Anti-corruption

April 18, 2014

LIDS Advisory Board Member to Teach HLS Course on Anti-Corruption

This fall, LIDS Advisory Board Member El Cid Butuyan will be teaching a seminar on “Transnational Corruption” at Harvard Law School. Mr. Butuyan’s work as a Senior Litigator for the Integrity Vice Presidency of the World Bank and background managing high level anti-corruption prosecutions in the Philippines allow him to draw upon a wealth of personal experience in teaching the course. LIDS encourages members with an interest in the topics of anti-corruption regulation, enforcement, and policy issues to consider joining the course! Non-HLS students may be eligible to cross-register according to applicable procedures. The court catalog description follows.

Transnational Corruption – Fall 2014 Seminar

Mr. El Cid Butuyan | Th 3:00pm – 5:00pm | 2 classroom credits

“This course will explore the emergence of the global anti-corruption movement and will provide students with: a brief overview of the trends in the burgeoning field of anti-corruption enforcement including various global norms on the subject; the work of select regulatory and enforcement authorities and international and multilateral institutions; and the day-to-day lawyering skills required of practitioners. Through readings, lectures, case studies, class discussions, and potential guest speakers, the course aims to introduce students to significant substantive and practical issues in international anti-corruption work and the fundamentals required for a future career in this exciting field.”

February 4, 2014April 1, 2014

A Call for a Novel Global Anti-Corruption Framework

Feb. 4, 2014 – Meng Lu

Globally, there are three different levels of anti-corruption enforcement effort. First, domestic political and legal efforts.[1] Second, foreign bribery laws in developed countries with extraterritorial effect.[2] Third, international anti-corruption efforts through international organizations. On the global level, there are the consensus building approach of the United Nations Convention against Corruption (UNCAC) and the sanction-based approach of the World Bank Group.[3] On the regional level, treaties such as the OCED Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997 have been influential in shaping members behaviors.[4] Anti-corruption efforts of the international community are aimed at creating a truly level playing field in the increasingly global business environment. However, current anti-corruption enforcements are either limited in efficacy or limited in reach and scope.

Most conventions and national laws on corruption focus on prevention and punishment through criminal law.[5] This post seeks to solicit new enforcement frameworks to increase the coverage of effective anti-corruption efforts without watering down the efficacy. Punishment based anti-corruption laws is grounded in the basic theory of liability. A risk neutral party will commit a harmful act if and only if the expected benefit exceeds private cost.[6] Private choice is suboptimal when social costs are not taken into account by private parties engaged in harmful behavior. Laws impose liability to make parties internalize this social cost. Thus, for a risk-neutral party, fault-based liability induces optimum behavior if expected sanction equals expected social harm.

A party’s decision to engage in corruption is a function of (1) probability of sanction, (2) level of sanction, and (3) benefits from corruption. Effective deterrence through the sanction system should focus on all three variables. Anti-corruption laws tend to focus on the probability and level of sanction, whereas methods to reduce the gains from corruption should also be pursued. For instance, the 2000 World Bank report prescribed that an effective anti-corruption strategy should encourage the reduction of rents by means of economic liberalization, deregulation, tax simplification, de-monopolization and reduce discretion through administrative and civil service reform, including meritocratic recruitment and decentralization. This multidimensional approach is common within public policy realm but often ignored in anti-corruption law. This post is a call for innovative ideas to incorporate all three elements in a novel, effective, and global anti-corruption framework.

[1] See e.g., The Anti-Graft and Corrupt Practices Act of 1960 and the Anti-Money Laundering Act of 2001, which addresses corruption, including attempted corruption, bribery, extortion, using confidential state information for private gain, money laundering, and organized crime in the Philippines.

[2] See e.g., FCPA and UK Bribery Act.

[3] See e.g., the United Nations Convention against Corruption.

[4] See e.g., the UK Bribery Act.

[5] Xandra E. Kramer, Private International Law Responses to Corruption, ‘International Law and the Fight against Corruption’, Mededelingen van de Koninklijke Nederlandse Vereniging voor Internationaal Recht, Preadviezen, 139 (Advisory Report for the Dutch Royal Society of International Law), Asser Press, 2012, p. 99-142.

[6] Since corruption laws deals mainly with corporations, it is reasonable to assume risk neutrality.

February 4, 2014April 1, 2014

Summer in the World Bank Anti-Corruption System

Feb. 4, 2014 – Meng Lu

Over the summer I worked at the Special Litigation Unit of the Integrity Vice Presidency (INT) within the World Bank Group in Washington, D.C. The World Bank Sanction system is a two tier adjudicative system akin to an administrative court. It consisted of a trial court-like first level sanction officer and a second level appellate board. I worked for the team that acted as the prosecutors in the system. The lawyers, who hailed from different countries, brought cases relating to fraud, corruption, and certain antitrust issues in World Bank-funded Projects.

During my time with the Special Litigation Unit I worked on two Statements of Evidence and Accusation, which are the equivalent of complaints in domestic American courts. Specifically, I worked on two cases in Africa, both involving companies that allegedly engaged in corrupt and/or fraudulent practices. One of the cases was sent to the Office of Evaluation and Suspension, which had, among others, the ability to debar a company from taking out World Bank loans. On a conceptual level, I enjoyed the process of learning about the novel enforcement framework for international and domestic corruption. The team was full of inspirational individuals who have a real passion for the fight against corruption. Researching applicable rules, compiling evidence, and writing the Statement of Evidence and Accusation was challenging, interesting, and substantial.

In addition to the day-to-day legal work, the World Bank is also going through a change initiative under the New President, Jim Yong Kim, which sparked interesting discussions within the Bank. Lawyers perform specific and highly specialized advisory and policy functions within the World Bank and INT is a fascinating place to work, especially for those interested in development and corruption. There are very few anti-corruption enforcement frameworks in the world right now. The World Bank sanction system, alongside FCPA and the UK Bribery Act, offers the best international efforts to combat corruption. The World Bank provides a fantastic, if not sometime slightly bureaucratic experience. Nevertheless, it was great to see the inner workings of the great development machinery.

January 16, 2014April 1, 2014

India’s Politics of Anti-Corruption

Jan. 16, 2014 – Raj Banerjee

Just last month, something incredible happened in Indian politics. The Aam Aadmi Party (AAP), a year-old political outfit borne out of a massive anti-corruption movement, took charge of the city-state of Delhi, home to India’s capital. Aam Aadmi means “common man” in Hindi; the acronym “AAP” means “you.” AAP’s leader, Arvind Kejriwal, a 45 year-old former engineer and tax man, spent much of 2013 pitting his common man persona against Delhi’s entrenched political leaders. Now, he finds himself the chief minister of Delhi.

AAP’s remarkable success and soaring popularity have shaken Indian politics, because they have highlighted a powerful anti-corruption sentiment across the country. At the same time, AAP struggles to define and mold that anti-corruption sentiment. This should not be a surprise to anybody who has studied corruption –academics still struggle to construct a working definition; and what is corrupt behavior often depends as much on the context as the act. AAP’s vision of a corruption-free India requires going after petty policeman and government officials, high-ranking bureaucrats and politicians, and businesses big and small. That is a lot of enemies for a fledgling political party to make. At the same time, if AAP picks its targets strategically, it will fall afoul of its own absolutist anti-corruption manifesto.

Add to this the complications of politics and governance. Despite its success in Delhi, AAP does not hold the majority of seats in the state 70 member legislative assembly. To survive, the Delhi AAP government relies on the Congress party; and as a young party, AAP needs its government in Delhi to show the country that it can deliver on its promises. At the same time, AAP cannot go soft on corrupt Congress leaders in Delhi, especially given how highly critical it has been of that corruption scandal-ridden party.

The month-old AAP government in Delhi must also realize that what makes for a good, populist movement does not necessarily make for sound policy. Mr. Kejriwal recently declared that Delhi would not allow foreign multi-brand retailers (such as Wal-Mart) to set up shop in his state. This policy has nothing to do with corruption. It was meant to be a handout to small local retailers, a large number of whom supported AAP in the Delhi elections. However, it leaves the large Delhi retail market open to massive Indian retailers, who can do just as much damage to small business. Mr. Kejriwal’s announcement also cuts against his own anti-corruption stance, as it benefits local companies subject to far less extensive corporate integrity and anti-corruption safeguards than their large Western counterparts.

AAP has done a remarkable job tapping into India’s anti-corruption sentiment. It continues to enjoy tremendous support across the country, and is growing beyond Delhi. Other anti-corruption movements and political parties around the world should take notice of its success. Nevertheless, the party will find it incredibly challenging to shape its anti-corruption vision from a position of power.