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Three cheers for coordinated enforcement actions. But are they only for Western countries?

As enforcement actions against corporate crime grow, so also have coordinated multi-jurisdictional settlements. These are arrangements involving two or more enforcement agencies from different countries wherein the participating agencies agree to cooperate in settling alleged corporate wrongdoing often using common corrective measures.

These measures may include the payment of fines and monetary penalties, disgorgement of ill-gotten profits, corporate governance reforms, structural or organizational changes, and in certain instances, the appointment of external compliance monitors, among others.

Recent examples include the settlement between Airbus, the U.S. Department of Justice, the UK Serious Fraud Office, and France’s Parquet National Financier. Under the terms of the Airbus settlement, all three enforcement agencies agreed to suspend formal criminal proceedings against the aerospace giant in return for Airbus’ commitment to implement commonly agreed sanctions which included the payment of fines of up to $4 billion, the appointment of external compliance monitors and serious corporate governance reforms.

The Airbus example follows earlier coordinated settlements involving prosecutorial agencies from Germany, the Netherlands, United States, United Kingdom, and large multinational corporations such as Siemens AG, Vimpelcom, Odebrecht, and Rolls Royce among others.

Impacts. At a basic level, coordinated settlements provide strong evidence of routinized cross-border cooperation among enforcement agencies in a world where economic crime is increasingly transnational. This is hugely significant given myriad concerns in the past about the lack of coordination and cooperation among prosecutorial authorities in the pursuit of corporate economic crime.

Coordinated settlements also serve an efficiency function by allowing prosecutors to pool together knowledge and financial resources that would ordinarily be spent in pursuing often large, well-heeled corporate groups individually.

Another practical benefit is the predictability of outcome for corporations alleged to have engaged in wrongdoing. This predictability comes in the form of commonly agreed sanctions which may not be the case where separate enforcement actions are undertaken.

The major impact of these settlements however lies in the prevention of an international double jeopardy of sorts – where a corporation may be pursued across several jurisdictions for the same crime. Such an approach often entails high litigation costs, reputational damage and potentially serious performance costs for corporate groups in an already difficult economic climate. Coordinated settlements therefore serve as a welcome antidote to the predictable chaos of multiple enforcement proceedings.

To be sure, multi-jurisdictional settlements are not without controversies. One challenge is the lack of transparency around the determination of fines and other sanctions. These concerns are often exacerbated by the cloak of secrecy that generally surrounds the negotiation of these settlements.

Transparency concerns aside, there are also questions about the inclusion of developing countries with a probable claim to jurisdiction. This is starkly illustrated by the Airbus case which involved corrupt payments made to foreign public officials in at least five developing countries. Rather inexplicably, these countries were not included in the settlement agreed between Airbus, the DOJ, SFO and France’s PNF. This creates a perception that coordinated settlements are a markedly western affair.

Notwithstanding these teething challenges, coordinated settlements remain a promising addition to prosecutorial toolkits across the globe. In a world where multinational cooperation has become endangered, these settlements provide a welcome ray of hope.

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  1. Chijioke – This is an interesting question. One route to achieve this objective is to have the developing country be the one that initiates the investigation and takes strong action against the corrupt parties. It would be impressive if a developing country investigated and took down its own participants in the crime. That would alleviate what is likely a concern among other countries’ enforcement staff, of not knowing who else in the government of the developing country was actually involved in the crime and either might seek to impede/jeopardize the investigation, or seek to embezzle the recovery money from the offending companies.

  2. Interesting question you raise Chijoke. I believe that an imbalance in political power can dictate which country drives these multi-jurisdictional investigations and subsequent penalties I.e. the more powerful country drives/leads the whole array of activities.
    Developing countries require time for their agencies to mature into this new norm however, as you’ve mentioned, it won’t be without it’s teething problems.

  3. As mentioned, this topic of multijurisdictional settlements is interesting, the first question is whether there has been some harmonization in standards and regulations and of course penalties as a result. The second question is one of deterrence and accepted good practice toward risk mitigation. Has this cooperation really reduced corruption, or is it just another cost of doing business? Both of these require a more quantitative approach to analysis of this trend as well as a careful identificatio of the (actual, not theoretical) drivers behind such a trend.

  4. In the face of rapid changes sweeping across the globe on all fronts, I find this a very apt and much needed article to encourage well directed consistent efforts and better complimentary performance from both developed as well as emerging economies in the light of the subject matter. Well done Dr.

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