The OECD Working Group on Bribery has been setting global standards for fighting foreign bribery since the adoption of the Anti-Bribery Convention in 1997. Among these standards, the Convention requires Parties to establish systems of liability of legal persons and to provide that firms found guilty of foreign bribery are subject to “effective, proportionate and dissuasive” sanctions.
Over the last 17 years, the Working Group has monitored the Parties’ implementation of the Convention. As a result of the Working Group’s peer pressure, most of the 41 Parties to the Convention have made major changes to their laws and institutions in order to live up to the standards contained in the Convention.
The Working Group has recently published a major new study — The Liability of Legal Persons: A Stocktaking Report (pdf) — that documents how the 41 Parties have attempted to live up to these obligations.
This report maps the Parties’ systems for holding legal person liable for bribery by using comparable information generated by the WGB in more than 200 reports over almost two decades of monitoring the Parties’ compliance with the Anti-Bribery Convention. It first documents the evolution of these legal developments over time. It then presents some 2,600 separate data points on key characteristics of the Parties’ legal systems, such as: whether the nature of liability is criminal or non-criminal, the standard of liability for attributing offences to legal persons, the relevance of compliance programs or other prevention measures for determining liability and sanctions, jurisdiction, intermediaries and successor liability.
The new Report reveals several broad features of legal person liability:
First, this is a rapidly evolving area of law. Forty of the 41 parties to the Convention have either established or refined their systems of legal person liability since the Convention was signed in 1997 (Argentina is the only Party that still has no legal person liability for legal persons, though it is currently working on legislation). Sixteen of the Parties have effectively created their systems “from scratch” over this same time period, as they had no prior legal tradition of holding legal persons liable for complex offence such as foreign bribery. This rapid law-making activity took place under the watchful eye of the Working Group on Bribery, which often provided the impetus for change.
Second, major variations in legal person liability systems persist among the 41 Parties. This is clearly documented in the Working Group’s report. This variation across jurisdictions can be found in nearly all aspects of these systems. For example, 27 Parties have only criminal liability for foreign bribery by legal persons, while 11 Parties have some form of non-criminal liability and at least 2 countries have both criminal and non-criminal liability. Variation in law and practice is seen in many other areas as well — for example, some Parties have elaborate standards concerning compliance or prevention programmes, as well as for determining liability for intermediaries and successor entities. Other countries have little or no express law in these areas. Credit for firms having effective preventive measures (e.g. compliance programmes) — either in the definition of the offence or as mitigating factors for sanctions – also shows great diversity across jurisdictions.
Third, the Parties have typically chosen to enact LP liability for a broader set of offenses than just foreign bribery, though the breadth of application varies. No Party still relies on bribery-specific legislation as the sole basis for its LP liability system. Ten Parties have chosen to enact bribery-specific legislation for LP liability, but this is generally complemented with additional sources of law for legal person liability such as interpretative or procedural acts. Consequently, WGB monitoring and peer pressure has also strengthened corporate liability regimes for offences beyond the scope of the Convention.
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The purpose of the WGB report is fact finding — it documents the current state of affairs within the systems for imposing liability on legal persons. However, the report also points to many unanswered questions in this field of law. As foreign bribery enforcement starts to accelerate in some jurisdictions, a particular concern is how the LP liability systems will interact across jurisdictions. For example, how will self-reporting incentives offered in one jurisdiction work if companies face different incentives (or no incentives) for self-reporting in other jurisdictions? How do rules for sharing information and allocating cases across jurisdictions influence this interaction?
The OECD Working Group’s report will promote further thinking about how the current patchwork quilt of law and practice can be turned into a workable and coherent set of rules for companies operating in the global economy.
Kathryn Gordon is a Senior Economist and Brooks Hickman is an Anti-Corruption Analyst for the OECD Anti-Corruption Division. Both are based in Paris.
Thanks to the OECD for this stocktaking research, which is a few months too early to include the latest assessment of UK Bribery Act enforcement or the new UK Deferred Prosecution Agreement Regime. Nonetheless, by summarising the varied approaches even within the vanguard Working Group on Bribery clearly, the study clearly demonstrates the contention of this blog – that there is a pressing need for new coordinating mechanisms for multi jurisdictional investigations and settlements.
We may be moving beyond the period when the majority of international corruption investigations are blocked by non-cooperation and loopholes in overseas regimes, but increasingly settlements are complicated and delayed by divergent standards of corporate liability, and even regulatory competition. Increased enforcement of anti-corruption legislation is welcome but can have different impacts on business behaviour, possibly including jurisdiction shopping where regulatory mismatches are wide enough.
There are efforts to pave the way to a more coherent approach through informal cooperation fora and the London Summit's new Global Asset Recovery Centre and International Anti-Corruption Cooperation Centre, but real progress is likely to wait on a new international agreement to engage China and other new enforcers. As we move closer to the new global order of 2017 it would be nice to think that this study will help.
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