International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

INTERNATIONAL ANTI-CORRUPTION LAW ARTICLE

International Anti-Corruption Law And Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

Chitengi Sipho Justine is an advocate of the High Court for Zambia and an accomplished researcher in the field of organised crimes law; in which field he is a practitioner, lecturer and currently reading for his PhD.

2010/12 Chitengi Sipho Justine (Advocate) 1

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

1.0 Introduction In the dawning of globalisation, economic crimes that used to be purviews for domestic legislation have now become a universal concern. For instance, the vice of bribery (hereinafter referred to as the vice) of foreign public officials (hereinafter referred to as FPOs) in order to obtain international business has become an international issue. There has since been a quickly burgeoning international plethora of cases perpetrating and perpetuating the vice with the most recent being the widely reported 11 March 2011 U.S. cracks down on firms that pay bribes to foreign officials. Indeed, [F]ederal authorities are now prosecuting businesses that try to win contracts by making payments to officials of government-owned businesses. Executives of an Azusa company are among those being tried.1 From the afore-mentioned, it was established that one Nestor Moreno was living pretty too large for a government official, director of operations for Mexico's nationalized electricity monopoly, when it was found that he drove a $297,000 Ferrari and owned a $1.8-million yacht named Dream Seeker; purportedly acquired from bribes offered by the Azusa company executives. In response to such heinous activities, vices, the international community has introduced stringent measures, including
http://articles.latimes.com/2011/mar/11/business/la-fiforeign-corrupt-20110311
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criminalisation of the vice, as evidenced in the proliferation of various international and regional legal instruments. These instruments constitute the international anti-corruption legal regime (hereinafter referred to as the regime) aimed at fighting, inter alia, this vice. This article provides a comprehensive legal anatomy on the appellation with reference to the regime and a critical engagement of the relevant provisions of the following:

United Nations Convention Against Corruption2 (hereinafter referred to as UNCAC); Organisation for Economic Cooperation and Development: Convention on Combating Bribery of Foreign Public Officials in International Business Transactions3 (hereinafter referred to OECD Convention); African Union Convention on Preventing and Combating Corruption4 (hereinafter
referred to as AU Convention); and

Council of Europe: Criminal Law Convention on Corruption5 (hereinafter referred to as CoE Convention). The
article is categorically segmented into three various broad parts under respective headings as hereinafter proceeds: 2.0 Pertinent Legal Issues When dealing with corruption as perpetrated by international corporations and government official at the international scene, the following legal issues are very pertinent, inter alia, as both prosecutors and defence counsel tend to
2 3

Entered into force on 10 January 2005 Entered into force on 15 February 1999 4 Adopted on 11 July 2003 5 Entered into force on 1 July 2002

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

institute full-scale litigation relying chiefly on spirited arguments founded thereon: i) Criminalisation of the vice; ii) Actus reus, Preparation, Attempt and Conspiracy; iii) Mens rea; iv) Transnational jurisdiction; v) Intermediaries and modes of participation; vi) Active/passive bribery; vii) Corporate liability and sanctions; viii) Facilitation/Grease payments; ix) Official immunity; and x) Reporting in Bad Faith It is trite that the OECD Convention is the most effective and rigorous instrument in tackling the vive as it, prima facie, which aims at combating bribery of FPOs6 in international business transactions. However, other Conventions are equally important in bridging the gap and filling the lacuna left by the OECD Convention including, inter alia, the narrowed ambit which is restricted to criminalisation of active bribery(supply side) only as contrasted with UNCAC which is much wider in terms of application and criminalises both active and passive(demand side) bribery. 2.1 Criminalisation of FPO Bribery Collectively, the international regime criminalises the vice. For instance, UNCAC prohibits and, as aforementioned, criminalises the intentional conduct of any person who actually gives a bribe to a FPO or simply makes an offer or promise for a
M. Pieth, Taking stock: Making the OECD Initiative against Corruption Work (2000), para 7
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bribe7 on the one hand- inchoate bribery. It equally outlaws the conduct of any FPO who, when offered, accepts or himself/herself solicits a bribe8 on the other. Similar provisions are explicitly or implicitly entrenched in other Conventions whereby State Parties (hereinafter referred to as SPs) are either obligated(mandatory) or requested(non-mandatory) to ...adopt such legislative and other measures as may be necessary to establish as criminal offences under [their] domestic law when committed intentionally....9 the bribery of FPOs. For example, the AU Convention mandates its SPs [i]n the spirit of international cooperation... to foster regional, continental and international cooperation to prevent corrupt practices in international trade transactions.10 Furthermore, under the AU Convention SPs undertake to: Adopt...measures...to prevent companies [from] paying bribes to win tenders.11 No doubt, such measures include the deterrent effect of criminalisation. On the authority of these provisions and indeed on a plethora of those in other Conventions as hereinafter enunciated, the conduct of companies, through their intermediaries, in offering bribes to FPOs including government ministers, inter alios, is criminalised because a Minister is
Article 16(1) Article 16(2) 9 CoE Convention, Article 5 10 Article 19(2) 11 Article 11(3)
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International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

covered in the meaning of persons defined as FPOs.12 Equally, it is a crime for a FPO to receive or even just entertain a bribery offer from a corporation or indeed requesting a higher offer of kickback from another corporation competing for business either personally or through an intermediary such a Deputy Director or otherwise. 2.2 Actus reus: Preparation/Planning, Attempt and Conspiracy The regime does not require the bribery to be implemented for the perpetrators to be liable. Instead, mere preparatory acts of preparation,13 conspiracy14 and attempt15 are themselves criminalised and stand equivalent to the actual offence of bribery of FPOs. Therefore, if a bribery scheme is derailed, the offence of inchoate bribery has already been committed because all perpetrators would have impliedly participated in at least one of the preparatory acts. This is a somewhat unusual departure from the routine criminal law, but such is the law in a legally justifiable bid to curb the vice under the regime. 2.3 Mens rea With the exception of only the AU Convention which does not at all require intention in the commission of offences,16 the regime criminalises the vice only when committed intentionally. Therefore,
12 13

intent to commit the offence is one of the requisite elements of the offence. Notwithstanding its importance, intent is, however, not explicitly defined in the regime; suffice to mention that the UNCAC stipulates thus: [i]ntent...as an element...may be inferred from objective factual circumstances.17 Therefore, in the adjudication process, mens rea may be deduced, by implication and analogy, from consideration of objective factual circumstances surrounding each individual case and decided on its own merit. As such, it could be deduced in certain instances that perpetrators intended to commit bribery though even if their scheme got derailed or even aborted provided they apparently had the requisite mens rea to so commit the offence. 2.4 Transnational Jurisdiction As the case may be, after establishing that there is a prima facie case against perpetrators of an FPO bribery indictment in light of the actus reus and mens rea being present, the next important issue is: which courts can try them? Initially, this would be a very contentious issue. For instance, prior to the establishment of the regime, ...the applicability of a States domestic law to offences committed outside its jurisdiction...was an area of ambiguity even in developed countries that had a heightened awareness of the conduct of their businesses abroad. Countries like the United Kingdom and Canada, until recently, did not have any
17

UNCAC, Article 2 Ibid, Article 27(3) 14 AU Convention, Article 4(1)(i) 15 UNCAC, Article 27(2) 16 Cf: T.R. Snider and W. Kidane, Combating Corruption Through International Law in Africa: A Comparative Analysis in Cornell International Law Journal (2007) 40, p 722

Article 28

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

clear provisions relating to cross border corruption [even] when their nationals were involved in the corruption of a foreign public official18 as rightly submitted by Carr, [I]t was very much a question of speculation as to whether or not their courts had jurisdiction over corrupt acts committed abroad by their nationals19 However, the controversy has since been settled and the ambiguity clarified following the creation of the regime; particularly after the coming into force of the OECD Convention and UNCAC. Both Conventions, inter alia, empower SPs to establish and exercise jurisdictions over economic crimes through any of the following types of jurisdiction: i) Nationality jurisdiction, which may be either active or passive nationality; ii) Territorial jurisdiction, which could be subjective or objective territoriality; or iii) Protective jurisdiction. The author opines that with reference to the offence of bribery of FPOs in international commercial transactions, all these types of jurisdictions are extraterritorial and transnational in nature because they encompass parties to the transaction from two or more different.
18

Carl Pacini, et al, take a similar position when they espouse that: [T]he OECD Convention... obligates signatory nations to make bribery of foreign public officials a criminal act on an extraterritorial basis.20 Succinctly stated, this means that since the regime is non-self-executing, SPs are employed to adopt into their domestic legislation the offence as created under the regime and establish jurisdiction over it; even when committed outside their boundaries. Therefore, in the exercise of jurisdiction a SP may act as follows, inter alia, depending on given scenarios: a) Prosecute its public officials and their intermediaries, subject to applicable domestic laws on official immunity, on the basis of active nationality because the perpetrators are its nationals. Furthermore, a country may also prosecute both a corporation and its human agents premised on objective territoriality where the offence was partially committed in its territory; b) In consultation with other countries with sufficient nexus (legal connection to the case), SPs may, in the alternative, have concerned perpetrators extradited to their respective countries for prosecution on the basis of active nationality jurisdiction, notwithstanding that the offences were committed abroad.
20

I. Carr, The United Nations Convention on Corruption: Making a Real Difference to the Quality of Life of Millions? in Manchester Journal of International Economic Law (2006) 3, pp 3- 44, at 9 19 Ibid, citing R v Libman [1985] SCR 178 (footnote 20) as example where the issue of extraterritoriality gave rise to substantive debates as to whether Canadian criminal law was sufficient to cope with corruption of foreign public official by their nationals.

C. Pacini, J.A. Swingen and H. Rogers, The Role of the OECD and EU Conventions in Combating Bribery of Foreign Public Officials in Journal of Business Ethics (2002) 37, p 385

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

The later approach operates on the international law principle of aut dedere aut judicare which compels the custodial State to try perpetrators itself or hand perpetrators over to a State that is willing to prosecute.21 2.5 Intermediaries and Modes of Participation The UNCAC criminalises participation in the commission of an offence by intermediaries in any capacity such as accomplice, assistant, or instigator....22 The AU Convention has a similar provision which is actually more comprehensive and detailed stipulating thus:

with the rigors and niceties of dual criminality. Depending on the matrix of a specific case, the taxonomy of participation may vary taking a complexion such as: corporation executives participating as agents25 for their corporations; regional directors of corporations participating as assistants26 to the group CEOs, while directors of operation in government departments may participate as accomplices27 and/or aiders28 to a Minister. The same government directors of operation may equally participate as conspirators29 with group CEOs of foreign corporation while group CEOs of multi-national corporations may also participate as instigators of their regional directors to commit FPO bribery.30 In the final analysis, unless otherwise, it is seldom that any of intermediaries in FPO bribery offences would participate as a principal offender but simply aiders and/or abettors31 of some kind owing to the fact that the most appropriate principal is the corporation itself and not the intermediaries- though in exceptional offences the FPO could be legally deemed as a reciprocating/alternate/equating principal offender. 2.6 Forms of FPO Bribery The vice manifests itself in two forms namely; active bribery and passive bribery.
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This Convention is applicable to the following acts of corruption...(i) participation as a principal, coprincipal, agent, instigator, accomplice or accessory after the fact, or on any other manner in the commission or attempted commission of, in collaboration or conspiracy to 23 commit....
Although the AU Convention does not explicitly provide for bribery of FPOs, by analogy and implication of Article 4(2) thereof,24 the same is captured. Therefore, the above quoted provision implicitly applies to bribery of FPOs, mutatis mutandis, provided the SPs in question mutually agree; and there is compliance
21

G. Werle, Principles of International Criminal (2005), p 63, para 183 22 Article 27(1) 23 Article 4(1)(i) 24 It states: This Convention shall also be applicable by mutual agreementwith respect to any other act or practice of corruptionnot described in this Convention.

AU Convention, Article 4(1)(i) UNCAC, Article 27(1) 27 Ibid. 28 OECD Convention, Article 1(2) 29 AU Convention, Article 4(1) (i) 30 Ibid 31 OECD Convention, Article 1(2)

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

One of the most common impediments to the successful prosecution of FPO Bribery offences arises from the fact the OECD Convention is the chief legal instrument of authority hereon and yet the OECD approach thereto is such that OECD

mandatory.34 Criminalisation of passive bribery is non-mandatory.35 2.7 Corporate Liability and Possible Sanctions Except the AU Convention which does not incorporate the concept of corporate liability, the regime provides for liability of legal persons. For instance, the OECD Convention obligates SPs to legislate on [l]iability of legal persons for the bribery of a foreign public official.36 Consequently, corporations may be held liable for participating, usually, as principals in the offence37on the provision of the CoE Convention which holds legal persons liable only for active bribery committed on its behalf. It obligates SPs to [a]dopt such legislative and other measures as may be necessary to ensure that legal persons can be held liable for the criminal offences of active bribery... committed for their benefit by any natural person....38 Equally, if another corporation competing for business is offered chance by a FPO to beat the bribery offer from another, such a corporation will also be liable for active bribery or attempted active bribery because the offer from the FPO would not at law amount to an offer of a bribe but simply an invitation to treat on an envisaged illegal activity or stimulation to
34

member nations have bound themselves to prevent bribery by multinational firms by criminalising active bribery....32
Consequently, defence counsel is likely to aver that FPO are not criminally liable under International Anti-Corruption Law since passive bribery is not outlawed, in as far as the OECD is concerned hence a FPO recipient of a bribe from a multinational corporation should be acquitted. Solace is however, found in those instruments that criminalise both active and passive bribery such as the CoE Convention.33 However, the issue remains controversial because the CoE Convention is a regional instrument; not binding States outside its region of operation. The critical question is what does the UNCAC provide hereon since it is the UN instrument thus the true International anti-Corruption Law? One would think that UNCAC solves this issue because it is a universal instrument, binding all States of the world, and criminalises both active and passive bribery. Of course it criminalises both forms of bribery; but the issue remains unresolved because under UNCAC only the criminalisation of active bribery is
32

C. Pacini, J.A. Swingen and H. Rogers, op cit, at 390 citing G. Sacerdoti, To Bribe or Not to Bribe? in K. Elliott (ed), No longer Business As Usual (2000), pp 29- 50 33 Article 5 read together with Articles 2 and 3

See Article 16 (1). See also A. Argandoa, The United Nations Convention Against Corruption and its Impact on International Companies in Journal of Business Ethics (2007) 74, pp 481- 496, at 489 35 UNCAC, Article 16(2). See also A. Argandoa, op cit. 36 Article 2 37 AU Convention, Article 4(1)(i) 38 Article 18

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

offer a bribe. On this point alone, the FPO would be held liable for soliciting a bribe. Another dimension hereto is that corporations may also be held liable for authorisation39 of their respective CEOs corrupt practice by implied acquiescence contrary to Article 1(2) of the OECD Convention. This liability is jurisprudentially founded on the extrapolation of the doctrines of vicarious liability40 and alter ego. These two doctrines, working in collusion, may also hold the companies liable at par with their CEOs as collaborators.41 In any case, [L]iability of a legal person... shall not exclude criminal proceedings against natural persons who are perpetrators, instigators of, or accessories to, the criminal offences.42 Concerning the issue of sanctions, the OECD Convention mandates SPs to prescribe either civil or administrative sanctions in addition to,43 and/or, criminal sanctions (subject to domestic legal systems), or non-criminal sanctions which may include monetary fine.44 The proviso thereto is that whatever sanctions SPs opt for should be effective, proportionate and dissuasive.45 SPs are further urged to legislate on seizure and confiscation of the bribe itself together with its proceeds or the monetary equivalence thereof.46
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Where the scheme is not executed (attempted bribery) the most appropriate penalty would be monetary sanctions in form of a fine in addition to custodial sentencing. 2.8 Facilitation/Grease Payments Perpetrators of the FPO bribery offence have often erected the defence of facilitation/grease payments which is allowable as per the OECD Convention; and include payments ...made to induce public officials to perform [their] nondiscretionary routine functions such as issuing licenses and permits.47 Technically, therefore, this defence cannot be sustained at law where the FPOs functions are discretionary function and not a non-discretionary routine function. The FPO should be liable if they had the discretion to decide which corporation to award business to in preference over others hence the reason for bribery. Furthermore, the amount involved should be scrutinised. If it is unreasonably too huge (not petty amount) to be treated as part of the de minimis rules under which the facilitation/grease payments fall concept is anchored48 then the defence of grease payment would fail with liability being established. In any case, the issue of facilitation/grease payments is at best contested because other than the OECD Convention, the rest of the regime does not embrace it.

OECD Convention, Article 1(2) Cf: Pieth, op cit, para 4(a) (3) 41 AU Convention, Article 4(1) (i) 42 CoE Convention, Article 18(3) 43 Article 3(4) 44 Article 3(2) 45 Article 3(2) 46 Article 3(3)

47 48

Pacini et al, op cit, p 397 Pieth, op cit, para 4(a)(2)

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

2.9 Official Immunity This is another ground of defence a FPO may raise in their memorandum of appearance. However, it is more likely than not bound to fail because, subject to domestic laws, the regime does not allow FPOs official immunity to hinder the investigation and/or prosecution of erring FPOs.49 2.10 Reporting in Bad Faith As enunciated in the case of D v National

Society for the Prevention of Children Cruelty,50 the importance and associated
dangers of informants role in crime detection has been appreciated worldover, hence the need to protect them. However, there are issues to do with the reciprocating need to equally protect innocent persons from disgruntled whistle-blowers. With the exception of the OECD Convention, the regime protects informants so long as the reporting is in good faith and on reasonable grounds.51 Informants who make false and malicious reports against innocent people52 risk punishment. Therefore, for informants to be liable for bad-faith reporting, three elements must be established against them namely; i) falsity of the report; ii) malice of the reporter; and iii) innocence of the reported person(s). The emphasis on reporting in good faith hereon is hinged on the realisation that FPOs are busy agents of their respective
49 50

governments hence should not be left to the whims and caprices of busy bodies who could be disgruntled elements trying to derail government programmes not only through malicious insinuations but also unfounded allegations resultant in bad faith reporting; with the possibility of ultimately disturbing development business plans of the FPO. Nevertheless, SPs should take all reasonable steps to balance the scale of mere suspicion and possibility of actual perpetration. As such, courageous and well-meaning informants deserve commendation because, as per Judge Cory, [t]he position of informers...is always precarious and their role fraught with danger....53 3.0 Conclusion From the foregoing, and indeed on a plethora of authorities, it is clear that a critical mass of expatiations is slowly building up at the international level aimed at combating the abhorrent offence of FPO bribery in international commercial transactions. Better still, it is generally settled at international anticorruption law that the aforesaid offence is criminalised even by ordinary preparatory acts and not actual implementation whereby capturing the wide inchoate offences incidental thereto or indeed consequential therefrom. This is clear from the buttressing and/or replicated provisions in other legal instruments not hereinbefore explored but on all-fours therewith. For example, the Organisation of American States Convention obligates its SPs to punish the offering... to a
53

AU Convention, Article 7(5) [1977] 1 All ER 589 51 Article 33 52 AU Convention, Article 5(7)

R v Scott [1990] 3 SCR 979 at 994

International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

government official of another state promise or advantage, in connection with any economic or commercial transaction in exchange for any act or omission in the performance of that officials public functions.54 Equally, the SADC Protocol55 criminalises acts of corruption relating to an official of a foreign State even before execution/implementation of the plans.56 Therefore, the non-implementation of the scheme in an attempted FPO bribery cases is immaterial because it does not relinquish the perpetrators liability. On the authority of the many provision espoused above and many more verbatim one, perpetrators of FPO bribery risk being prosecuted, accordingly, by their domestic courts or foreign courts with established jurisdiction.

54 55

Article VIII Signed on 14 August 2001but not yet entered into force 56 Article 6

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International Anti-Corruption Law and Inchoate Bribery of Foreign Officials: Liability of Officials; Corporations and their Intermediaries

BIBLIOGRAPHY (A) PRIMARY SOURCES Table of Cases Cited 1. D v National Society for the Prevention of Children Cruelty [1977] 1 All ER 589. 2. R v Libman [1985] SCR 178. 3. R v Scott [1990] 3 SCR 979. List of Conventions 1. African Union Convention on Preventing and Combating Corruption (2003), Maputo. 2. Council of Europe: Criminal Law Convention on Corruption (2002), Strasbourg. 3. Organization of American States: Inter-American Convention against Corruption (1996/97), Caracas. 4. Organisation for Economic Cooperation and Development: Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1999), Basel. 5. United Nations Convention against Corruption (2005), Washington D.C. List of Protocol 1. Southern African Development Community Protocol against Corruption (2001), Victoria Falls. (B) SECONDARY SOURCES List of Books Consulted 1. A. Argandoa, The United Nations Convention Against Corruption and its Impact on International Companies in Journal of Business Ethics (2007) vol. 74, Springer Publishers, Amsterdam. 2. C. Pacini, J.A. Swingen and H. Rogers, The Role of the OECD and EU Conventions in Combating Bribery of Foreign Public Officials in Journal of Business Ethics (2002) vol. 37, Kluwer Academic Publishers, Amsterdam. 3. G. Sacerdoti, To Bribe or Not to Bribe? in K. Elliott (ed), No longer Business As Usual (2000) OECD, Paris. 4. G. Werle, Principles of International Criminal (2005) T.M.C. Asser Press, The Hague. 5. I. Carr, The United Nations Convention on Corruption: Making a Real Difference to the Quality of Life of Millions?In Manchester Journal of International Economic Law (2006) Vol. 3, No. 3, London. 6. M. Pieth, Taking stock: Making the OECD Initiative against Corruption Work (2000) available and accessed on 7 October 2009 at

www.oas.org.juridica/english/pieth2000.htm
7. T.R. Snider and W. Kidane, Combating Corruption through International Law in Africa: A Comparative Analysis in Cornell International Law Journal (2007) vol. 40, New York. Websites Visited 1. http://www.articles.latimes.com/2011/mar/11/business/la-fi-foreign-corrupt-20110311 2. http://www.oas.org.juridica/english/pieth2000.htm 11