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NGOs to OECD: Corporate pretrial agreements can work, but we still need deterrence

The OECD is hosting an Anti-Bribery Ministerial meeting Wednesday (March 16) to discuss how to strengthen implementation of its Anti-Bribery Convention. One of the issues on the table for discussion is how to encourage voluntary disclosure by companies of wrongdoing and how settlements can be used to do that.

Using corporate settlements to deal with foreign bribery offenses isn’t new. In fact, of the 126 companies across the world that faced criminal sanction for foreign bribery between 1999 and 2014, 69 percent were dealt with by way of settlements.

The United States has led the way, resolving 70 out of 84 Foreign Corrupt Practices Act enforcement actions against companies by way of deferred or non prosecution agreements between 2004 and 2012.

Other countries are now eyeing the U.S.’s high rates of enforcement and the billions brought in through fines and are wanting to jump on the bandwagon. The UK introduced deferred prosecution agreements in 2014, concluding its first one in 2015.

France is just introducing legislation to enable prosecutors to enter into criminal settlements with companies for foreign bribery offenses. The Irish Law Commission and an Australian Senate Committee are looking at whether deferred prosecution agreements should be introduced into their respective countries.

But what are the lessons from the U.S.’s ten-year experiment with using DPAs to deal with foreign bribery cases? And do settlements like DPAs actually achieve real deterrence and justice? This is not just a theoretical question. Under the UN Convention Against Corruption, countries must seek to ensure that discretionary legal powers, such as settlements, are used with “due regard to the need to deter the commission of the offense.”

The U.S. experience shows that the use of deferred prosecution agreements for economic crime is increasingly controversial. DPAs have been criticized by U.S. judges and law academics for letting individuals off the hook, failing to deter economic crime with high rates of recidivism, undermining the deterrent effect of the law by protecting companies from the collateral consequences of their actions, and even undermining the rule of law and the American justice system itself. 

The introduction of the Yates memo and the beefing up of the FBI anti-corruption unit suggest that some of these criticisms have hit home.

Clearly the use of settlements has a role to play in encouraging companies to self-report and improving enforcement rates. A settlement action is, after all, preferable to no action at all. But the lessons from the U.S. suggest that an uncritical adoption of settlements as the primary means to enforce overseas bribery offenses will ultimately undermine public confidence that justice is really being done.

Corruption Watch, Global Witness, Transparency International, and the UNCAC Coalition wrote to the OECD this week to ask the Working Group on Bribery to develop some global standards on the use of settlements to ensure they achieve real deterrence.  

That letter laid out 14 standards which settlements should meet, including the following:

1. Settlements should be one tool in a broader enforcement strategy in which prosecution also plays an important role

2. Settlements should only be used where a company has genuinely self-reported, and cooperated fully

3. Judicial oversight which includes proper scrutiny of the evidence should be required

4. Prosecution of individuals should be the standard practice

5. Settlements should only be used where a company is prepared to admit wrongdoing. Settlements, including their detailed terms, should be submitted to public hearing and should be accessible to the public, and

6. Compensation to victims, based on the full harm caused by the corruption, must be an inherent part of a settlement.

We hope the letter will start a dialogue at a global level about how real justice and deterrence in relation to overseas corruption can be achieved, and what role settlements have in that process.

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Susan Hawley is Policy Director of Corruption Watch, which has just produced a report on Corporate Settlements in foreign bribery cases, “Out of Court, Out of Mind: Do Deferred Prosecution Agreements and Corporate Settlements Fail to Deter Overseas Corruption?” The report is available here.

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