- 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 and Jazz Omari and the team can be contacted at enquiries@brettonwoodslaw.com or by telephone at +44 1245 351073.