Global Litigator: Anticorruption Litigation Does Not Stop at the Water’s Edge

In addition, the investigative and sanctioning bodies of multilateral development banks (MDBs) are more active than ever in enforcing the anticorruption provisions of their contractor and procurement agreements with companies and nonprofits that are implementing MDB-financed projects. Furthermore, watchdog efforts and international collaboration between law enforcement agencies and regulators have raised the stakes of noncompliance, meaning that multinational clients may be running the risk of cross-jurisdictional litigation and sanctions.

Since the passage of the FCPA in 1977, the anticorruption landscape has changed considerably. Over the past three decades, the international anticorruption movement has blossomed as watchdog groups, such as Transparency International, corporate governance initiatives such as the World Economic Forum Partnering Against Corruption Initiative, and sovereign and MDB anticorruption efforts have begun to tackle corruption from all angles. As this movement continues to progress, companies and counsel who do not keep abreast of the times will likely find themselves warding off liability in multiple jurisdictions, involving multiple enforcement bodies, and mired in a web of criminal, civil, and administrative actions.

In short, anticorruption litigation today is borderless. Clients operating across jurisdictions will need guidance to navigate the changing anticorruption landscape, which has created litigation challenges on multiple fronts.

In recent years, the global anticorruption movement has witnessed a significant increase in cross-border collaboration among a host of actors, ranging from law enforcement bodies and regulators to nongovernmental and multilateral organizations. Collaboration, specifically among law enforcement and regulatory agencies, is likely one of the biggest challenges to companies that are trying to manage corruption risk and liability.

Anticorruption Alliance

Recently, the International Corruption Hunters Alliance brought together more than 200 of its members—including domestic anticorruption officials and organizations such as the United Nations, Interpol, the Organisation for Economic Co-operation and Development, and Transparency International—for an unprecedented gathering to address international corruption issues. Representing 134 countries, the alliance met to develop an international enforcement strategy for tracking and resolving cross-border bribery and fraud cases and to advance the efficiency and effectiveness of investigations and enforcement actions.

In addition, with the explosion of information technology and social media in the anticorruption space, law enforcement, regulators, civil society, and the business community have employed a number of tools to share information and illuminate the dark underworld of bribery and corruption in the public and private spheres. These tools have made it easier for prosecutors in various parts of the world to piece together a complex web of illicit dealings. As a result, criminal charges or civil penalties are less likely to remain confined within any one jurisdiction. Furthermore, social media can fan out details of corporate corruption to shareholders before word even reaches the boardroom, leaving clients particularly vulnerable if their compliance programs and due diligence activities have overlooked possible corruption risks.

Clients who have actively involved themselves in the global anticorruption dialogue (whether by joining anticorruption organizations, speaking and writing on the topic, or participating in American Bar Association and similar anticorruption symposia, committees, or task forces, such as the ABA’s active Global Anti-Corruption Task Force) stand to gain from the “insider’s perspectives” of law enforcement, regulators, and civil society, and secure a seat at the table to raise awareness of the challenges that businesses face in their global operations. By joining the discourse, clients can gain exposure to litigation developments and best practices, navigate global high-risk “hot spots,” and strengthen their reputation for taking bribery and corruption seriously. A further benefit is that it puts law enforcement bodies and regulators on notice that the company is more likely engaged, cooperative, and doing what it can to prevent bribery and corruption from infiltrating its operations; it may also ultimately help defend against bribery and corruption charges and give leverage in settlement negotiations. In addition, active participation in, rather than a back-seat approach to, emerging international collaboration allows clients to help shape the conversation as regulatory and enforcement trends continue to evolve.

Cross-Debarment

Cross-debarment has recently opened the door to increased liability and administrative sanctions for any entity contracted to work on MDB-financed projects. In 2010, the leaders of the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank signed the Agreement for Mutual Enforcement of Debarment Decisions, which implemented the cross-debarment process among the institutions. Through cross-debarment, these MDBs now have a uniform framework for preventing and combating global corruption and standardized definitions of corruption and other misconduct. As of July 1, 2011, the enforcement principle that an entity debarred by one of these MDBs may be sanctioned for the same misconduct by the others is now the governing rule among the signatories to the agreement.

The coordinated efforts of these institutions to sanction entities found to have committed corruption, fraud, coercion, and collusion in development projects have created yet another challenge to minimizing litigation risks for clients. The initial debarring institution is not required to present detailed information to the other MDBs about its decision to sanction or debar an entity. Therefore, other MDBs have little on hand to question the sanction or debarment decision, including procedural or administrative issues that may have emerged in the course of the sanctions process. For companies hoping to escape rounds of sanctions, cross-debarment now multiplies the ill effects they may encounter—not only from cross-debarment, but also from the pangs of criminal and civil liability that can spring from or give birth to it.

For many companies, MDB sanctions and cross-debarment are not typically on the litigation and compliance radar. Developing a litigation response strategy and a compliance program that incorporate MDB anticorruption guidelines can only serve to strengthen a company’s defenses, even if the company is not currently involved in an MDB-financed project. In the unfortunate scenario that your client is already facing sanctions and debarment, there may be strategic benefits for the company to participate in that MDB’s particular voluntary disclosure program, thereby potentially minimizing the domino effect associated with the sanctions and debarment process.

In addition to their collaboration efforts through cross-debarment, MDBs are also working with domestic regulators and law enforcement agencies. In the initial years of MDB sanctions programs, investigations and information sharing proceeded at a slow pace, and there were significant obstacles to building a case to uncover corruption on a larger scale.

Today, domestic authorities and MDBs are increasingly cooperating on investigations, sharing evidence, and referring their findings to maximize enforcement coverage of anticorruption laws and regulations, such as the FCPA and U.K. Bribery Act. Companies are not only at risk for violating MDB anticorruption contractual obligations and guidelines, but they also could face criminal charges under relevant anticorruption laws, civil cases to reclaim illicit assets, and administrative restrictions or bans on contracting.

What may be most surprising is that MDB cooperation extends beyond well-known regulatory bodies like the Securities and Exchange Commission, the Department of Justice, and the U.K. Serious Fraud Office. The MDB community has made an impact through referrals to authorities in Africa, Asia, and Latin America, leading to arrests of public officials and preventing contract awards across emerging and developing markets. Repercussions of referrals and litigation can ripple throughout a company’s operations and undermine growth in these markets, as well as threaten its presence in more well-established markets.

Given the increase of referrals, under the right circumstances, clients are well advised to consider voluntary disclosure as an option, in addition to taking preventive measures up front through their compliance program and litigation response strategies. Voluntary disclosure should be on the table not only with MDBs but also with law enforcement bodies and regulators in the various jurisdictions in which your client operates. Although there are risks associated with voluntary disclosures, a cost-benefit scenario may show voluntary disclosure to be the most attractive option.

Carbon-Copy Prosecutions

Another example of how anticorruption litigation is borderless comes in the form of the rise of duplicative foreign prosecutions. See Andrew S. Boutros, Transnational Crimes Face Repeat Punishment, Litigation, Vol. 39, No. 1 (Winter 2013), at 43. Often referred to as “carbon copy prosecutions,” duplicative foreign prosecutions can present a series of litigation troubles to multinational corporations. Because a growing number of countries are implementing and enforcing anticorruption laws, multinational corporations are at risk of successive, duplicative prosecutions by law enforcement and regulatory agencies.

The increase of duplicative foreign prosecutions can be linked to the fact that many of these new laws are based on the provisions of the FCPA. This means that if a company has entered into a guilty plea, a non-prosecution agreement, or a deferred prosecution agreement with U.S. authorities, a parallel cross-border enforcement action may become low hanging fruit for foreign prosecutors. Similarly, companies entering into plea deals or facing charges by foreign prosecutors for violating local anticorruption laws should also expect the possibility of being under the specter of parallel U.S. regulatory enforcement.

The result of an FCPA or similar foreign prosecution or settlement is that companies can hardly resist duplicative foreign prosecutions and have little by way of argument against the facts and theories on which the prosecution or agreement rests, particularly if law enforcement agencies and regulators enjoy an especially collaborative relationship. One way to shield against duplicative foreign prosecutions, particularly within the context of a deferred prosecution or non-prosecution agreement with the Department of Justice, is to ensure that your client keeps the factual terms as straightforward as possible. This provides the company with firmer ground to defend itself against claims in other jurisdictions while avoiding any factual contradictions.

Today, compliance officers, general counsel, and outside counsel must be prepared to address the litigation threat beyond the jurisdiction of the U.S. government. In other words, companies and their representatives cannot remain myopic in the presence of the ever-expanding anticorruption enforcement environment.

As collaboration and vigilance increase among key actors in the global fight against corruption, the stakes become higher for companies that have not looked beyond the FCPA—or the U.K. Bribery Act, for that matter. Client operations are truly global, and information travels at the speed of light; collaboration within the anticorruption community continues to grow stronger each day. Together these factors create anticorruption litigation challenges that surpass the borders of any given jurisdiction.

Consequently, clients who consider some of the litigation strategies highlighted above and adopt a borderless anticorruption and compliance mindset will likely be better equipped to minimize litigation and liability while expanding into new markets. Thinking borderless in terms of anticorruption risk and response involves implementing strategies that reflect the most stringent applicable anticorruption standards and integrating these strategies into a company’s global business operations.

Companies that recognize that the anticorruption regulatory environment transcends geographical and institutional borders will likely be able to successfully address litigation and liability issues up front with dynamic and evolving compliance strategies, serving ultimately to protect corporate and shareholder interests and facilitate growth.