Towards a system of compensation for the victims of foreign corruption
Towards a system of compensation for the victims of foreign corruption
Friederycke Haijer
Most criminal justice systems around the world provide for victim participation in criminal proceedings. However, victim participation is problematic in two main scenarios. The first scenario is when criminal cases are settled out of court, rather than litigated. The second scenario is when victims do not live in the country where the proceedings take place. Both scenarios are particularly common in cases of foreign bribery. In this post, I will use the example of the Vimpelcom settlement with the Netherlands to argue for a formalized international mechanism for victim participation in global anti-bribery enforcement. I will argue that lessons can be learned from the field of human rights, where there is more practical experience with and jurisprudence concerning the paying of reparations to large numbers of victims of mass atrocities.
The Vimpelcom settlement: to whom should recovered assets be returned?
The 2016 Dutch settlement with Vimpelcom concerned bribery by the company of Uzbek government officials. Between 2002 and 2012, more than half of the population of 25 million in Uzbekistan lived on less than 2 dollars per day. During that same period, Vimpelcom (currently known as VEON), one of the world’s largest telecom companies with a post-box in Amsterdam, paid over 130 million dollars in bribes to the Uzbek government in order to gain access to the Uzbek telecom market. The bribery eventually came to light and the company became the focus of a criminal investigation by both the Dutch and United States (US) authorities. Following out-of-court negotiations, in 2016, Vimpelcom agreed to pay 800 million dollars (400 to the Dutch authorities and 400 to the American authorities) and its assets were forfeited in several countries. In 2018, there were reports that Switzerland was making preparations to transfer the funds involved in the bribery to the Uzbek government. In other words, the same Uzbek government that had accepted a bribe from Vimpelcom in the first place would now be receiving those same funds so that Switzerland could plausibly deny being associated with the corruption. It is clear that there is something wrong with this picture. However, fixing the picture is less straightforward.
Just like Switzerland, the Netherlands is also holding Uzbek bribery assets. And it is also facing the question of how to handle them responsibly. Compared to many other OECD countries, the Netherlands is a relatively new player in the international anti-corruption enforcement arena. After years of low enforcement, the Dutch picked up their efforts in 2013, which resulted in several high-profile investigations. When the Dutch settled with Vimpelcom, there was no policy in place, nor did the Dutch have any experience in handling such large amounts of money originating from foreign crimes.
Should the enforcers benefit?
In the Dutch government’s settlement with Vimpelcom, although legally the money was divided in three parts (a fine, a confiscation and a recovery of criminal proceeds), all the money in the 400-million-dollar settlement has to some extent or another benefited the Dutch treasury. These financial gains for the country are at odds with the international anti-bribery regime, as contained in the United Nations Convention Against Corruption (UNCAC) and the OECD Anti-Bribery Convention, both of which value victim compensation. This settlement is also at odds with the Dutch criminal justice system, which provides that payments ordered by a criminal court should first benefit victims, before they benefit the state (article 36f, Dutch Criminal Code). Moreover, the financial gains are problematic for the international standing of the Netherlands, at a time when the country is trying to clean up its image as a tax haven. Allegations of using anti-bribery legislation to generate revenue through letterbox companies would not contribute to these efforts towards a cleaner financial image. Based on these efforts and a straightforward reading of its current policy, it is to be expected that the Dutch government would prefer a more established way to ensure that Vimpelcom’s confiscated assets directly benefited victims.
In the debates on compensation of the victims of bribery, the question of whether the money should benefit the poor population in countries where the bribery took place is not discussed. Rather, the issues are: Who is to be regarded as a victim? In what form should the compensation reach them? When the government of the country where the bribery took place cannot be trusted, who should handle the money on behalf of the victims?
The country that is holding the money does not automatically have legitimacy in the country where the victims live, nor does the company that paid the bribe. Local civil society organizations in the country where a bribe was paid, such as Uzbekistan, generally do not have the capacity to manage a fund of hundreds of millions of dollars Although individual victims may formally be able to file claims in some of the countries that are keeping the money, in practice it is almost impossible for them to participate in a meaningful way. It is unlikely that most victims will be aware of either ongoing procedures or their rights as victims, since settlement negotiations take place behind closed doors. And even if they were, it is extremely difficult and expensive to prove their individual damage in a court of law.
Lessons from the human rights regime
This is where the global anti-corruption regime can learn from the human rights regime, and in particular from the International Criminal Court (ICC). Similar to bribery cases, in cases that involve mass atrocities, individuals that were harmed are often disconnected from the proceedings. The Trust Fund for Victims that was established in the broad framework of the ICC attempts to address this issue by providing the opportunity to claim rehabilitation or material support to victims that fall within the jurisdiction of the court. This is a broader mandate than court ordered reparations. The Trust Fund for Victims is funded through fines and forfeitures of criminally acquired assets and through voluntary donations by member states and individual donors. Considering the amounts that have been paid in fines and forfeitures in anti-bribery to OECD countries in the last five years, there should be sufficient funds available to set up such a Trust Fund for the victims of foreign bribery. In the process of spending the funds, a bribery trust fund could emulate the Trust Fund for Victims and apply human rights-based principles, such as participation by victims in program planning, sustainability of community initiatives, transparency, accessibility for applicants that have traditionally lacked access to funding, and addressing the most vulnerable groups.
Returning to the example of Vimpelcom and Uzbekistan, the existence of a Trust Fund for Corruption Victims would make the rehabilitation process much easier. Countries that are holding criminal assets would no longer be required to assess whether a stated regime change is genuine or orchestrated or whether corruption has diminished sufficiently, which are insurmountable tasks. In such grand corruption cases, an assumption can arguably be made that the government that had received a bribe is not fit to handle the money and therefore a Victim’s Trust Fund should step in.
This fund could address the question of who should be regarded as victim based on human rights principles rather than criminal law principles. In particular, the Victims Trust Fund could base its rehabilitations on the obligation of states to take appropriate measures towards the full realization of economic, social and cultural rights to the maximum of their available resources, which could in the case of Uzbekistan ensure that most of the money went to those civilians who continued to live under the poverty line, particularly at the time when the Uzbek government was accepting the bribes.
Friederycke Haijer is a PhD candidate and teaches public international law at Utrecht University. Since June 2018, she is interim director of Transparency International Netherlands. The views expressed in this post do not necessarily represent the views of Transparency International. The research on which this blog is based was financed by the European Research Council (proposal 336230 UNIJURIS).