Wednesday, February 27, 2019

Article Published: "Aligning Emerging Global Strategies to Combat Corporate Corruption," The International Lawyer 52(1)1-45 (2019)

I am delighted to announce the publication of "Aligning Emerging Global Strategies to Combat Corporate Corruption," The International Lawyer 52(1)1-45 (2019).  My great thanks to the editors at the International Lawyer which is the official triannual publication of the American Bar Association's Section of International Law, for their work on this article and for a outstanding volume 52(1). 

The article considers the ways that different legal and regulatory mechanisms within public and private institutions might be better aligned to develop hybrid regulatory strategies to combat (and in the process to better manage the risk and magnitude of) corruption as well as its effects.  More particularly, it suggests that an alignment of prosecutorial practice with the risk management and compliance infrastructures of enterprises and lenders (including sovereign lenders), might be a useful step toward a coherent and comprehensive strategy. This combines elements of practice int he United States with those emerging in China to sketch what I call a two thrust strategy using an intertwined program of coordinated financial and criminal regulation. 

The Abstract and the Introduction follow. Comments and engagement always welcome. To order, visit the ABA store or contact the ABA Service Center. The Chinese language version of this essay appeared in the Jilin University Journal, social science edition 吉林大学学报社科版.

"Aligning Emerging Global Strategies to Combat Corporate Corruption" 
 The International Lawyer 52(1)1-45 (2019).
Larry Catá Backer

The commitment of governments, international organizations and enterprises to combating corruption appears to have intensified in recent years. The efforts of these institutions appear centered on a “Two Thrust Approach,” consisting of the simultaneous application of the development and enforcement of public legal regimes and the implementation and operation of private compliance systems. This system dies not produce regulatory coherence between the law making by the government and the compliance systems created by business are not coordinated well. However, recent regulatory and compliance trends suggest the emergence of a “Two Swords, On Thrust Strategy” as a supplemental approach to the enforcement of anti-corruption rules and norms. The Two Swords-One Thrust Strategy combines the power of state officials to exercise discretion in managing anti-corruption laws and the authority of financial institutions to control the access of enterprises to their investment universe or to exercise their shareholder authority to influence corporate behavior. The essay examines the possibility of developing this strategy. To that end, the essay first considers the emerging efforts to institutionalize rules for the exercise of prosecutorial discretion in criminal investigations to compel corporate governance reform. It then considers the “second sword”, the use of market power by sovereign investors to influence compliance oriented corporate governance reform that parallels those advanced by prosecutors. The essay ends by suggesting the utility of this strategy for Chinese anti-corruption efforts by considering the possibility of coordinating the work of the procuratorate with the financial power of Chinese sovereign wealth finds in the exercise of their shareholder power and their power to limit access to investment markets.


I. Introduction

Who cares about corruption?[1] In September 2017, the media reported that parliamentarians at the Council of Europe had been bribed by Azerbaijan to mute criticism of their government within the Council's human rights organs.[2] Also in September 2017, France’s financial prosecutor announced the commencement of a corruption investigation against the son of the former president of the International Association of Athletics Federations for payments to influence the choice of host cities for the largest global sporting events.[3] At the same time, authorities in Brazil launched a probe into vote buying for the 2016 Olympics, a criminal offense.[4] In January 2016, the Norwegian Pension Fund Global intensified its efforts to engage in more aggressive anti-corruption investment strategies.[5] In December 2013, Vietnam reported that it had sentenced bankers to death in connection with embezzlement from a state owned bank.[6]

“It’s a message to those in this game to be less greedy and that business as usual is getting out of hand,” said Adam McCarty, chief economist with the Hanoi-based consulting firm Mekong Economics. “The message to people in the system is this: Your chances of getting caught are increasing,” McCarty said. “Don’t just rely on big people above you. Because some of these [perpetrators] would’ve had big people above them. And it didn’t help them.”[7]

It is noteworthy that Colombia, shortly after the peace settlement ending fifty years of civil war, turned its attention to the control of criminal corruption in response to corruption scandals involving transnational corporations that reached to the office of the president of the republic.[8] “Already seven people have been jailed in the case, including a former senator and an ex-vice minister of transport. The attorney general also asked the Supreme Court of Justice to investigate five other members of congress.”[9] In China, Ding Ning, the chairman of Yucheng Group, was recently sentenced to life in prison for his role in an online lending fraud scheme.[10] In August, 2017, “[t]he Supreme People’s Procuratorate said China would strictly crack down on any crimes that seriously damaged financial security and that destroyed financial orders.”[11]

Corruption, especially bribery, has become a matter of international concern. The United Nations (U.N.) Global Compact, a voluntary initiative between large enterprises under the leadership of the U.N. committed to implement universal sustainability principles and to take steps to support U.N. goals, is built around ten principles.[12] Its tenth principle states that “[b]usinesses should work against corruption in all its forms, including extortion and bribery.”[13] The U.N. Global Compact has expressed the view that “[c]orruption is a considerable obstacle to economic and social development around the world. It has negative impacts on sustainable development and particularly affects poor communities.”[14] In that respect, the U.N. Global Compact highlights a “two thrust” attack on corruption. “New and tougher anti-corruption regulations continue to emerge worldwide. All companies need robust anti-corruption measures and practices to protect their reputations and the interests of their stakeholders.”[15]

These “two thrusts”—the first consisting of national legislation (criminal and civil) and the second consisting of corporate self-regulation against corruption—have become the foundation of contemporary measures to combat corruption, especially when committed by individuals within the largest public or private enterprises. [16] The extent of national legislation and international efforts to make national legislation coherent is well known.[17] National efforts continue to develop. For example, in 2017, the government of the United Kingdom adopted the Criminal Finances Act of 2017.[18] In addition, the range of international agreements respecting corruption touches virtually every country on earth.[19] The international community has also adopted some soft law instruments with some influence in developing customary standards of conduct and expectations in economic relations.[20] In the United States, the Foreign Corrupt Practices Act (FCPA) has served as a model, variations of which have been adopted elsewhere.[21] The Criminal Law of the People’s Republic of China prohibits “official bribery,” which applies to state officials and state entities, as well as “commercial bribery,” which applies to virtually everyone else.[22] A great number of other states have enacted anti-bribery and corruption laws as well.[23]

Recent reports from the global financial sector have highlighted the way in which this “two thrusts” strategy has also begun to be felt by actors in financial markets, especially those firms that are in the business of investing in or lending to operating companies worldwide. In one recent case,

[a]n American mutual fund manager said in an SEC filing [] that it sold all shares it held in Petrofac because of an ongoing corruption investigation by the UK’s Serious Fraud Office. That SFO investigation is focused on Petrofac’s past relationship with Unaoil. Ohio National Fund, Inc. said the “escalating fraud investigation seems to us a thesis changer.”[24]

The U.S. Securities and Exchange Commission (SEC) has noted the priority to which it has given corruption cases under the FCPA; its enforcement actions suggest the preference for civil penalties as punishment for violations of the Act.[25] The complex nature of extra territorial effects of anti-corruption measures and the weaknesses of arguments against such efforts have also been noted.[26] Indeed, financial institutions, and most notably, sovereign wealth funds, have begun to more vigorously defend against corruption by building anti-corruption measures and requirements into their investment strategies as well as in their shareholding policies.[27]

Related to these emerging trends is another—the increasing emphasis on monitoring and compliance programs imposed formally and informally on and by enterprises.[28] Governments incentivize this obligation by their willingness to enforce cooperation agreements with enterprises facing corruption probes in order to avoid criminal sanction.[29] These have been advanced in the United States[30] and in the United Kingdom.[31] What makes this interesting is the way that governments, having created a strong tradition of respecting the autonomy of corporations even when they are subsidiaries, now seek to treat production chains as a single enterprise for purposes of corruption probes. Most interesting among these efforts is the so-called Pilot Program launched by the U.S. Department of Justice in April 2016,[32] which was designed to encourage company self-reporting and cooperation to avoid exercises of prosecutorial discretion to seek criminal penalties against companies or their employees.[33] Additional due diligence efforts may be required under provisions of the U.K.’s Criminal Finances Act of 2017.[34] Under this Act, an enterprise may well incur criminal and civil liability for acts attributable to it occurring within its supply chain if connected with torture involving public officials.[35] In Brazil, the Clean Companies Act[36] includes a leniency provision permitting state prosecutors to enter a “deferred prosecution deal for companies willing to plead guilty and settle corruption charges.”[37] The effect is that the legal relationships among corporate enterprises or between corporations and their clients (with whom there may be no ownership relationship) are now treated as irrelevant for purposes of criminal investigation.[38]

These trends tend to challenge the traditional legal and societal principles for the organization of business and its responsibilities. They also point to a new and heightened importance of corruption for both states and financial institutions. The trends suggest some of the ways in which legal systems and the practices of large institutions in global markets have been contributing to changes in the frameworks within which corruption is detected, controlled, and punished. This essay first examines two less well known elements of the “two thrusts” approach to corruption that focus on corporate compliance programs. The first is the use of sovereign investing as a tool for the correction of corruption and the supervision of institutional reform to avoid future corruption. The second is the use of prosecutorial discretion to allow legal regimes to manage corporate compliance programs. In the former case, state officials use private power to aid corporate self-regulation; in the latter case, state officials use public authority to devolve supervision to corporate surveillance mechanisms. [39] In the next section, the essay considers the way in which sovereign wealth funds are emerging as potentially useful instruments of corruption management. The section that follows briefly considers the utility of government policies that favor settlement and cooperation agreements to manage company efforts at corruption self-regulation in the context of sovereign lending practices that aid in anti-corruption efforts. The effect, though little publicized, can be quite potent—a “Two Swords One Thrust” can serve as another effective strategy in governmental and private efforts to combat corruption. The “Two Swords One Thrust” Strategy combines the power of state officials to exercise discretion in managing anti-corruption laws and the authority of financial institutions to control the access of enterprises to their investment universe or to exercise their shareholder authority to influence corporate behavior. This essay suggests briefly the utility of this strategy for Chinese anti-corruption efforts. Within China, it may be possible to coordinate compliance efforts by the procuratorate with that of the Chinese sovereign wealth funds through the medium of social credit systems currently being developed.


[1]. See Alvaro Cuervo-Cazurra, Who Cares about Corruption, 37 J. Int’l Bus. Stud. 807, 807-822 (2006) (arguing that anti-bribery laws abroad may act as a deterrent against engaging in corruption in foreign countries, but that corruption results in relatively higher FDI from countries with high levels of corruption). [1].

[2]. See Jennifer Rankin, Azerbaijan Revelations Spark ‘Great Concern’ at Council of Europe: News of Country’s $2.9bn Lobbying and Money-Laundering Scheme Could Herald Shake-Up at Rights Body, The Guardian (Sept. 5, 2017), (“The details of the payments came as an independent panel began confidential hearings into alleged corruption at [the Parliamentary Assembly of the Council of Europe] Pace in Strasbourg, one of the world’s oldest human rights bodies.”).

[3]. See French Prosecutor Pins Corruption in IAAF on Son of Ex-President, France 24 (Sept. 5, 2017),

[4]. See Brazil Police Launch Raid to Probe Vote-Buying for 2016 Olympics, France 24 (Sept. 5, 2017),

[5]. Norway Fund Blacklists China’s ‘Corrupt’ ZTE, Loc. (Jan. 7, 2016), (“The world’s biggest sovereign wealth fund, Norway’s public pension fund, has divested from Chinese telecom equipment maker ZTE because of corruption fears, the Norwegian central bank which manages the fund said on Thursday.”); see also Decision on Exclusion of Company from the Government’s Pension Fund Global, Norges Bank (Jan. 7, 2016),

[6]. See Patrick Winn, Vietnam Is Sentencing Corrupt Bankers to Death, by Firing Squad, PRI (Apr. 3, 2014), (“In March, a 57-year-old former regional boss from Vietnam Development Bank, another government-run bank, was sentenced to death over a $93-million swindling job”).

[7]. Id.

[8]. Juan Manuel Bedoya-Palacio, Colombia Enters the Age of Enforcement, The FCPA Blog (Aug. 31, 2017),

[9]. Id.

[10]. See Ding Ning: China’s Biggest Ponzi Scheme Mastermind Sentenced to Life in Prison, The Independent (Sept. 12, 2017),

[11]. Stella Qiu & Vincent Lee, China’s Top Prosecutor to Intensify Crackdown on Financial Crimes, Reuters (Aug. 22, 2017), (“This year, high profile regulators who have been caught up in President Xi Jinping’s anti-corruption drive include the former head of the insurance regulator, former vice chairman of the securities regulator and former assistant chairman of banking regulator.”).

[12]. The Ten Principles of the UN Global Compact, U.N. Global Compact, (last visited Oct. 7, 2018) (“The ten principles are derived from: the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption”).

[13]. Id.

[14]. Anti-Corruption, U.N. Global Compact, (last visited Oct. 7, 2018).

[15]. Id.

[16]. See, e.g., Dimitri Vlassis, The U.N. Convention Against Corruption Origins And Negotiation Process in 66 Resource Material Series 126 (2005).

[17]. See, e.g., id.

[18]. Criminal Finances Act 2017, c. 22 (U.K.). The Act made provisions in connection with terrorist property and created corporate offenses for cases where a person associated with a corporate body or partnership facilitates a tax evasion offense.

[19]. See, e.g., United Nations Convention against Corruption, Dec. 9, 2003, 2349 U.N.T.S. 41; United Nations Convention against Transnational Organized Crime and its Protocols, Sept. 29, 2003, 2225 U.N.T.S. 209; African Union Convention on Preventing and Combating Corruption, July 11, 2003, 43 I.L.M. 5; Civil Law Convention on Corruption, Nov. 4, 1999, Eur. T.S. No. 174 (open to non-member states); Criminal Law Convention on Corruption, Jan. 27, 1999, Eur. T.S. No. 173 (open to non-member states; Additional Protocol to the Criminal Law Convention on Corruption, May 15, 2003, Eur. T.S. No. 191 provides that adhering states embed in their national criminal law the criminalization of active and passive bribery in both the public and private sectors, including bribery of members of foreign and domestic parliamentary assemblies and of officials of international organizations); OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Dec. 17, 1997, S. Treaty Doc. No. 105-43 (open to all OECD countries and some non-member countries); OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, Dec. 17, 1997, S. Treaty Doc. No. 105-43 (open to all OECD countries and some non-member countries).

[20]. See, e.g., G.A. Res. 51/191, Declaration Against Corruption and Bribery in International Commercial Transactions, (Dec. 16, 1996). For a review of how this declaration fits into the broader context of the fight against corruption, see Vlassis, supra note 16.

[21]. Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 78dd-1 (2006); see also D. Michael Crites, The Foreign Corrupt Practices Act at Thirty-Five: A Practitioner’s Guide, 73 Ohio St. L.J. 1049 (2012).

[22]. See Hui Xu & Sean Wu, Bribery and Corruption: China, Global Legal Insights (2018),—-bribery-and-corruption/china; see also Ron Cheng, Why US Companies Should be Paying Attention to China’s New Anti-Corruption Laws, Forbes (July 27, 2016),

[23]. The International Bar Association has created a database with the relevant anti-bribery laws from fifty-six states, as well as international conventions. See National Anti-Bribery Legislation, Int’l B. Assoc. (Dec. 1, 2014), (“texts of international anti-bribery conventions as well as the anti-bribery legislation of a number of countries [are] accurate as of 1 December 2014”).

[24]. Richard L. Cassin, Fund Dumps Petrofac Shares on SFO Probe Concerns, The FCPA Blog (Sept. 8, 2017), Petrofac designs, builds, operates, and maintains oil and gas facilities worldwide. Our Story,, (last visited Oct. 7, 2018). Unaoil provides “industrial solutions to the energy sector in the Middle East, Central Asia and Africa. These include green and brownfield Engineering and Construction, Workforce Solutions, Operations and Maintenance, and the provision of niche equipment and products, such as production chemicals.” Chairman’s Message,, (last visited Oct. 7, 2018). On July 19, 2016, the U.K. Serious Frauds Office (SFO) issued a Press Release in which they announced that the SFO is “conducting a criminal investigation into the activities of Unaoil, its officers, its employees and its agents in connection with suspected offences of bribery, corruption and money laundering.” Unaoil Investigation, (July 19, 2016), See generally, Unaoil, (July 18, 2018),

[25]. SEC Enforcement Actions: FCPA Cases,, (last updated Oct. 2, 2018) (listing companies and amounts of civil penalties from 2018 back to 1978).


[26]. See Larry Catá Backer, Soft Extra Territorialism and Anti-Corruption Campaigns: On the Perverse Folly of Corrupt States, Law at the End of the Day (Sept. 15, 2006),

[27]. See Bestemmelser om forvaltningen av States pensjonsfond, 21. Dec. 2005, nr. 123.

[28]. See Alun Milford on Deferred Prosecution Agreements, (Sept. 5, 2017),

[29]. On U.S., Canadian, and U.K. government’s view of what constitutes an effective compliance program, see U.S. Dep’t of Justice, Justice Manual, § 9-47.120 (2018) [hereinafter Justice Manual]; Corporate Compliance Programs,,; Ministry of Justice, The Bribery Act 2010: Guidance (2010).

[30]. See U.S. Dep’t of Justice, Evaluation of Corporate Compliance Programs (2017), See generally, Justice Manual, supra note 29, § 9-28.000.

[31]. See, e.g., U.K. Bribery Act 2010, c. 23, § 7 (U.K.).

[32]. See U.S. Dep’t of Justice, The Fraud Section’s Foreign Corrupt Practices Act

Enforcement Plan and Guidance (2016),

[33]. See id. The Press Release explained that the Pilot Program was in part “designed to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs” U.S. Dep’t. of Justice, Criminal Division Launches New FCPA Pilot Program, (April 5, 2016),

[34]. See Criminal Finances Act 2017 (U.K.); see also Richard J. Rogers & Sasho Todorov, Compliance Alert: Due Diligence Under the U.K.’s Critical Finances Act of 2017, The FCPA Blog (Sept. 7, 2017),

[35]. Rogers & Todorov, supra note 34 (“if a company is unfortunate enough to identify a Gross Human Rights Abuse with which it is connected, it may wish to consider proactively investigating the allegations. This will help the company beat civil society to the punch, and will demonstrate a good faith effort to mitigate any potential violations.”).

[36]. Lei No. 12,846/13, de 13 Agosto 2013, Diário Oficial Da União [D.O.U.] de 13.8.2013 (Braz.).

[37]. Felipe Rocha dos Santos, New Guidance for Brazil Anti-Corruption Settlements, The FCPA Blog (Sept. 7, 2017), The settlements have proven controversial, and have sometimes been blocked by the Brazilian Federal Prosecutor’s Office for excessive leniency. Id.

[38]. See Lei No. 12,846/13.

[39]. See Justice Manual, supra note 29, § 9-28.000; Bestemmelser om forvaltningen av States pensjonsfond, nr. 123.

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