5 September 2014, by Maud Perdriel-Vaissiere.
Earlier this year a StAR report revealed that in the majority of foreign bribery cases settled abroad, host countries are left out of the bargain: only 3% of the payments imposed on companies over the last 13 years were returned to the countries where the bribe took place.
For too long there has been a global misreading of what “asset recovery” precisely entails under the UNCAC. Contrary to common belief, it is not only about recovering stolen or embezzled public funds stashed away by corrupt agents, or confiscating the lavish properties they illicitly acquired abroad – i.e. assets over which foreign governments can establish prior ownership. Instead it encompasses any and all proceeds of corruption, including assets of private origin and, in particular, the proceeds of active bribery (i.e. all the illicit profits, benefits or advantages of monetary value gained by companies as a result of paying a bribe to a foreign official)
Media reports on the ill-gotten gains of corrupt dictators have likely promoted this misconception, along with the confusing language of the UNCAC itself (using alternately the terms “asset”, “property” and “proceeds of corruption”), and the “brand name” of the World Bank/UNODC’s joint initiative (Stolen Asset Recovery Initiative – StAR).
However, the asset recovery process – as provided by the UNCAC – involves the “proceeds of offences established in accordance with th[e] Convention” (Article 3) that have been transferred abroad. That is to say: “any property derived from or obtained, directly or indirectly, through the commission of an offence” (Article 2(e)).
These proceeds of corruption may therefore include assets of private origin and, in particular, the proceeds of active bribery – i.e. all the illicit profits, benefits or advantages of monetary value gained by companies as a result of paying a bribe to a foreign official. This means that Chapter V of the UNCAC on asset recovery is applicable (and ought to be applied) in any court or out of court proceedings involving the proceeds of corruption.
Now, this does not necessarily mean that foreign governments are entitled to the payments made under foreign bribery settlements – which brings us to the next question: how can foreign governments recover the proceeds of active foreign bribery?
The answer to this question is in UNCAC Article 53(b), which provides for the direct recovery of property through compensation claims. This article was established to provide a concrete remedy for states harmed by corruption in situations (such as bribery or trading in influence) where the proceeds of corruption involve funds of private origin, to which the state was never entitled (Cf. Technical Guide, p.203).
Damages are regarded as a basis for returning the proceeds of corruption and a compensation claim is the only way to recover them. And yet, this provision has yet to be implemented.
The full implementation of Article 53 is hindered by two main obstacles:
- The “complexity exception” relates to the “technical” difficulty encountered in many jurisdictions in identifying/recognising, quantifying and ultimately repairing the damage caused by corruption. Since the UNCAC provides absolutely no guidance on this subject, many jurisdictions – for fear of having to deal with this issue themselves – make the choice of not implementing the provision at all.
- Concerns about money returned to the host country being recycled (again) through corruption. This is a legitimate concern, but leads to the unfortunate situation where the citizens of these countries – the true victims – are doubly penalised for governance failures and the corrupt behaviour of their public officials.
However, past experience shows that none of these obstacles is insuperable as long as there is strong and genuine political will to implement the UNCAC. For example, in 2007, the US Department of Justice retrieved US$84 million that had been used by James Giffen to bribe high-ranking Kazakhstani officials on behalf of Western oil companies. Due to sensitivities surrounding the repatriation of the funds, which were frozen in Switzerland, the governments of the US, Switzerland and Kazakhstan partnered with the World Bank to establish the BOTA Foundation. This independent, non-governmental and non-profit foundation used the money to improve the lives of children and families in Kazakhstan through investment in health, education, and social welfare. By all accounts, their work has been extraordinarily successful and, notably, substantially corruption-free.
No doubt there is an obligation under the UNCAC to share foreign bribery settlement monies with host countries! But even though the issue was given some attention at the 5th Conference of States Parties held in Panama, additional advocacy work is needed.
The UNCAC Coalition will make every effort to ensure that States Parties live up to their commitments. It will continue to call on them to ensure that any court or out of court proceedings involving the proceeds of corruption are conducted in line with Chapter V; and that related recoveries reach the true victims.
About Maud Perdriel-Vaissiere
Maud Perdriel-Vaissiere is the UNCAC Coalition Advisor on Asset Recovery.
- In a recent blog post published in the ‘Global Anti-corruption Blog’, Andy Spalding precisely questions whether the UNCAC obligation to return stolen assets “also extend[s] to the allocation of other forms of settlement money”. In his opinion, since “bribery monies typically were never really stolen”, the funds involved in bribery enforcement actions do not satisfy the “St” of “StAR”.
- There are indeed good precedents in both areas. Those will be discussed in a later blog post.
- See: Resolution 5/3 on asset recovery (in particular operative clause n°26).