Negotiated Settlements for Corruption Offences : A European Perspective 9789462741157, 9789462364523

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Negotiated Settlements for Corruption Offences

NEGOTIATED SETTLEMENTS FOR CORRUPTION OFFENCES A EUROPEAN PERSPECTIVE

Edited by Abiola O. Makinwa

Published, sold and distributed by Eleven International Publishing P.O. Box 85576 2508 CG The Hague The Netherlands Tel.: +31 70 33 070 33 Fax: +31 70 33 070 30 e-mail: [email protected] www.elevenpub.com Sold and distributed in USA and Canada International Specialized Book Services 920 NE 58th Avenue, Suite 300 Portland, OR 97213-3786, USA Tel: 1-800-944-6190 (toll-free) Fax: +1 503 280-8832 [email protected] www.isbs.com Eleven International Publishing is an imprint of Boom uitgevers Den Haag.

ISBN 978-94-6236-452-3 ISBN 978-94-6274-115-7 (E-book) © 2015 Abiola O. Makinwa | Eleven International Publishing This publication is protected by international copyright law. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. Printed in The Netherlands

This publication is supported by the European Union Programme Hercule II (2007-2013). This programme is implemented by the European Commission and it was established to promote activities to combat fraud affecting the EU's financial interests including cigarette smuggling and counterfeiting (for more information see http://ec.europa.eu/anti_fraud/about – us/funding/index_en. htm). Any communication or publication related to the action, made by the beneficiary in any form and using any means, shall indicate that it reflects only the author’s view and that the Commission is not responsible for any use that may be made of the information it contains.

TABLE OF CONTENTS

Preface ................................................................................................................ xi

Contributor Biographies ................................................................................... xiii 1

Negotiated Settlements for Corruption Offences: Wither Europe? ........... 1 Abiola Makinwa

1.1

Introduction ............................................................................................... 1

1.2

The Long Shadow of the FCPA ................................................................ 4

1.3

The Push ‘For’ and ‘Against’ Negotiated Settlements .............................. 9

1.4

Wither Europe? ....................................................................................... 11

1.5

Conclusion .............................................................................................. 15

2

Negotiated Settlements for Corruption Offences: Position in France ..... 17 Maud Perdriel–Vaissière

2.1

An Assessment of the French Legal Framework .................................... 18

2.2

Negotiated Settlements: A Solution to Corruption Offences? ................ 21

2.3

Looking Ahead: Some Policy Recommendations .................................. 26

2.4

Conclusion .............................................................................................. 34

3

Negotiated Settlements for Corruption Offences: Position in Germany . 35 Anna Oehmichen

3.1

Introduction ............................................................................................. 35

3.2

Legal Framework: Rules Governing Corruption .................................... 35

3.3

Legal Framework: Rules Governing Negotiations and Settlements ....... 40

3.4

Position of Negotiated Settlements in Germany ..................................... 51

3.5

European Perspective .............................................................................. 55

3.6

Summary and Conclusion ....................................................................... 57

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TABLE OF CONTENTS

4

Negotiated Settlements for Corruption Offences: Position in Italy......... 59 Paola Mariani

4.1

Introduction ............................................................................................. 59

4.2

Italian Legal Framework ......................................................................... 60

4.3

Position of Negotiated Settlements ......................................................... 70

4.4

European Perspective .............................................................................. 72

4.5

Recommendations and Conclusions ....................................................... 75

5

Negotiated Settlements for Corruption Offences: Position in Poland ..... 77 Karolina Stawicka / Arkadiusz Matusiak

5.1

Introduction ............................................................................................. 77

5.2

Legal Framework .................................................................................... 78

5.3

Negotiated Settlements in Poland ........................................................... 88

5.4

European Perspective .............................................................................. 94

5.5

Conclusion .............................................................................................100

6

Negotiated Settlements for Corruption Offences: Position in the Netherlands ............................................................................................105 Karin Van Wingerde / Gerben Smid

6.1

Introduction ............................................................................................105

6.2

Foreign Bribery under the Dutch Criminal Code ...................................108

6.3

Negotiated Settlements in Corruption Cases in the Netherlands............110

6.4

A Pragmatic Approach to Regulating Corporate Misconduct................118

6.5

Discussion and Conclusions...................................................................121

7

Negotiated Settlements for Corruption Offences: Position in Norway ..125 Tina Søreide

7.1

Introduction ............................................................................................125

7.2

The Legal Framework ............................................................................126

7.3

Enforcement ...........................................................................................129

7.4

Conviction and Penalties ........................................................................131

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7.5

Position of Negotiated Settlements ........................................................133

7.6

Discussion ..............................................................................................138

7.7

Conclusion .............................................................................................146

8

Negotiated Settlements for Corruption Offences: Position in Sweden ..147 Claes Sandgren

8.1

Introduction ............................................................................................147

8.2

Legal Framework ...................................................................................147

8.3

Exercise of Prosecutorial Discretion ......................................................156

8.4

Negotiated Settlements ..........................................................................160

8.5

Sentencing ..............................................................................................161

8.6

European Perspective .............................................................................164

8.7

Conclusions and Recommendations ......................................................165

9

Negotiated Settlements for Corruption Offences: Position in the United Kingdom ................................................................................................171 Alan Bacarese

9.1

Introduction ............................................................................................171

9.2

The Legal Framework ............................................................................172

9.3

Position of Negotiated Settlements ........................................................178

9.4

Sentencing ..............................................................................................181

9.5

Recent Cases and Settlements in the UK ..............................................182

9.6

Conclusions ............................................................................................191

10

Perspectives on Negotiated Settlements .................................................193

10.1 The Criminal Law Viewpoint: Hans de Doelder ...................................193 10.2 The Corporate Viewpoint: Jan Eijsbouts ...............................................195 10.3 The EU Integration Viewpoint: Jaap de Zwaan .....................................200 10.4 The Efficiency Viewpoint: Sharon Oded ...............................................203 10.5 The Civil Society Viewpoint: Paul Arlman ...........................................210

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Preface Member states of the European Union (EU) must continually review their anticorruption policies and regulations to ensure that they meet the obligation to provide ‘effective, proportionate and dissuasive criminal penalties’ in the protection of the financial interests of the EU. The European Anti-Fraud Office (OLAF) bears the important role of assisting EU member states in their discharge of this obligation by providing assistance and advice. To this end, OLAF, in its administrative and investigative role needs to evaluate best practices and emerging strategy in the fight against corruption inasmuch as these may (1) assist in the development of EU policy and rules or (2) have a direct effect on the financial interests of EU Member States. One such emerging practice is the negotiation of settlements between prosecuting authorities and offenders with respect to corruption offences. In July 2013, OLAF awarded a HERCULE II Grant to The Hague University of Applied Sciences to hold a High Level Seminar on Negotiated Settlements for Corruption Offences: A European Perspective. The seminar took place in The Hague from the 22nd–23rd of May 2014. Researchers and experts from eight European countries assessed the potential, problems and prospects of negotiated settlements as a strategy in the fight against corruption. The chapters in this book represent the final conclusions and recommendations of the participants. I am grateful to the country researchers and invited experts for their contributions to the HU/OLAF seminar and to this printed volume. I thank Joris Voorhoeve, Lector of the International Peace, Justice and Security Research Program and Hilde Cadenau, Program Leader of the International and European Law Program who supported the OLAF application. My special thanks go to Marco Romagna, rapporteur to the Seminar as well as Anja Bachs-Plugge, Ian Curry Sumner, Sander de Hollander, Stefania Marassi, Hyun-Ju Park, Jantine Middelkoop, Mirjam Schoenmaeckers-Daemen, Bas Schrijver and Piet Willems for their assistance in the realization of this project. Abiola Makinwa The Hague University of Applied Sciences March 2015

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Contributor Biographies Mr. Paul Arlman Paul Arlman is the Chair of the Dutch Chapter of Transparency International. After studying Law, Economics and International Relations at the Universities in Rotterdam, Groningen (Netherlands) and Nice (France), Paul joined the International Affairs Department of the Ministry of Finance in The Hague, Netherlands. He was successively Financial Attaché at the Netherlands Embassy in Washington and Deputy Director for International Affairs at the Ministry, responsible for financial institutions including IMF-IBRD, regional development banks and the EEC. Between 1981 and 1986, he was a full Member of the Board of the European Investment Bank in Luxembourg where he chaired the Policy Committee. In 1986, he was elected Executive Director of the World Bank Group for the Dutch-led constituency. From 1988, he was also Executive Director at the Multilateral Agency for Investment Guarantees of which he chaired the Audit Committee. From 1990 he was the Secretary General of the Amsterdam Stock Exchange Association, chairing the Trading Markets Committee and, having taken the initiative to its set-up, he served as a Member of the Peter's Committee on Corporate Governance in the Netherlands. From 1998 to July 2005 he was the Secretary-General of the Federation of European Securities Exchanges (FESE) in Brussels. From 2001 to 2003, he was Chairman of the Industry Advisory Committee to the European Parliamentary Financial Services Forum. From 2005 to end 2011 he served as global Chair of Plan International, a child centered community development organization. He has been Chair of the Dutch Chapter of Transparency International since 2008, a Board Member of Prime Finance since its inception and, since 2006, of the VEB (The Dutch private shareholders association). He was a Founder Member of the European Corporate Governance Institute and a Board Member from its inception in 2002 until 2008. Mr. Alan Bacarese Alan Bacarese is currently working as an EU legal adviser to the Government of Montenegro on a Rule of Law reform programme. He remains a consultant (after being Special Counsel) and a leading UK and international anti-corruption expert with Peters & Peters, London, UK. Alan specializes in corruption (domestic and transnational), money laundering, mutual legal assistance and fraud, with a wealth of experience as the recent Head of Legal and Case Consultancy at the International Centre for Asset Recovery, Basel, Switzerland. Called to the Bar in 1988 he worked within the Crown Prosecution Service (CPS) and its HQ’s Policy Directorate and European and International Division until 2007. He has worked on large-scale international cases in many countries and led on domestic and international corruption and on high profile human rights issues. Alan has worked extensively internationally as a member of the

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UK’s delegation to the OECD’s Working Group on Bribery and as a technical adviser to the UN, EU and other international organizations on corruption and transnational crime related work. In 2007 Alan joined the newly created International Centre for Asset Recovery, with lead responsibility for money laundering, anti-corruption, financial investigations and asset recovery cases in a number of jurisdictions. Alan is a co-author of the leading UK Legal textbook on Corruption and Misuse of Public Office (Oxford University Press-September 2011) and ‘The Counter Fraud Practitioners Book’ (Gower Publishing–2012). He is a regular speaker on the international circuit and speaks at the European Law Academy (ERA), Cambridge University and Yale University on a broad range of international crime subjects. Prof. Hans De Doelder Hans de Doelder is an Emeritus Professor of the Erasmus University Rotterdam where he was appointed professor of criminal law and criminal procedural law in 1987. From 1993 till 2001 he was the dean of eth Faculty of law. After graduating at Leiden University (1972), and the Brabant University (1981) he served as a public prosecutor from 1979 till 1989. Since 1989 he has served as a deputy judge in the District Court of Rotterdam. In addition to this he is a deputy justice at the Court of ‘s Hertogenbosch and an alternate member of the Joint Court of Justice of the Netherlands Antilles and Aruba (Gemeenschappelijk Hof van Justitie). Hans is an honorary professor of the University of Trento, the China University of Political Science in Beijing as well as the East China University of Politics and Law in Shanghai. Until 2004 Hans was the vice-chairman of the Complaints Board of the Rotterdam Police. He is also affiliated with the Erasmus Centre for Penal Studies. The ECPS is a concise, non-hierarchical organization which focuses on high quality criminal investigation and education for the benefit of all parties who come into contact through their work with criminal law or punitive elements. Prof. Jan Eijsbouts Jan Eijsbouts is Extraordinary Professor Corporate Social Responsibility (CSR) and Professorial Fellow of the Institute of Corporate Law, Governance and Innovation Policies at the Law Faculty of Maastricht University since October 2010. Jan Eijsbouts studied Dutch Law at Groningen University (master’s degree 1969, with optional course Anglo American Law). After having acted as in-house counsel at Royal Philips Electronics (1971–1975) and at Royal DSM (1976–1988) he retired mid 2007 from Akzo Nobel as Group General Counsel and Corporate Director Legal Affairs, a position he had held since 1999. From 2001 till 2008 he was also member of the Dutch Bar. Jan was Co-Chair of the Corporate counsel Forum (2004–2006) and of the CSR Committee (2007–2008) of the International Bar Association. In 2010 he delivered his pre-advice to the Dutch Association of Jurists NJV on the general civil and corporate law aspects of CSR. As adviser on corporate law and conflict management at the Gaemo Group he contributed to the work of Prof. John Ruggie (Harvard Kennedy

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School of Government), Special Representative of the UN Secretary General on the subject of business and human rights. Jan Eijsbouts also acted as legal adviser to the Business and Human Rights Initiative of the UN Global Compact Network Netherlands. Jan Eijsbouts is mediator at NMI, ACB and CEDR. He is member of the International Advisory Boards of the Mentor Group (Boston, US) and the CEELI Institute (Prague) and Chairman of the Board of the World Legal Forum Foundation (The Hague). He is member of the public Private Network of HiiL (The Hague Institute for the Internationalization of Law). Dr. Abiola Makinwa Abiola Makinwa is a member of the faculty of the International and European Law program of The Hague University of Applied Sciences. Her recently published book, Private Remedies for Corruption: Towards an International Framework, Eleven International Publishing, 2013, focuses on the role of private actors in the fight against corruption. In 2010, her essay ‘Future Thinking through the Prism of International Corruption’ won the 2010 Hague Institute for the Internationalization of Law Future Thinking Essay award. In 2008, Abiola took part in the groundbreaking European conference on Civil Law Consequences of Corruption in Bremen, Germany. In 2010 she participated in the first Special Session on Peoples Empowerment on Enhancing the Role of Civil Society in the Fight against Corruption at the 14th International Anti– corruption Conference in Bangkok. In 2011 she took part in a Yale Law School Workshop on the role of private actors in the fight against Corruption. She was appointed as the Dutch National Reporter together with Professor X. Kramer to report on ‘Civil Law Consequences of Corruption in International Commercial Contracts’ for the 19th Congress of the International Academy of Comparative Law (Wien 20–27 July 2014). More recently, Abiola has been awarded a 2013 EU OLAF Hercule II Grant to research European Perspectives on Negotiated Settlements for Corruption Offences. Abiola is a member of the Committee of Experts of Transparency International (Netherlands Chapter) as well as the Swedish Folke Bernadette Academy Research Working Group on the Rule of Law. Prof. Paola Mariani Paola Mariani Ph.D. is Associate Professor of International Law and she is in charge of EU law and Private International Law courses at Bocconi University in Milano. She is also a Partner in an Associate Law Firm in Milano. International fight against corruption is one of her field of research and she has been appointed National Reporter together with Professor G. Sacerdoti on the subject ‘The Civil Law Consequences of Corruption in International Commercial Contracts’ to the 19th Congress of the International Academy of Comparative Law (Wien on 20–27 July 2014). She published in 2013 ‘How damages recovery actions can improve the fight against corruption: the crisis of the criminal law policies and the role of private enforcement in an Italian case of judicial corruption’, in Crime Law and Social Change, 1/ 2013 and L'adesione

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dell'Italia alla convenzione civile del Consiglio d'Europa sulla corruzione: la tutela privatistica dei diritti lesi da pratiche corruttive, in Diritto del commercio internazionale, 2/2013. Mr. Arkadiusz Matusiak Arkadiusz Matusiak is a Senior Associate in the Dispute Resolution Practice at Bird & Bird’s Warsaw office. An attorney with 15 years of professional experience, Arkadiusz specializes in criminal cases. His criminal trial experience covers dozens of cases, including fraud, IP and unfair competition criminal cases. For many years he was a Prosecutor in the Warsaw District Prosecutor's Office in the Department for Organized Crime and Corruption, where he directly handled the most important investigations led by the Police, Central Bureau of Investigation, Internal Security Agency and Central Office of Anti-corruption. Arkadiusz has been engaged in some of the highest-profile criminal cases and led cases against organized crime groups in Poland. He has participated in several corruption proceedings against police and army officers, in cases against public officials, including those from the Ministry of Defense and Ministry of Environment (corruption in the award of a concession for shale gas in Poland, in road construction and transportation hubs in Warsaw). Before working as a prosecutor he was a customs inspection officer, where he cooperated closely with OLAF. Arkadiusz has advised international corporations operating in Poland in the development and implementation of anti-corruption procedures and conducted training in this field. He has represented corporations in criminal proceedings relating to unfair practices at the board and top management level. Dr. Anna Oehmichen Anna Oehmichen attended the universities of Trier and Alcalá de Henares (Spain) and obtained a Juris Doctorate (International and Comparative Criminal Law) from Leiden University in The Netherlands. She completed a legal clerkship at the International Criminal Court in The Hague and a traineeship with Europol in the same city. She spent parts of her practical training period at a Belgian criminal defense law office and held a placement at the German Foreign Ministry. During subsequent years, Anna worked as a research fellow at the Center for Criminology in Wiesbaden, the National Agency for the Prevention of Torture in Wiesbaden and at the University of Gießen (Department chaired by Professor Thomas Rotsch). Concomitantly to her research activities, Anna has worked in the boutique law firm Knierim | Huber Rechtsanwälte, specialized in business crime, since October 2011. She holds memberships to the German Bar Association (DAV) and the German Association on Business Crime (Wirtschaftsstrafrechtliche Vereinigung e.V., WisteV). Furthermore, she is associated with the European Criminal Bar Association and the International Criminal Defense Lawyers–Germany e.V. Anna has published on a variety of criminal law related issues, including foreign trade and corruption matters.

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Dr. Sharon Oded Sharon Oded is a senior associate at De Brauw Blackstone Westbroek’s Regulatory and Criminal Enforcement practice group. He specialises in internal investigations and regulatory compliance. Sharon regularly assists multinational corporations in establishing global compliance programs and handling regulatory and criminal investigations on a global scale. Sharon is also Assistant Professor of Law Enforcement and Compliance at the Erasmus University Rotterdam, Erasmus School of Law, Rotterdam Institute of Law and Economics. He is the author of the book Corporate Compliance: New Approaches to Regulatory Enforcement, Edward Elgar Publishing, 2013. Sharon publishes in leading academic journals and is a frequent speaker at compliance and enforcement forums. Ms. Maud Perdriel-Vaissière Maud Perdriel-Vaissière is a French lawyer with extensive experience in the areas of Asset Recovery and Anti-corruption. Previously managing director of the French organization SHERPA (where she also headed the ‘illicit financial flows’ program), she is now acting as a free-lance legal consultant providing services to civil society organizations on these issues ranging from legal research to investigations and litigation. Maud has also authored articles in books, academic journals and newspapers. Prof. Claes Sandgren Claes Sandgren is a Professor of Law and former Dean of the Faculty of Law at the University of Stockholm. He has also served as a diplomat with the Ministry of Foreign Affairs and as Ambassador and head of the Secretariat for Analysis of Swedish Development Assistance. Claes was former Chairman of the AntiCorruption Institute of Sweden and an Expert in the Committee (Mutbrottslagstiftningskommittén) Reviewing the Swedish Legislation on Bribery and Drafting Integrity Codes of Conduct. Claes has served as Chairman of the Swedish Section of the International Commission of Jurists and currently serves as chairman of several instances including the Swedish Institute for Legal Development present and the Board of Juridisk Tidskrift (Law Journal). He has been a Commissioner of the International Commission of Jurists, Geneva and a board member of the Swedish Chapter of Transparency Int'l as well as several other Boards. Dr. Gerben Smid Gerben Smid is a legal adviser with experience in the fields of enforcement, policy making and legislation, both nationally and internationally. Gerben focuses on criminal and administrative law as well as on international and EU law in this respect. He obtained a PhD in criminal law from Erasmus School of Law, Erasmus University Rotterdam, The Netherlands. His dissertation focused on international influences on combating (foreign) bribery by means of criminal law. After obtaining his PhD, Gerben worked as a policy adviser to the Attorney

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General in the Dutch Caribbean, including Curacao, Sint Maarten and BES. From 2007 to 2011 he was also a member of the board of Transparency International Netherlands. Currently he is a member of the expert committee on corruption of Transparency International Netherlands. Dr. Tina Søreide Tina Søreide is an Associate Professor of Law and Economics at the Norwegian School of Economics (NHH). Her chapter was prepared while she was a postdoc researcher at The Faculty of Law, University of Bergen (UiB) in Norway. Søreide holds a PhD in economics from NHH and a master from the Department of Economics, UiB. Previously she worked at the World Bank in Washington DC and the Chr. Michelsen Institute (CMI). She teaches political economy and the economics of corruption. Her academic publications address primarily corruption-related challenges in governance, industry regulation and the private sector. Ms. Karolina Stawicka Karolina Stawicka is a Senior Associate and Head of the Employment Practice at Bird & Bird’s Warsaw office. Karolina is an experienced employment law expert. She also specializes in litigation, including criminal cases involving corruption and employee corruption related crimes. In 2005, she was a supporting expert in the project ‘Strengthening of the implementation of the anti-corruption strategy, PHARE 2003’ in cooperation with Northern Ireland Public Sector Enterprises Limited (NI–CO), Warsaw. In 2002–2004, she supported the Open Society Institute in an international programme related to the Monitoring of the EU Accession Process in areas of corruption and anticorruption policy, minority rights and access to justice. Karolina advises clients in the full spectrum of cases connected with employment law, including implementation of codes of conduct, whistleblowing polices and anti-corruption procedures, and has conducted trainings in this field. She has represented international corporations in running internal investigations relating to unfair practices at the board and top management level vis-à-vis domestic and international, including FCPA, and as a consequence labour law and criminal proceedings against them. Prior to joining Bird & Bird, she worked inter alia for the Polish Ministry of Foreign Affairs and the High Commissioner for Refugees. Dr. Karin Van Wingerde Karin Van Wingerde is an assistant professor of criminology at the department of criminology at Erasmus School of Law, Erasmus University Rotterdam, The Netherlands. After obtaining her PhD which focused on the deterrent effect of sanctions on the behavior of firms in the waste industry in the Netherlands, she worked as a researcher at the Rotterdam Court of Audit for a period of two years. Since September 2013 she is back in academia at Erasmus School of Law. Karin’s research interests include corporate and governmental deviance,

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governance and regulation, financial and environmental crimes, corporate and governmental compliance, public safety. She currently works on several publications based on her dissertation. As of January 2014 Karin is Dean of education of the PhD programme of the Erasmus Graduate School of Law. Karin is a member of the editorial board of the Dutch academic journal Tijdschrift voor Toezicht (Journal on regulation and governance). Prof. Jaap de Zwaan Prof. Dr. Jaap de Zwaan is the Lector of the Lectorate of European Integration at The Hague University for Applied Sciences. He started his career as member of The Hague bar in 1973. From 1979 until 1998 he worked for the Dutch Ministry of Foreign Affairs in The Hague (European Integration Department and Legal Service) as well as in Brussels (Permanent Representation of the Netherlands at the EU). In 1993 he obtained his PhD degree in Law at the University of Groningen with a thesis entitled ‘The Permanent Representatives Committee, its role in European Union decision making’. In 1998 he was appointed full time professor of the Law of the European Union at Erasmus University Rotterdam. From 2005 to 2011 Jaap served as the Director of the Netherlands Institute of International Relations ‘Clingendael’. Rapporteur: Mr. Marco Romagna Marco Romagna holds a LLM in Laws from Trento University with a thesis on ‘Identity theft/fraud in Facebook: Juridical and Criminological Analyses’. He recently obtained his MA in Global Criminology from Utrecht University, with a thesis on ‘The cyber-market of identities: criminological analysis on the market of identity documents within the Surface Web and Onionland’. His main research areas concern Cyber criminality, Criminal Law, Criminology, International and European Law and white-collar crimes. As an intern, he has collaborated with the eCrime, ICT, Law & Criminology research Centre at Trento University and with Cardenal Herrera University in Valencia.

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1

Negotiated Settlements for Corruption Offences: Wither Europe? Abiola Makinwa

1.1

Introduction

The fight against corruption is a key aspect of efforts by the European AntiFraud Office (OLAF) to protect the financial interests of the European Union (EU).1 To this end OLAF is actively engaged in improving corruption prevention, detection and investigation techniques of EU authorities and Member States.2 Significantly, OLAF is charged to take part in the activities of international bodies and associations specialized in the fight against fraud and corruption for the purpose, among others, of exchanging best practices.3 Of particular importance to OLAF are best practices that deter grand scale corruption by the use of appropriate penalties. This is all the more relevant in view of the recently released EU Anti-corruption Report.4 The fact that €120 billion is cited as the yearly cost of corruption to the EU5 and that the majority of EU citizens and companies believe that corruption is a problem in their 1

2

3 4 5

To improve judicial cooperation in acts of corruption involving officials of the European Communities or officials of the Member States, the European Union adopted the Convention on the Fight against Corruption involving Officials of the European Communities or Member States of the European Union in 1997. See Convention drawn up on the basis of Art. K.3(2)(c) Treaty on European Union on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, 1997 O.J. (C 195) 25.6.1997, p. 2–11. In 2003, this prohibition was extended to private sector bribery with the Council Framework Decision on Combating Bribery in the Private Sector. Article 2 requires that member states take the necessary measures to ensure that ‘intentional’ active or passive bribery in the private sector shall constitute a criminal offense. See Council Framework Decision on Combating Corruption in the Private Sector, not yet in force, O. J. (L 192) 31/07/2003 p. 54–56. See also Criminal Law Convention on Corruption, Strasbourg, 27 January 1999, in force 1 July 2002, 173 CETS; the Civil Law Convention on Corruption, Strasbourg, 4 November 1999, in force 1 November 2003,174 CETS. Article 2(5) Commission Decision 1999/352/EC, ECSC, EURATOM establishing the European Anti–fraud Office as amended by Commission Decision of 27 September 2013. OJ L 257, 28.9.2013, p. 19–20. Corruption in international business transactions is a criminal offence in most EU countries. EU member states with the exception of Cyprus, Latvia, Lithuania, Malta, and Romania have ratified the OECD Anti–Bribery Convention on Combating Bribery of Foreign Public Officials in International business Transactions. There is no longer any accommodation for business corruption in Europe. See also P. van Duyne, Corruption: Acts and Attitudes, in B. Huber (Ed.), Combating Corruption in the European Union, Academy of European Law, Trier, 2002, p. 1, at p. 13. Para 4 Preamble Commission Decision of 27 September 2013, ibid. Report from the Commission to the Council and the European Parliament, EU Anti–corruption Report, COM (2014) 38, Brussels, 3 / 2 / 2014 (hereinafter EU Anti–corruption Report). ‘The financial crisis has put additional pressure on Europeans and their governments… Corruption alone is estimated to cost the EU economy EUR 120 billion per year, just a little less than the annual budget of the European Union.’ See EU Anti-corruption Report at p. 3.

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NEGOTIATED SETTLEMENTS FOR CORRUPTION OFFENCES

countries,6 is strong motivation to continue to evaluate and research effective strategies of anti-corruption prevention and enforcement. The United States (US) experience shows that the possibility of negotiated settlements can have a significant effect on the management of corruption.7 Corporations that voluntarily disclose instances of corruption and set up effective control mechanisms are rewarded with the possibility of negotiated sanctions.8 At the same time, co-operation by corporations, provides governments with easier access to information necessary to detect, investigate and prosecute complex, multi-jurisdictional cases of international business corruption.9 Furthermore, the possibility of negotiating settlements creates an 6 7

8

9

‘At European level, three quarters of respondents (76%) think that corruption is widespread in their own country.’ EU Anti-corruption Report at p. 6. The following are some examples of European corporations that have entered into settlements with the US Department of Justice (DOJ) and/or the Securities Exchange Commission (SEC) for allegations of bribery in their business affairs since 2008; German Siemens (Germany) agreed to pay $800 million in settlement of allegations of US Foreign Corrupt Practices Act (FCPA) violations involving its subsidiaries in Argentina, Bangladesh and Venezuela; Alstom (France) paid $772 million in criminal penalties to settle charges of bribing government officials in Indonesia, Saudi Arabia, Egypt, and the Bahamas to win infrastructure contracts; BAE Systems (UK) agreed to pay $400 million in settlement of charges relating to a series of substantial bribery payments to shell companies and third party intermediaries without due diligence or proper corporate controls and the bribery of Saudi Arabian officials for an $80 billion deal for the sale of jet fighters; Total S.A (France) agreed to pay $398 million to settle SEC and criminal charges for paying bribes to intermediaries of an Iranian government official to obtain valuable contracts to develop oil and gas fields; Snamprogetti B.V. and its parent company ENI S.p.A of Italy (Netherlands / Italy) agreed to pay $365 million to resolve FCPA-related charges for paying bribes to Nigerian government officials to help win contracts to build Liquefied Natural Gas facilities; Technip S.A.(France) resolved FCPA-related charges as well as a civil complaint filed by the SEC by agreeing to pay a $240 million criminal penalty and enter into a deferred prosecution agreement and by paying $98 million in disgorgement of profits for bribes paid to Nigerian government officials regarding contracts to build Liquefied Natural Gas facilities in Nigeria; Koninklijke Philips (The Netherlands) agreed to pay more than $4.5 million to settle SEC charges for improper payments made by employees at its Polish subsidiary to health care officials in Poland Electronics. Full details of DOJ FCPA cases since 1977 are available at the US Department of Justice website at and SEC cases since 1978 at the US Securities and Exchange Commission website at . See also listing by Richard Cassin, ‘Alcoa lands 5th on our Top Ten list’ . See generally, ‘Left out of the Bargain: Settlements in Foreign Bribery Cases and Implications for Asset Recovery’, World Bank Publication, 2013 ; See also Shearman & Sterling’s ‘Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act’ FCPA Digest 5 Jan 2015, and Gibson Dunn ‘2014 Year–End FCPA Update’, . Albrecht remarks that the application of criminal law in complex environments presents a corresponding need for criminal justice systems to develop equally complex structures. This is particularly so ‘where criminal law interferes with other systems (economy, commerce or the environment) which organized interests require conditions of implementation quite different from those in the field of conventional (street) crime and traditional criminal law.’ See H. J. Albrecht, ‘Settlements out of Court: A Comparative Study of European Criminal Justice Systems,’ Research Paper 19, South African Law Commission at p. 8.

2

1

WITHER EUROPE?

incentive for corporations to change internal corporate culture with regards to corrupt practices.10 The creeping spread of this US best practice to Canada11 and to the United Kingdom (UK)12 as well as the impact it has on European multinationals13 raises the important question: What is the European response to the question of negotiated settlements? How does the possibility of negotiated settlements align with the particular character of European criminal law enforcement systems? What socio-economic, political, legal, and other factors should be taken into consideration in formulating a European response? These questions were the central point of discussion at a High Level Seminar on Negotiated Settlements for Corruption Offences: A European Perspective that took place in The Hague on the 22nd – 23rd of May 2014.14 Country researchers,15 and invited experts16 from eight countries representing Northern, Western, Eastern, Southern and Greater Europe and also representing civil and common law jurisdictions addressed the question of how negotiated settlements fit into the European framework. The participants surveyed enforcement 10

11

12 13 14 15

16

Ruggie remarks that ‘[s]ome States are beginning to use “corporate culture” in deciding corporate criminal accountability. They examine a company’s policies, rules and practices to determine criminal liability and punishment, rather than basing accountability on the individual acts of employees or officers. These principles may be invoked at the liability stage, or during sentencing and in exercising prosecutorial discretion. Both incentivize companies to have appropriate compliance systems.’ See J. Ruggie, ‘Protect, Respect and Remedy: a Framework for Business and Human Rights Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises,’ A/HRC/8/5, 7 April 2008, p.10 para 31. In 2011, Niko Resources Ltd, a Canadian energy company pleaded guilty to providing improper benefits to a foreign public official in order to further the business objectives of the company and its wholly-owned subsidiary in Bangladesh, contrary to section 3(1) of the Canadian Corruption of Foreign public officials Act (CFPOA). The Court accepted a sentencing recommendation which included a fine totaling $9,499,000 and a Probation Order under which Niko Resources agreed to be subject to Court supervision and regular independent audits to confirm its compliance with the CFPOA. Mitigating factors that the court took into consideration in arriving at the plea agreement were the guilty plea by Niko Resources, their level of co-operation, as well as the steps that Niko Resources had already taken to reduce the likelihood of committing a subsequent related offence. See Agreed Statement of Facts, Court of Queen’s Bench of Alberta, Judicial District of Calgary, Her Majesty the Queen and Niko Resources Ltd., June 23, 2011. . See also Sherman & Sterling, ‘Global Convergence on Anti-corruption Compliance: A Canadian Example’, November 7, 2011 . See overview of cases in the UK provided by Alan Bacarese at pp. 171-192 of this volume. See Footnote 7 above. Under the auspices of a European Anti-Fraud Office (OLAF) HERCULE II Grant. France - Maud Perdriel-Vaissière (France); Anna Oehmichen (Germany); Paola Mariani (Italy); Karolina Stawicka / Arkadiusz Matusiak (Poland); Karin Van Wingerde / Gerben Smid (The Netherlands); Tina Søreide (Norway); Claes Sandgren (Sweden); Alan Bacarese (The United Kingdom). Hans de Doelder (Criminal law); Jan Eijsbouts (Corporate viewpoint); Paul Arlman (Civil Society); Jaap de Zwaan (European Integration); Sharon Oded (Efficiency viewpoint).

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mechanisms involving negotiation for corruption offences from the perspectives of their home countries and have identified areas of commonality, differences, problems and prospects. Their findings and conclusions are presented in this volume. 1.2

The Long Shadow of the FCPA

It is important to put the discussions in this book in the context of the legal environment where negotiated settlements have become associated with the enforcement of anti-corruption rules against corporations. The US Foreign Corrupt Practices Act (FCPA) has played a key role in fashioning this environment. It is unique in the annals of the fight against corruption for creating a modality where a domestic standard criminalizing corruption in commercial transactions can apply to acts of corruption occurring in other countries.17 The globalization of the standard established by the FCPA18 has resulted in an international consensus criminalizing corruption in international business transactions.19 The normative space created by this consensus provides a platform around which global strategies regarding world-wide implementation of anti-corruption rules can be shaped. The long arm of the FCPA means that enforcement strategies of the US Department of Justice and the US Securities and Exchange Commission affect the operation of multinational corporations regardless of whether or not they are US Corporations. Any corporation that offers, registers or sells securities on a US stock exchange falls within the scope of the FCPA.20 A US listing is sufficient to establish jurisdiction over acts involving the listed company that take place entirely outside the US.21 A foreign corporation will also fall within the scope of the FCPA if it takes any action in furtherance of a bribery transaction within US territory.22 This jurisdictional link is very widely

17 18

19

20 21 22

The Foreign Corrupt Practices Act 1977, 15 USC Section 78dd-1, et seq. In 1996, the Organization of American States adopted the Inter-American Convention against Corruption (1996), 35 ILM 1996 at 724. Other instruments include the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997), 37 ILM 1998 at 1, the Council of Europe’s Criminal Law Convention on Corruption (1999), European Treaty Series No. 173 and its Civil Law Convention on Corruption, the Convention of the European Union on the Fight Against Corruption involving Officials of the European Communities or Officials of Member States 37 ILM 1998 at 12, the UN Convention against Transnational Organized Crime,40(2) ILM 2001 at 353 the African Union Convention on Preventing and Combating Corruption, 43(1) ILM 2004 at 5 and, finally, the recent UN Convention Against Corruption, (2004), 43(1) ILM 2004 at 37. In the words of Noonan, ‘[f]or the first time, a country made it criminal to corrupt the officials of another country.’ John Noonan, Bribes: The Intellectual History of a Moral Idea, (University of California Press 1987) 680. For the history and internationalization of the FCPA standard see Abiola Makinwa, Private Remedies for Corruption: Towards an International Framework, Eleven International Publishing, 2013, pp. 101-119. 15 USC Section 78dd-1(a). 15 USC Section 78dd-1(a). 15 USC Section 78dd-3.

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interpreted. Meetings involving discussions about payments,23 the use of bank accounts in the United States,24 the authorization of bribery cash payments while traveling in the United States25 are examples of instances held sufficient to bring a foreign corporation within the jurisdictional reach of the FCPA. Foreign subsidiaries of US companies will fall within the reach of the FCPA where it can be established that the parent company or its employees authorized, directed or controlled the activity in question.26 In summary, FCPA enforcement directly affects the activities of European corporations that fall within this broad jurisdictional reach. What is the essential character of FCPA enforcement? The FCPA style of enforcement can be described as a cooperation between corporations on the one hand and government authorities on the other, to prevent, detect and sanction corruption, based upon a shared vested interest in stable growing markets.27 FCPA style enforcement is directly influenced by the U.S. Department of Justice (DOJ) Principles of Federal Prosecution of Business Organizations (PFPBO).28 The PFPBO emphasize the fact that government prosecutors and corporations share a common public interest goal to create an enforcement environment that ensures free and fair competition, punishes misconduct and safeguards the environment.29 This environment is needed to promote public trust as well as the confidence of shareholders, consumers, investors and business entities in the integrity of the market.30 Such an enforcement environment can positively influence the economic, social and political development of countries.31 Also

23 24

25 26

27 28 29 30 31

For example see United States v. Alcatel-Lucent France, S.A., et al. Information, Court Docket Number: 10–CR–20907 S.D. FLA., (2010) 4. See for example Securities and Exchange Commission v. Siemens Aktiengesellschaft, Civil Action No. 08 CV 02167 D.D.C. (2008). Siemens AG was held accountable for the acts of Siemens Argentina, Siemens Venezuela and Siemens Bangladesh all of which were foreign subsidiaries headquartered in other countries. These companies, although organized under the laws of foreign countries, were caught in the FCPA web as a result of meetings in the US, where discussions were held about improper payments, as well as moneys paid via US bank accounts. See for example United States v. Syncor Taiwan, Inc., No. 02–CR–1244–ALL C.D. Cal. (2002). See for example the case of United States v. ABB Inc. Court Docket Number: 10–CR–664, S.D. Tex., (2010). ABB Ltd was a corporation headquartered and incorporated in Switzerland with shares publicly traded on the New York Stock Exchange. ABB Ltd was held accountable to the US government for these activities by its subsidiary as an ‘issuer’ within the meaning of Section 78dd-l (a) of the FCPA for bribes paid by an indirect subsidiary ABB Network Management (ABB NM), based in Sugar Land, Texas paid bribes from 1997 to 2004 that totaled approximately $1.9 million to officials at Commission Federal de Electricidad (CFE), a Mexican state-owned utility company. Hereinafter referred to as the FCPA Style of enforcement. United States Attorneys’ Manual, Title 9, Chapter 9-28.000, Principles of Federal Prosecution of Business Organizations (hereinafter referred to as the PFBBO). Section 9–28.100 para 1 US Principles of Federal Prosecution of Business Organizations (PFPBO). Id. Corruption is a number one contributor to the failure to realize such an environment. See generally G.T. Abed, S. Gupta (Eds.), Governance, Corruption & Economic Performance, Washington: International Monetary Fund, 2002; S. Rose-Ackerman, Corruption and Government: Causes, Consequences and Reform, CUP, Cambridge, 1999. M. Paolo, ‘Corruption and growth,’ Vol. 110, No. 3, The Quarterly Journal of Economics, 1995, pp. 681-712; J.E. Campos, D. Lien, S. Pradhan, ‘The impact of corruption on investment: predictability matters’, Vol. 27, No. 6, World

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emphasized by the PFPBO is the symbiotic relationship32 between the potential consequences of prosecution of corrupt activity by corporations and the potential harm that can be occasioned on innocent bystanders such as investors and employees.33 These shared vested interests and potential undesirable consequences of prosecution encourages the development of anti-corruption enforcement mechanisms that do not ‘kill the goose that lays the golden egg’ and yet, at the same time, are sufficiently effective so as not to leave society at the mercy of the negative consequences of grand scale commercial corruption. Shared interests and vulnerabilities provide a fertile ground for cooperation and evince in government prosecuting authorities a ‘willingness to secure the facts in a manner that encourages corporate compliance and self-regulation.’34 Exploiting the intersection of interests between government authorities and corporations can act as a key element in fashioning an environment that is conducive to compliance with anti-corruption rules. Rewarding good behaviour becomes the channel for co-operation and partnership. The commentary to the PFPBO notes that in some circumstances it is ‘entirely proper’ to give incremental degrees of credit ranging from immunity, to lesser charges, to sentencing considerations and for a prosecutor to consider the corporation’s preindictment conduct, (e.g. voluntary disclosure, cooperation, remediation or restitution), in determining whether or not to seek an indictment.35 Allowing a corporation’s prior behaviour to influence sanctioning decisions for corruption can help to create a smart enforcement environment that may enhance or better traditional criminal enforcement as far as compliance with anti-corruption rules is concerned.36 The smart enforcement environment is one where even before any discovery of corrupt activity, investigation or prosecution has occurred, the corporation in its own interest has taken systemic steps to self-regulate compliance ex-ante.

32 33 34

35 36

Development, 1997, pp. 1059-1067; P.H. Mo, ‘Corruption and economic growth’, Vol. 29, No. 1, Journal of Comparative Economics, 2001, pp. 66-79. Section 9-28.100 para 1 PFPBO. Section 9-28.100 para 1 PFPBO. Section 9-28.100 para 2 PFPBO. Italics mine. See also Special Policy Concerns Section 9-28.400 PFPBO which states: [t]he nature and seriousness of the crime, including the risk of harm to the public from the criminal misconduct, are obviously primary factors in determining whether to charge a corporation. In addition, corporate conduct, particularly that of national and multi-national corporations, necessarily intersects with federal economic, tax, and criminal law enforcement policies. In applying these Principles, prosecutors must consider the practices and policies of the appropriate Division of the Department, and must comply with those policies to the extent required by the facts presented. See Comment to Section 9-28.400 PFPBO. For example non-prosecution, deferred prosecution agreements, civil and regulatory alternatives, are described as ‘occupy[ing] an important middle ground between declining prosecution and obtaining the conviction of a corporation.’ See Comment to Section 9-28.200 para 2, PFPBO.

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The prior behaviour that is encouraged by this enforcement environment is listed in the factors that the US Department of Justice (DOJ) will consider in determining whether to charge a corporation or to enter into a negotiated plea or other agreement. Factors included are the corporation’s timely and voluntary disclosure of wrongdoing, its willingness to cooperate in the investigation of its agents, the existence and effectiveness of the corporation’s pre-existing compliance program, the corporation’s remedial actions (including any efforts to implement an effective corporate compliance program or improve an existing one, replace responsible management, discipline or terminate wrongdoers, pay restitution), and its level of cooperation with the relevant government agencies.37 In return for co-operation, corporations may benefit from deferred prosecution, no prosecution or other plea bargain arrangements. The Securities and Exchange Commission (SEC) can also reward the prior behaviour of a corporation that has violated the Books and Records provisions of the FCPA. The factors that the SEC will take into consideration are listed in the SEC Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions of 23 October 2001.38 This report lists self-policing, self-reporting, remediation and cooperation as factors that will be taken into consideration in deciding whether or not to take enforcement action, impose lighter sanctions, or to use mitigating language in documents used to announce and resolve enforcement actions.39 FCPA style enforcement is slowly gaining traction beyond the United States. The UK is particularly important in this respect. The UK Bribery Act40 has a long jurisdictional reach that renders multinational corporations susceptible to its enforcement. The Bribery Act 2010 applies if an offense under the Act is committed within the UK.41 The Act also applies where corrupt activity takes place outside the UK involving a corporation or person with a close connection to the UK.42 The remit of the Bribery Act is very broad as it applies not only to instances of bribery of foreign officials to acquire commercial contracts43 but also where a corporation has failed to prevent the payment of bribes on its behalf to obtain contracts or other advantages.44

37 38 39 40 41 42 43 44

Section 9-28.300 et seq., PFPBO. Otherwise referred to the Seaboard Report. . The practice of both the DOJ and SEC in the exercise of their prosecutorial and investigative discretion are summarized in the Joint Resource Guide to the U.S. Foreign Corrupt Practices Act (2012) . UK Bribery Act 2010. Section 12(1) UK Bribery Act 2010. Section 12(2) UK Bribery Act 2010. Section 6 UK Bribery Act 2010. Section 7 UK Bribery Act 2010.

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In a similar fashion to US prosecutors, UK prosecutors reward the prior behaviour of a corporation in the balancing of public interest factors for and against prosecution.45 A prosecution will take place unless the public interest factors against prosecution clearly outweigh those tending in favour of prosecution.46 Among the public factors47 that will favour prosecution are a failure to report wrongdoing within a reasonable time of the offending coming to light48 as well as the failure to report properly and fully the true extent of the wrongdoing.49 Factors that may avoid a prosecution are a genuinely proactive approach by the corporation such as self-reporting, remedial actions, compensation of victims50 as well as the existence of an effective corporate compliance programme.51 The Director of the UK Serious Fraud Office (SFO) has reiterated that there are very powerful arguments in favour of self-reporting52 and that the possibility of deferring prosecution where a corporation has fully co-operated represents a ‘very useful addition to the prosecutors toolbox for use in appropriate circumstances’53 and to ‘avoid the collateral damage caused by the a full blown prosecution of a corporation.’54 The consideration of the prior behaviour of a corporation in the exercise of prosecutorial discretion by the SFO serves as an incentive for compliance with anti-corruption rules. This is also further encouraged by the fact that it is a complete defence to a Section 7 UKBA offence (failing to prevent bribery) for a company to show that it had 45

46 47 48 49 50 51 52

53 54

In July 2009 the Serious Fraud Office (SFO) in the United Kingdom released Guidelines for Prosecutors on the Bribery Act 2010 Bribery Act 2010: Joint Prosecution Guidance of the Director of the Serious Fraud Office and the Director of Public Prosecution as well as the Guidance on Corporate Prosecutions (Hereinafter referred to as the Guidance). See generally . Para 31 Guidance p. 7. Para 32 Guidance pp. 7-9. Para 32(e) Guidance p. 8. Para 32(f) Guidance p. 8. Para 32(a) Guidance p. 8. Para 32(c) Guidance p. 8. David Green gives the following reasons why a corporation should self-report: (i) a self-report at the very least mitigates the chances of a corporate being prosecuted. It opens up the possibility of civil recovery or a DPA; (ii) there is the moral and reputational imperative: it is the right thing to do and it demonstrates that the corporate is serious about behaving ethically; (iii) if the corporate chooses to bury the misconduct rather than self-report, the risk of discovery is unquantifiable. There are so many potential channels leading to exposure: whistle-blowers, disgruntled counterparties, cheated competing companies, other Criminal Justice agencies in the UK, overseas agencies in communication with SFO, and the SFO's own developing intelligence capability, to name a few; (iv) if criminality is buried and then discovered by any of the above routes, the penalty paid by the corporate in terms of shareholder outrage, counterparty and competitor distrust, reputational damage, regulatory action and possible prosecution, is surely disproportionate; (v) last but not least, burying such information is likely to involve criminal offences related to money laundering under sections 327-9 of the Proceeds of Crime Act. See Speech given by SFO Director David Green at the Pinsent Masons and Legal Week Regulatory Reform and Enforcement Conference, 24 October 2013,