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Luis Dantón Martínez Corres: USMCA heralds new era of anticorruption and compliance

It is not an overstatement to say that a new era on anticorruption and compliance cooperation and coordination efforts has begun with the announcement of the United States-Mexico-Canada Trade Agreement or USMCA, which is set to replace NAFTA as soon as it is signed in late November of 2018 and subsequently ratified in 2019.

In a post for the FCPA Blog last month, I analyzed the context in which the anticorruption provisions of a free trade agreement can help fight corruption, particularly between countries that have clear asymmetries in the enforcement of their own anticorruption laws, as is the case with the United States, Canada and Mexico. Now that the full text of the agreement has been made public I can discuss some of the aspects of Chapter 27 (“Anticorruption”) (pdf) of USMCA.

Chapter 27 constitutes great news for the three countries involved (the Parties). Here are some reasons for my optimism, focusing on three broad areas of this enormously important chapter:

1. Renewed regional commitment to address corruption. It is a groundbreaking achievement that the three countries now have a common framework to address anticorruption efforts. Its predecessor NAFTA did not include any such anticorruption provisions.

Therefore it is a cause of celebration that the Parties affirm their resolve to prevent and combat bribery and corruption in international trade and investment. It is also noteworthy that in doing so they make explicit and abundant references to international conventions and widely accepted anticorruption principles underscoring the importance of regional and global cooperation efforts in this subject.

Trade and investment is a very broad concept that in practice may encompass economic activity in general, and in the context of the economic ties of the United States, Canada and Mexico is quite significant and worth trillions of dollars. Perhaps Mexico, and to a lesser degree Canada, will benefit the most from Chapter 27 of USMCA given that their anticorruption enforcement efforts are lagging compared with the United States.

We can also expect this regional agreement to have a huge impact beyond this trading block and will set a standard for future trade agreements.

2. The importance of ethics and compliance programs. Chapter 27 of USMCA recognizes the need to build integrity within both the public and private sectors and acknowledges that each sector has complementary responsibilities in this regard.

Among those responsibilities for the private sector it includes measures to encourage company management to make statements in their annual reports or otherwise publicly disclose their internal controls, ethics and compliance programs or measures, including those that contribute to preventing and detecting bribery and corruption in international trade and investment.

The Parties explicitly and widely recognize the benefits of internal compliance programs in enterprises to combat corruption. In this regard, each Party shall encourage enterprises, taking into account their size, legal structure, and the sectors in which they operate, to establish compliance programs for the purpose of preventing and detecting corruption-related offenses. This element will further reinforce the need for companies of all sizes, including explicitly SME’s, to have effective compliance programs that meet the standards set forth in Chapter 27.

3. International Cooperation. Finally, he Parties recognize the importance of cooperation, coordination and exchange of information among their respective anticorruption law enforcement agencies in order to foster effective measures to prevent, detect and deter bribery and corruption.

We are about to see an unprecedented era in which the anticorruption law enforcement agencies of the three countries undertake technical cooperation activities, including training programs to an extent not seen before in the region. This is very significant in particular for Mexico which needs to bolster greatly its institutional capacities for investigating and prosecuting corruption activities.

This international cooperation element of Chapter 27 underscores some of the key global trends in international anticorruption enforcement, namely coordinated multinational investigations. One need only look at Brazil, for example, to understand the weight that such international cooperation, coordination and exchange of information between the United States Department of Justice and the Brazilian prosecutors played in the investigation and resolution of the massive Petrobras enforcement action, and begin to imagine what cooperation among the United States, Canada and Mexico can produce in the near future.

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There are other issues in Chapter 27 of USMAC that need to be highlighted and discussed — the treatment of facilitation payments, who can qualify as public officials under Chapter 27 of USMAC, the practical application and impact of the anticorruption provisions in the execution of energy projects in the region, among others.

I’ll focus on those issues and others soon.

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Luis Dantón Martínez Corres, pictured above, is a partner leading the corporate governance and compliance practice of the Mexico-based law firm, Ritch Mueller. He previously served as head of legal and trustee services of Nacional Financiera, S.N.C., a leading Mexican development bank. He’s also admitted to practice in New York. He can be contacted here.

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