri Lankan business community at a Rotary district conference. This time Antje, a former Senior Legal Adviser at the UN, was, together with UNDP Sri Lanka, involved in organising a motivational session in front of the staff of all UN Agencies, including their adolescent children.

The two tours motivated and helped raise awareness in mainstream Sri Lankan society as well as the UN and the diplomatic community in Sri Lanka, of matters important for the implementation of the UNCRPD and the UNCRC, including the importance of inclusive education and parenting.

To ensure the realization of the rights of children during adolescence, in December of last year the UN’s Committee on the Rights of the Child published a new General Comment [2] providing guidance to States on the necessary measures. The Committee stated “the potential of adolescents is widely compromised because States parties do not recognize or invest in the measures needed for them to enjoy their rights.” UNICEF South Asia’s goal to promote investment by state parties in the 340 Million adolescents in South Asia prompted the Deputy Head of the Regional Office South Asia to invite Janis to a conference held in May 2017 in Nepal. Janis opened the conference, which was attended by senior officials of all UNICEF South Asia’s country offices, with a keynote motivational speech which Antje helped to prepare, covering the topics of investment in, and fulfilment of, children’s rights, including in adolescence, leaving no child behind. His speech, which was widely disseminated in the social media and which was also addressed to the young people of South Asia, was focused on motivating that group to advocate for the realization of their rights.

Janis’ successful appearance in Nepal prompted the UNICEF Bangladesh country office to follow suit. In July 2017 Janis delivered motivational speeches to UNICEF’s HQ and field staff in and near Dhaka, the aim of which was to drive the achievement of results by its staff, including by ensuring the the fulfilment of rights of children. He also spoke to around 100 adolescent club members in the Mirpur slum with a view to enhancing their motivation to work as social change agents, which was supported by UNICEF.

The advancement of human rights, in particular of the most vulnerable members of society, i.e. children and young adults, including those with disabilities, requires a committed government machinery, supported by a motivated UN staff (e.g., of UNICEF), as well as motivated rights’ holders, e.g., the millions of adolescents and children and their caregivers in South Asia. Antje’s pro-bono work in South Asia was aimed at contributing positively to this noble endeavour.

Antje is very grateful to all those who helped to make this ambitious project a success, in particular to Martin Henrich – Rainbow Foundation Baddegama; Samitha Baddegama Thero; Lalith Ganheva – Lanka Help e.V. Deutschland; Zahabia Adamaly; Lasanthi Senarath Attanayake & colleagues, Kelaniya University and the International Centre for Ethnic Studies; Rakitha Karunaratne and his team, German Goethe Institute Sri Lanka; Senake Amerasinghe – former Rotary District Governor and his team; Banthe Devananda; Una Macauley, Dilupa Fernando and their team at UNDP Sri Lanka; Philippe Cori and his team at UNICEF Regional Office for South Asia; Sara Bordas Eddy and her team at UNICEF Bangladesh Country Office; and of course, Janis McDavid.

 

[1] The purpose of the convention is to promote, and protect the full and equal enjoyment of all human rights and fundamental freedoms by all persons with disabilities.

[2] General Comments provide authoritative interpretations of children’s rights under the Convention.

 

Antje Kunst

Counsel, Rule of Law and Human Rights Expert

antjekunst@brettonwoodslaw.com

The (dis)advantageous relationship between International Organisations and their host countries: the Austrian experience

By | Administrative Law, Centre of Excellence, Civil Servants, Employment Disputes, IAL, International Administrative Law, International Organisations | No Comments

 

The relationship between International Organisations (IOs) and their host countries creates some interesting legal and political issues which do not always sit happily together: on the one hand, IOs have broad autonomy and enjoy a remarkable number of privileges and immunities (which are generally a grey area for the host country’s authorities) yet, on the other hand, the IOs are an important resource for the host country in terms of economy and visibility.

In considering this relationship, the Latin expression “do ut des”, which means “give and receive” or, perhaps more accurately, “give to receive” is particularly relevant to the subject matter. In fact, in principle, hosting international organisations is convenient and “remunerative” but it implies the loss of sovereignty of the host country in some fields (e.g. see the extraterritoriality of the international premises) and the conferment of a number of privileges and immunities to the international organisations (inter alia, the immunity from national courts).

Privileges are exemptions from the otherwise applicable substantive law of a state, while immunities are usually regarded as exemptions from the administrative, adjudicatory, or executive powers of a state[1]. Typical privileges of IOs are partial exemptions from some areas of domestic law (such as taxes, customs, foreign exchange controls, immigration), the most common of which is the exemption from the obligation to pay any direct taxes for the IO itself and its employees (while for indirect taxes, reimbursement schemes are frequently agreed)[2]. However, the most important and significant immunity enjoyed by the IOs is that from legal suit, the so-called “jurisdictional immunity”, which can raise different interpretations but the existence of which is not controversial. What is controversial is its scope, i.e., whether it is absolute, restrictive or functional. Most treaties or agreements usually confer a functional immunity, which is not a crystal clear concept, especially for the national authorities that have to face the grey area of IOs’ immunities. It seems that, in practice, the concept of functional immunity frequently leads to a de facto absolute immunity[3].

While financial privileges’ disputes are mainly settled on a diplomatic level, the jurisdictional immunities have generated the most extensive case law in domestic court decisions, which provide “examples for judicial dialogues or conversations crossing national jurisdictional borders”[4]. National courts adopted different approaches to the jurisdictional immunity of IOs also in consideration of the legal system in place, i.e. common or civil law system, the first relying on precedent decisions, the latter on a “constant jurisprudence” that stems from codified legal sources. However, the common denominator is that national courts, in deciding whether to grant the jurisdictional immunity, rely on the availability of alternative dispute settlement methods. With the 1999 Waite and Kennedy v. Germany judgment of the ECtHR, the obligation for IOs to provide an alternative access to justice (namely, an effective internal justice system, comparable to the national one) has been directly linked to the awarding or not of the immunity from the national process. By way of a concrete example, if a national court can be persuaded that the existing mechanism within an IO is insufficient to afford the staff member proper protections of his or her employment rights, it could waive the IO’s immunity in the specific case and proceed to a judicial review of its internal justice system, with consequences on the immunities.

Therefore, in order to enjoy the privileges and immunities there is a “contractual exchange” whereby international organisations must fulfil their side of the bargain, by providing staff member who are subject to those immunities with access to appropriate and sufficient systems of justice as they might expect in domestic jurisdictions[5]. The privileges and immunities of international organisations cannot be considered inalienable if they conflict with the fundamental rights and principles of the host country, of the European Union and fundamental and basic principles of human rights. In short, immunities from legal suit do not give the IOs carte blanche to do as they see fit: this point is all the more pertinent where tortious harm has been caused to the staff member at the hands of the defendant organisation and the functional immunities from legal suit do not extend to such circumstances. The same concept applies to the immunity from enforcement measures, regularly enjoyed by IOs. Even if a domestic court is allowed to rule against an IO, the judgment cannot be directly enforced due to the Organisation’s strong immunity shield from enforcement measures. However, in this case, domestic courts have applied the Waite and Kennedy doctrine where the claimant does not have a reasonable alternative mean of enforcement.

On the other hand, being an International Organisation’s member state is commonly considered beneficial for both state and society, therefore being a host state creates particular advantages. The Austrian government described the presence of IOs in Vienna as an important goal of its foreign policy because it positively affects the country’s reputation and influence in international relations and has positive effects on the local economy.[6] Thus, Austria and the other countries hosting IOs have an interest in the smooth functioning of the Organisations present on their territory and in their freedom from unilateral interference, which generally originates from provisions in treaties and domestic legislation on IOs legal personality and their privileges and immunities. In this regard, it should be noted that Austria occasionally extends privileges and immunities to events related to IOs (such as seminars or meeting) or grants them to international entities whose status as IOs is uncertain such as, the OSCE, which is more a political organisation rather than an international humanitarian one and the CTBTO, which is a treaty signed and ratified by many countries but which cannot enter into force and become binding until all the nuclear technology holder countries sign and ratify it.  However, Austria, throughout the years showed a balanced approach towards IOs’ immunities when those immunities negatively affected third parties’ rights, in particular their right of access to justice. In fact, in Austria the ECHR (see, in particular, article 6) enjoys constitutional rank (like in most civil law European legislations) and the access to justice is part of the treaty law such as, for example, the International Covenant on Civil and Political Rights (ICCPR 1966, in particular, article 4); in addition, it is considered a norm of customary international law, thus binding both IOs and States[7].

During the Cold War, Austria served as platform for international dialogue, due to its geopolitical position and its neutral status. This role of “international hub” was strengthened by the opening in 1979 of the Vienna International Centre (VIC), also called UNO City. Since then, Vienna is seat of the United Nations (UN), together with New York, Geneva and Nairobi. The idea of the VIC born in 1966, when the Government of Austria made an offer to the United Nations to construct in Vienna an International Centre to be used by organisations belonging to the United Nations system. In 1967, the Government of Austria and the city of Vienna jointly decided to assign an area on the left bank of the Danube as the site of the centre and in 1968 organised an international competition for the design of the buildings, which attracted the interest of architects worldwide and was in the end won by the Austrian Johann Staber. The Government of Austria (65%) and the city of Vienna (35%) shared the VIC construction costs (approximately 640 million Euros)[8]. The construction site began in 1972 and the VIC complex, which covers an area of 180,000 m² and has extraterritorial status, was inaugurated on 23rd August 1979. Separate agreements were signed by Austria and, respectively, IAEA and the United Nations (on behalf of UNIDO and the other United Nations entities in Vienna) on 28 September 1979. The Government of Austria handed over the VIC complex to the United Nations and IAEA for the symbolic rental sum of one Austrian schilling (equivalent to 0.07 euro today) a year for 99 years[9].

Over the years, the presence of international entities in Austria grew exponentially and it is now quite impressive: more than 40 IOs, financial institutions, diplomatic representations, NGOs and Quasi-NGOs are present on the Austrian territory and constitute an important economic factor, too. They employ more than 6000 employees, out of which about a quarter are Austrian citizens. According to a recent study by Ernst & Young, the sector spends about 725 million Euros per year, which result in a macroeconomic demand effect of about 1.4 billion Euros and thus contributes to GDP growth and Austria’s prosperity. In the long-term, all indicators demonstrate the economic benefit of the sector, in particular, conference activities increased by one third in the period 2010 – 2014[10]. In this regard, for example, the nuclear negotiations with Iran, successfully completed in Vienna in July 2015, and the “Syria talks” held since autumn 2015, generated a publicity value equivalent to 100 million Euros.

Further to encourage the settlement of International Organisations, Austria incentives also Non-Governmental Organisations (NGOs) to choose it as their seat. In fact, upon request of an organisation, the Federal Ministry for Europe, Integration and Foreign Affairs may grant the legal status of Non-Governmental Organisation by decree, on the legal basis of the Federal Law on the Granting of Privileges to Non-Governmental International Organisations. NGOs not only are an important expression of the civil society, they also enrich the thematic work of International Organisations. In relation to this, since 2016, NGOs have the possibility to apply for recognition as Quasi-International Organisations upon the fulfilment of certain requirements: the organisation must have non-profit character, its structure has to be similar to that of an IO, it must have permanent staff and an appropriately equipped office in Austria; in addition, its work must be related to the mandate of an established IO.  On the other hand, the legal status of Quasi-International Organisation implies certain tax exemptions. A recent example of an organisation, which has been awarded the status of Quasi-International Organisation and that chose Vienna as its seat, is the “Sustainable Energy for All (SE4All)”. It started its activities in summer 2013 and established its permanent headquarters in Vienna in 2015. SE4All is headed by the Special Representative of the UN Secretary General for “Sustainable Energy for All” and therefore fulfils all the above-mentioned requirements[11].

Overall the relationship between IOs, NGOs and Austria can be described as extremely positive and fruitful for both parties. However, the other side of the medal is that the host country tends to avoid conflicts on the privileges and immunities granted to the IOs and on the “grey area” constituted by the jurisdictional immunity. Therefore, there is still room for a more regulated and transparent cooperation between the IOs and the national authorities in order to grant the IOs’ employees and, in general, the third parties involved in disputes with IOs, the full respect of their civil fundamental rights.

 

Ludovica Moro

ludovicamoro@brettonwoodslaw.com

 

[1] A. Reinisch, International Organisations Before National Courts.

[2] A. Reinisch, The Privileges and Immunities of International Organisations in Domestic Courts.

[3] See supra note 2.

[4] See supra note 2.

[5] This is a well-established principle also in the Convention on the Privileges and Immunities of the United Nations. A commentary on the Convention by Professor August Reinisch states: “The de facto “absolute” immunity of the United Nations is mitigated by the fact that article VIII, section 29, of the Convention requires the United Nations to “make provisions for appropriate modes of settlement of: (a) disputes arising out of contracts or other disputes of a private law character to which the United Nations is a party”. The General Convention’s obligation to provide for alternative dispute settlement in case of the Organisation’s immunity from legal process can be regarded as an acknowledgment of the right of access to court as contained in all major human rights instruments.” (http://www.un.org/law/avl/ )

[6] A. Reinisch, The Privileges and Immunities of International Organisations in Domestic Courts.

[7] See supra note 6.

[8] Source: United Nations Office in Vienna (UNOV) website.

[9] See supra note 8

[10] Source: Austrian governmental website – www.bmeia.gv.at

[11] See supra note 10

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

Asian Infrastructure Investment Bank closes its Doors to Corrupt Bidders

By | Multilateral Development Banks, News | No Comments

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:

  1. 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
  2. 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
  3. contracts with the Bank for advisory services to be performed by the Bank. 
  4. 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.

Contact Bretton Woods Law: enquiries@brettonwoodslaw.com

The EU Court’s Grand Chamber supports equality and the rule of law in EU Missions

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

In a long awaited judgment the Grand Chamber of the Court of Justice of the European Union (‘CJEU’) found on appeal that it has jurisdiction in an employment dispute brought by an Italian magistrate who was seconded by her government to the CDSP mission in Bosnia Herzegovina.

In the Case C‑455/14 P H vs. Council of the European Union and the European Commission and the European Union Police Mission (EUPM) in Bosnia and Herzegovina the claimant brought a legal suit before the EU General Court seeking the annulment of a re-deployment decision adopted by the Head of the EUPM and compensation for harm suffered as a result of alleged psychological harassment.

In an earlier decision refusing the claim the EU General Court ruled on 10 July 2014 in H v Council and Others (T‑271/10) that it lacked jurisdiction since the contested decisions fell within the EU’s Common Foreign Security Policy (‘CFSP’) and relied upon provisions that set out that the CJEU shall not have jurisdiction over provisions relating to the CFSP norwith respect to acts adopted on the basis of those provisions.

The Grand Chamber ruling on 19th July 2016 found that pursuant to the aforementioned provisions, the CJEU does not, in principle, have jurisdiction on the provisions of, or acts adopted under, the CSFP. The Court then observed that the European Union was founded, in particular, on the values of equality and the rule of law stating:

“The very existence of effective judicial review designed to ensure compliance with provisions of EU law is inherent in the existence of the rule of law”.

Whilst the ruling acknowledged that the contested decisions were admittedly set in the context of the CFSP it added that this does not necessarily exclude the jurisdiction of the EU judicature. The Grand Chamber then referred to the fact that the EU judicature had jurisdiction to rule on all actions brought by EU staff members having been seconded to the EUPM. It noted that staff members seconded by the Member States and those seconded by the EU institutions were subject to the same rules so far as concerns the performance of their duties ‘at theatre level’.

Indeed, the decisions adopted by the authorities of that mission, which related to the allocation of human resources assigned to it by the EU institutions and Member States, did have an operational element, which fell within the CFSP. However, by their very essence, they also constitute acts of staff management. Consequently, it was held that the jurisdiction of the EU judicature should not be excluded from reviewing acts of staff management that relate to staff members seconded by the Member States.

Finally the Grand Chamber held that the contested decisions were only imputable to the Council and that, accordingly, the action was admissible only in so far as it was directed against the Council. The case was referred back to the General Court for judgment on the substance of the action.

The Grand Chamber’s judgment is very welcome news for more than 1500 staff who currently serve with CSDP missions, in some of the most dangerous parts of the world. It is an important step towards bringing missions under judicial scrutiny, thus achieving greater legal accountability. It is expected that the case-law of the CJEU will also serve as an important tool for policy change and as guidance for human resources officials in CSDP missions, seconding institutions and employees serving in CSDP missions alike.

In conclusion, the Grand Chamber has made an important ruling by permitting effective judicial review of staff management decisions by a CSDP mission, thusensuring compliance with EU law, including the EU Charter, and bringing a welcome boost to the morale of staff upon whom the success of such missions ultimately depends.

View full decision >

Antje Kunst provides lecture to a delegation of the Vietnamese bar federation

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On 6 July 2016, Antje Kunst from Bretton Woods Law provided a lecture to a delegation of the Vietnamese bar federation during a study trip organized by the German Federal Bar and the Foundation for International Legal Cooperation (IRZ).

The German Federal Bar (Bundesrechtsanwaltskammer) is the umbrella organization of the 28 regional Bars in Germany (Rechtsanwaltskammern) and safeguards the professional interests of all lawyers in Germany at a federal, European and international level.

The delegation consisted of the vice-president of the Vietnam Bar Federation and vice-presidents of several regional bar associations in Vietnam.

Antje provided a lecture on risks and threats of corruption and the legal profession setting out inter alia the results of the IBA OECD and UNODC survey of 2010 in this area. She explained international anti-corruption instruments such as UNCAC, its implementation review process and requirements on preventive measures and criminal sanctions. She elaborated on the IBA international principles on conduct for the legal profession of 2011, i.e. independence, integrity, avoidance of conflicts of interest and confidentiality/professional secrecy. She discussed with her Vietnamese colleagues specific corruption risks for the legal profession such as the attorney-client privilege and the instruction of lawyers as intermediaries or agents (especially in international business transactions).

She highlighted the role of the legal profession can play in the international fight against corruption referring to the IBA Anti-Corruption Guidance for Bar Associations: Creating, Developing and Promoting Anti-Corruption Initiatives for the Legal Profession. Her Vietnamese colleagues provided interesting insights on corruption in the justice sector, the national anti-corruption legislation, projects and efforts to curb corruption including in the legal profession and the challenges faced.