by Kathryn Gordon and Brooks Hickman
The liability of legal persons for foreign bribery and related economic offenses is a key feature of the emerging legal infrastructure for the global economy. Without it, governments face a losing battle in the fight against the bribery of foreign public officials and other complex economic crimes.
In recognition of the essential role that the liability of legal persons plays in combating foreign bribery, Articles 2 and 3 of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention) (PDF: 598 KB) require “[e]ach Party … to establish the liability of legal persons for foreign bribery” and to apply “effective, proportionate and dissuasive” penalties to legal persons for foreign bribery.
“Legal persons” refers to organisations (e.g. corporations) that have legal rights and are subject to legal obligations. For legal persons subject to the laws of a Party to the Anti-Bribery Convention, these obligations should also include respecting laws prohibiting foreign bribery. The Convention’s texts concerning the “liability of legal persons” thus aim to ensure that business organisations (and not just individuals) can be held responsible for foreign bribery.
The liability of legal persons is important because it casts legal persons as subjects of the law enforcement process. At its most basic level, LP liability ensures that a legal person can be held liable for certain types of wrongdoing in addition to, or independently from, any natural persons – such as its officers, employees or agents – who were involved in the offense. Furthermore, some LP liability frameworks create additional incentives that induce companies to have effective compliance programs and cooperate in the law enforcement process, in order to enhance the detection, prevention, investigation and resolution of cases of foreign bribery.
The OECD Working Group on Bribery has issued a comparative law mapping of these liability systems
The OECD Working Group on Bribery (WGB) is the inter-governmental body charged with monitoring the Parties’ compliance with their obligations under the Anti-Bribery Convention and with promoting compliance through guidance and peer pressure. The WGB recently issued The Liability of Legal Persons: A Stocktaking Report (PDF: 3,399 KB) to provide a comparative law analysis of how the 41 Parties to the Convention have structured their systems for imposing liability on legal persons for foreign bribery. This Report also documents the evolution of the Parties’ efforts to adopt and refine their systems for the liability of legal persons over time following the adoption of the Anti-Bribery Convention.
These comparative law mappings are based primarily on information provided in roughly 200 monitoring reports that the WGB has issued over 17 years in three phases of monitoring. In some instances, additional information has been provided by the WGB member countries to supplement and update the WGB’s findings.
Many Parties had to develop these systems “from scratch” since the Convention entered into force, while others started with fairly advanced systems
The Report begins with a timeline of law-making events relevant for LP liability in the 41 Parties since the adoption of the Convention in 1997. It shows that the Parties to the Convention had very different starting points for LP liability. Sixteen of them had no established system for LP liability before the Convention, except possibly in some areas of administrative law (e.g. tax and customs). For these Parties, legal person liability was essentially a foreign concept, alien to their legal traditions and practices. In contrast, 25 countries had some prior legal basis for imposing liability on legal persons, including codified law and judicial decisions.
Whether they were establishing systems for liability of legal persons for the first time or refining existing systems, 40 of the 41 Parties engaged in some kind of law-making activity relevant for LP liability after the adoption of the Convention. Many of these Parties expressly attributed this legal evolution to the obligations of the Convention as well as the WGB’s advice and peer pressure. Argentina is the one Party that has yet to establish legal person liability for foreign bribery (though it does have it for other offenses and is currently working on legislation that would establish it).
Evolution in legal person liability systems shows both convergence and entrenched variation
Viewed as a whole, this mapping attests to the wide variability among the 41 Parties’ systems for imposing liability on legal persons. This variability exists despite the marked trend toward adopting and strengthening of these laws over the 17 years of implementing the Convention. Thus, overall, the mapping paints a picture marked by contrast between a convergence of legal arrangements and the persistent variability of legal approaches to legal person liability.
The variability manifests itself in a number of ways, including when and how liability should be attributed to legal persons, jurisdiction, the level of sanctions, and successor liability. One fundamental difference in the Parties’ underlying approaches and philosophies toward holding legal persons liable for foreign bribery can be seen in the very nature of the liability imposed. As shown in Figure 1, 27 Parties (66%) have adopted criminal LP liability, 11 countries (27%) have adopted various forms of non-criminal approaches (e.g. administrative liability). At least two countries, Mexico and the United States, have both.
Figure 1. Nature of legal person liability
(number of Parties to the Convention, out of 41 Parties)
Approaches to legal persons’ compliance efforts, self-reporting and cooperation vary widely
Another important divergence can be seen in how the Parties integrate compliance systems, self-reporting and cooperation into their legal person liability systems. As shown in Figure 2, the existence of internal “compliance systems” can preclude liability for foreign bribery as a matter of law in at least some circumstances in 12 Parties (29%). In 6 Parties, it is an element of the offense with the burden of proof falling on the prosecution, while in 8 Parties it is an affirmative defense with the burden of proof falling on the defendant. In at least 2 Parties, Australia and Czech Republic, the burden can fall on either the prosecution or the defendant (depending on the specific legal provision at issue) or shift from the prosecution to the defendant.
Figure 2: When can a compliance system preclude liability?
(number of Parties to the Convention, out of 41 Parties)
Another significant area of variation is the role that compliance systems, among other mitigating factors, can play in reducing the sanctions imposed for foreign bribery and related offenses. The Report mapped three types of mitigating factors: (i) the existence and effectiveness of compliance systems, (ii) self-reporting a violation to the authorities, and (iii) cooperation with investigations. These mitigating factors are a key part of the incentive system that encourages companies to play a role in the law enforcement process. Fourteen of the 41 Parties, from both civil law and common law traditions, are known to make some provision for such mitigating factors. For compliance programmes, most Parties will give credit for implementing compliance programmes before the offense has been committed, but some Parties, such as Italy, may instead give credit to companies that establish a compliance programme after the offense has been committed.
The Working Group on Bribery will continue to promote the development and refinement of legal person liability systems in Phase 4
The Report shows clearly the varying stages of development of the Parties’ systems for imposing liability on legal persons. Some Parties have relatively mature and tested systems, whereas others are still exploring and experimenting with their systems. This is particularly apparent in such areas as imposing liability for the acts of intermediaries, jurisdiction over offenses committed abroad, and successor liability. This suggests that, despite the significant progress made in developing legal person liability systems since the adoption of the Convention, many Parties are still clarifying their legal thinking and practice in relation to this crucial area of law for the global economy. The WGB will continue to follow these developments in the recently launched Phase 4 monitoring cycle, which includes a focus on the liability of legal persons. The WGB, by providing a platform for learning and sharing of experiences, particularly through its monitoring process, will thus continue to facilitate the development of international norms for addressing the liability of legal persons.
Kathryn Gordon is a Senior Economist and Brooks Hickman is a Legal Analyst at the Organisation for Economic Co-operation and Development (OECD) Anti-Corruption Division.
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