Keywords

Introduction

In March 2019, the US Securities and Exchange Commission (SEC) issued millions of dollars in fines resulting from the scandalous revelations regarding MTS (VimpelCom) and Ucell (Telia Sonera) bribing Uzbek government officials for billions of dollars in an effort to remain on the market (USAO SDNY, 2019). As a consequence, we can ponder how a foreign authority exercises its jurisdiction on another continent, if companies must comply with its orders, and why these companies could not be fined by Uzbekistan.

The answers to these questions are twofold. First, VimpelCom was trading its shares on the New York Stock Exchange (NYSE), which was sufficient for the SEC to establish its jurisdiction and begin investigating the crimes committed by a Russian-owned Dutch-domiciled multinational company operating within the territory of Uzbekistan. Second, Uzbekistan lacked any legal mechanism to investigate and prosecute a corporate crime, since it had not yet introduced corporate criminal liability (CCL) for any crimes. This leads to the realisation that the existing anti-corruption laws in Uzbekistan fell short of actually combating corporate crime or at a minimum establishing mechanisms for seeking compensation for damages resulting from the corrupt actions of foreign companies, a realisation that hit hard. Had Uzbekistan had CCL for bribery in place, the case would have been tried in Uzbekistan according to Uzbek laws, and the damage done to Uzbekistan would have resulted in compensation paid into the Uzbek budget. Former Minister of Justice Ruslanbek Davletov was quite vocal about this shortcoming, emphasising the need to begin developing legal mechanisms to hold corporations criminally liable for their violations instead of relying only on an individual’s criminal responsibility (Gazeta.uz, 2020).

It must be said that the ‘insufficient implementation of internationally recognised criminal law institutions, including the lack of criminal liability of legal entities’, was also noted in the Presidential Resolution No. PP-3723, dated 14 May 2018, ‘On measures to radically improve the criminal justice system and criminal procedure legislation’ (Preamble). However, the legal regulation and lawmaking spheres in Uzbekistan, a post-Soviet state, even after 30 years of independence, remain under Soviet influence, an influence which serves as a stringent example of a civil legal system. Criminal liability has always been perceived as exclusively individual, whereby introducing CCL is met with scepticism and a sense of impossibility.

Limitations to the traditional approach of incriminating corruption solely in the public sphere are increasingly acknowledged. Extensive international efforts exist to criminalise corruption and bribery in the private sector, namely, through the United Nations Convention Against Corruption (UNCAC, 2004, Article 26), OECD Anti-Bribery Convention (OECD, 2020), and the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD, 1997, Article 2). There are also numerous national-level legal initiatives in many countries that render corporations criminally liable for corruption-related crimes. These international and domestic legal initiatives introduced corporate criminal liability (CCL) for the offence of bribery, thereby making clear the importance of recognising the grand scale of such offences that stretch far beyond a public office. Billion-dollar fines and penalties for corporate crimes have become a regular occurrence in countries where corporate business is booming. But how will this legal experiment develop further in a developing country where businesses are only beginning to grow and struggling to survive despite the bureaucracy and overregulation? Which factors should be taken into account when introducing legal measures against corruption? Will CCL not impose even more regulations over businesses?

This chapter attempts to answer these questions, analysing the introduction of CCL for bribery. In doing so, we test the hypothesis that introducing CCL will serve as an effective tool to combat high-level corruption and kleptocratic practices in Uzbekistan (GAN Integrity, 2020).

This chapter consists of three parts. Part I introduces the main theories applicable to this topic, along with methodological considerations and definitions, placing bribery under the umbrella concept of corruption. We also outline several existing approaches to CCL mechanisms and critically evaluate them. Part II discusses current regulations related to corruption and bribery in Uzbekistan, including socio-legal perspectives, which we used to analyse relevant cases, which we also supplement with interviews amongst retail business, construction, and marketing company representatives. Part III considers the introduction of CCL to combat bribery in Uzbekistan, analysing the inadequacy of administrative liability and the challenges that might arise along the way.

Part I: Bribery in the Private Sector

Causes and Effects

Bribery, one of the most common forms of corruption, refers to a ‘quid pro quo’ agreement where one person offers, gives, or promises another person who accepts, agrees to receive, or requests an undue advantage in exchange for the latter improperly performing their duties or even when acceptance of this advantage itself is improper (Bribery Act, 2010, Sections 1 and 2). In this chapter when discussing bribery, we rely on this definition since it covers not only the payer and the recipient of the bribe, but also the mere offer or agreement to accept a bribe. Thus, even an attempt to bribe is a crime, instead of the common practice of a post-factum offence.

Several definitional dilemmas and complexities surrounding corruption and bribery require clarification. Since corruption is an umbrella term used to allude to any abuse of power for a private gain, it can include not only bribery, but also nepotism, high-level kleptocracy, fraud, conflicts of interest, and embezzlement amongst others. Here, we focus only on the separate crime of bribery, although discussions of bribery may spillover into other corrupt activities.

Firstly, corruption is typically defined as an abuse of entrusted power for a private gain.Footnote 1 However, corruption is often perceived as a matter of the abuse of public power, whilst the private sector is also an active participant in corrupt activities, including bribery. Along with the rise of privatisation and the outsourcing of public services, the risk of bribery and state-sponsored corruption is significantly increasing, since it expands the number of points of contact between the public and private sectors (by businesses to secure contracts and advantages). Moreover, this process creates a paradox. Such paradoxes occur when private sector actors are involved in activities aimed at detecting bribery, and in doing so create even more room for bribery and corruption. Such instances may occur, for example, when private auditing companies carry out a sloppy audit of a privatised public service, and the resulting relationship leads to a sophisticated corruption scheme.Footnote 2 These considerations imply that limiting the fight against corruption only to the public sector would render it one-sided. Instead, the private sector may very well be considered one of the key contributors to corruption.

Secondly, corruption—in particular bribery—is often considered a ‘private deal’ between the immediate parties to a deal (House of Lords, 2019). However, a duty improperly performed by an office holder for a financial or other gain was entrusted to them by someone else. For example, a public official gains their power from a government agency, which gains its own power from the law. Similarly, an employee in the private sector owes a fiduciary duty to their employer, shareholders (if any), and its clients (e.g., banks), and this power is granted by virtue of their employment. In other words, bribery is never a private deal. By committing the offence of bribery, a person violates the trust bestowed upon them either by law or by their employer. As a result, a corrupt act is not attributed to a single person, but to an entire institution which granted power to that person.

Thirdly, bribery, as a white-collar crime, has the false perception of being a non-violent or victimless crime (Croall, 2016). However, the outcomes of corruption extend far beyond a deal itself, and affect society as a whole (Friedrichs, 2009). Corruption can result in consequences as severe as a lack of access to basic public services like education, healthcare, decent infrastructure, adequate standards of living, justice, security, and human rights (Mauro, 1997). Private sector corruption creates adverse effects such as inflated prices, unfair competition, violations of consumer rights, low-quality products and services, and barriers barring entry to markets, which in the long term can damage the economy of an entire country (Özşahin & Üçler, 2017). Corruption can happen anywhere, and the entire society is a victim of each episode of corruption, including private-sector corruption.

Another recognised impact of bribery is the deterioration of the investment climate in the country due to low levels of infrastructure development, which in turn results from the inefficient allocation of funds (Beekman et al., 2014). Businesses prefer to avoid investing, especially in cases involving foreign direct investment, in countries with a high risk of bribery. Doing business in such contexts carries the risk of prosecution, higher costs of doing business due to bribes associated with various expenses, and, as mentioned above, low levels of infrastructure which can also increase the costs of doing business (Mathur & Singh, 2013).

It is worth noting that one theory argues that corruption in the business environment and generally business ethics have roots in the cultural context (Pena López & Sánchez Santos, 2013). We can contrast two extreme models of society, using Tönnies’ classic sociological terminology: a cold society (gesellschaft) and a warm society (gemeinschaft) (Shluchter, 2011). Individuals falling within the first category have no relationships with one another; therefore, interpersonal knowledge is minimal, even within families. A warm society, by contrast, is characterised by the existence of a large network of personal contacts and mutual knowledge of others.

Conceptualising Bribery and Corruption in the Uzbek Socio-Legal Context

In order to understand the Uzbek social context informing the meaning of corruption and bribery in Uzbekistan, in this chapter, we draw from the work of Ferdinand Tönnies on community and society (Shluchter, 2011). According to Tönnies, purely economic relationships are more common in a cold society, whereas social distance may be deemed inappropriate in a warm society. As such, treating those closest to one in the same way strangers are treated would seem wrong. In warm communities, a government plays a particularly high corrective function in the realm of economic interactions with the private sector (Shluchter, 2011).

Uzbek society serves as an example of a warm society—that is, expressions of gratitude, demonstrations of the utmost respect, informal relations, and excessive hospitality are its main features. Thus, we may conclude that in the Uzbek context of a business or public office, the line between common hospitality and bribery remains rather vague and cannot be easily demarcated. In most cases, the giving or receiving of a ‘gratitude’ gift or favour is not viewed as an illegal act. In fact, such gratuities are expected. This sort of mindset creates a network effect. Through years of practicing ‘gratitude’ gifts and favours, the practice becomes intrinsic to society, becoming a social norm, a set of normative expectations which individuals follow, whereby such informal, unwritten norms, and practices often contradict state law. This leads us to argue that the legal instrument adopted intended to regulate bribery should precisely determine the limit of hospitality that companies and public offices can show or accept.

Methodological Considerations

Bribery is relevant in light of the commitments undertaken by Uzbekistan in the field of combating corruption. Although the issue of CCL seems well-studied at the international level, with numerous publications dedicated to it, the majority of them focus on countries belonging to the Anglo-Saxon legal family. In Uzbekistan, as a country with a continental legal system, the concept of corporate criminal responsibility remains rather ambiguous. A previously developed draft law on the introduction of such responsibility did not garner much support.

At the same time, recommendations regarding corporate liability related to bribery, including those provided to Uzbekistan within the framework of its participation in the United Nations Convention Against Corruption (UNCAC) and the Istanbul Anti-Corruption Action Plan of the OECD Anti-Corruption Network for Eastern Europe and Central Asia, remain relevant.

In this regard, this chapter attempts to justify the necessity of introducing CCL through an analysis of the causes and effects of bribery from a socio-legal research perspective. Thus, we discussed how models of ‘cold’ and ‘warm’ societies and the traditional expression of gratitude through gifts influence the nature of corrupt relationships. The concept of corporate responsibility is considered in light of new trends in the ethical standards of the business community and its potential role in strengthening a broad anti-corruption consciousness.

Based on an analysis of current legislation, we identify the gaps in Uzbekistan’s anti-corruption law, focusing on norms aimed at protecting businesses from corruption and norms intended to promote corporate sector integrity, as well as in the context of companies managed by ‘puppet’ directors and the task of attracting foreign investments. Through a comparative analysis, the shortcomings of the administrative responsibility system are examined in contrast to CCL, considering acceptable models for the country based on foreign experiences.

To understand the corruption risks in business-to-business and business-to-government relationships, as well as the perception of the business community regarding the introduction of CCL, we conducted interviews with representatives of the business sector. Field research was conducted among representatives of retail trade (chain supermarkets), construction companies, and the advertising sector in the last quarter of 2022 and the first quarter of 2023. Within the retail industry, interviews were also conducted with suppliers. Interviewees were selected based on our contacts and social connections within various sectors. Respondents were guaranteed anonymity, and we asked semi-structured questions in order to facilitate the sharing of objective information. In total, we conducted eight interviews, each lasting from 45 minutes to 1 hour and 30 minutes. Considering the sensitivity of the subject matter and the questions we asked, interviews were not audio recorded. We only made verbatim notes during the conversations, noting our primary observations afterwards.

From the three sectors represented in our respondents, ‘grey’ practices in business-to-business relationships were more characteristic of the retail sector, whilst the corrupt component in business-to-government relationships was more prevalent in the advertising sector and the construction industry.

Concept of Corporate Criminal Liability

It has long been established and is now undeniable that companies have individual legal personalities just like natural persons—that is, companies have their own rights and duties separate from their directors and managers.Footnote 3 Individuals in their activities are responsible not only for their duties arising from contracts or agreements, but also via non-contractual obligations, which include not committing a tort and more imperative obligations such as being prohibited from committing a crime. However, this concept is not equally applicable to corporations, since corporations have long been perceived as capable of having only contractual and tortious obligations and lack any responsibilities under criminal law (Choudhury & Petrin, 2018). This provides an interesting perception because many criminal justice systems offer protection against crimes to any subject of the law, natural or corporate, such that companies enjoy protection against crimes but cannot be prosecuted for such crimes if they commit them (Diskant, 2008). Yet, companies were found to engage in criminal activities, such that a separate social phenomenon called corporate crime was identified. Consequently, it seems unjust to allow a company that engages in criminal behaviour to go unpunished just because there is no available legal tool to do so.

Edelman’s Trust Barometer (2023) established that business has become the most trusted institution replacing nongovernmental organisations (NGOs) and governments, a trend that has been holding for the last three years since 2020. That is, according to Edelman’s Trust Barometer annual report, people around the world consider businesses to be more ethical and competent when compared with governments, NGOs, and the media (Edelman, 2023). Business is now the sole institution viewed as competent and ethical; the government is viewed as unethical and incompetent, with businesses under pressure to step into that void left by governments. This indicates that people view businesses as social actors that should shape new values and be more active in solving the problems that governments fail to.

Accordingly, this represents a crucial moment for Uzbekistan vis-à-vis ensuring that businesses operating within its territory do so ethically and competently. This can also serve lawmakers by extending the scope of laws to cover not only individuals, but also legal entities initially not included. As such, CCL will not only deter companies from committing certain crimes, but also lead to an increase in trust towards businesses amongst Uzbek people. In turn, such actions will also greatly influence the social fabric by helping bring about the necessary changes to the mindsets of people and prevent corruption becoming a social norm.

The criminal liability of corporations is a long-standing practice in countries such as the US, the UK, and the Netherlands; other countries following the lead also introduced CCL into their systems, such as Israel and South Africa (1977), UAE (1987), France (1994), China (1997), Korea (1998), Belgium (1999), Italy (2001), Poland (2003), Qatar (2004), Romania (2006), Luxemburg, Slovak Republic, and Spain (2010), and the Czech Republic (2012) amongst others. Several of these countries have introduced CCL for bribery (including bribing foreign public officials) in the hopes of reducing the levels of corruption.

How Does Corporate Criminal Liability Work?

The main difficulty confronting a legislator in developing a mechanism for attributing criminal liability to corporations lies in how to establish the mental component of a crime attributed to an abstract entity.

Jurisdictions that have introduced CCL have used different legal mechanisms. These mechanisms can be divided into three main categories: (1) attribution through identifying the mental element of the crime within the senior management of a corporation, also called the identification principle; (2) through vicarious liability, where the company is liable for the actions of their employee; and (3) by breach of a statutory duty, when the behaviour deemed criminal and the means to attribute it to the company are clearly stated in the statute (Khanna, 1996).

The first formulation, the identification principle, was developed in the UK and is used in most of the Commonwealth countries. According to this approach, the mental element of a crime is established through a company’s ‘governing will and mind’, which can be determined from the senior manager of the company. That is, a crime must be committed by the most senior manager of a company with necessary intent (Lennard’s Carrying Co v Asiatic Petroleum Co 1915; DPP v Kent and Sussex Contractors Ltd 1944; ICR Haulage Ltd 1944; Moore v I Bresler Ltd 1944). The primary criticism of this approach is that it is ineffective against big corporations with multiple management levels, in which no one person is considered the governing agent or mind of the company, and decision-making is divided across smaller management units. Thus, large companies tend to get away with an otherwise prosecutable crime just because this legal tool fails against the size of an organisation (Tesco Supermarkets Ltd v Nattrass 1972). As a result, for a large company, the chance of being criminally liable under this formula is quite small.

The second mechanism, vicarious liability, takes place when the criminal actions of the employee are attributable to the company. In other words, a company is liable for a crime committed by its employee when fulfilling their duties and for the benefit of a company (but not solely). Vicarious liability does not give any weight to attempts by the employer to prevent the crime from being committed. This type of mechanism is deemed unfair because in order for a company to be vicariously liable for a crime committed by its employee little proof is required. This creates a nefarious incentive to conceal a crime since the employer fears punishment alongside their employee. However, vicarious liability is quite simple in its application and, therefore, practical.

The third approach can also be viewed as an expanded identification principle or even a fusion between the identification principle and vicarious liability, viewing corporate culture as the central subject—a breach of statutory duty. Corporate culture can be defined as a combination of fundamental values, beliefs, moral principles, and behaviours that define an organisation and direct its operations (Tarver, 2023). This new formula, a ‘failure to prevent’, has been used by UK legislators in the Bribery Act, 2010 for bribery offences and the Criminal Finances Act of 2017 for prosecuting tax evasion. Through this approach, the emphasis is placed on the prevention of a crime, raising awareness, education, and persuasion rather than prosecution and punishment (UK Ministry of Justice, 2012).

In this chapter, reckoning with findings from previous research, we argue that corporate culture should be the primary basis for CCL. It should work alongside the elements of a crime (acting with intent for a company’s benefits).

Part II: The Current State of Regulation for Corruption and Bribery in Uzbekistan

Current regulations related to corruption in Uzbekistan are primarily enshrined in the ‘Act on Combating Corruption’ (2016) and Articles 1929–19210 and 210–214 of the ‘Criminal Code of Uzbekistan’ (1994), which criminalise bribery offences in the private and public sectors.

The ‘Act on Combating Corruption’ has rather broad provisions. For example, Article 20 refers to measures directed at preventing corruption in the sphere of social and economic development and entrepreneurship, whilst the Act itself summarises reforms needed in order for businesses to operate freely and minimise their exposure to corruption. More specifically, the Act recommends the following measures:

  • Eliminating administrative and bureaucratic barriers, alongside simplifying and speeding up the processes related to registration, permissions, and licensing procedures.

  • Creating equal conditions for conducting business activities and preventing unfair competition.

  • Maintaining a competitive environment in the distribution of public procurement and other actions.

Here, businesses are only perceived as a ‘risk group’ needing protection against exposure to corruption, but the Act does not stipulate that businesses can also engage in corrupt behaviour. Furthermore, corruption and bribery are heavily regulated, although only within the public sector. Specifically, this Act sheds light on the fact that a legislator intends to only punish a public official as a bribe-taker and a person (not a business) as a bribe-giver. Thus, this represents a one-sided fight.

The Criminal Code of Uzbekistan defines cases of bribery as something that occur in the public sector, whilst corrupt practices and transactions that take place in the private sector are called a ‘graft’ (‘podkup’), the definition of which mirrors that for bribery. The punishment for bribery in the private sector ranges fines of from US$3000 to three years imprisonment (if certain aggravating circumstances are present, fines up to US$18,000 or eight-years imprisonment may be levied; Criminal Code 1994). None of the abovementioned rules and norms include gift-giving or excess hospitality as components of bribery. However, we argue that the current increase in the number of businesses and their growth in number and in size call for more sophisticated measures and regulations. The norms directed at combating bribery should be more detailed and leave no loopholes in order to achieve their aims. These needs are recognised on various levels. As mentioned above, the Minister of Justice in his speech strongly argued that Uzbekistan needs CCL related to corruption since it is now not limited to instances regulated by current laws. In addition, the private sector recognises this need, since about 100 Uzbek entrepreneurs and other representatives of the corporate sector gathered at a business forum in Tashkent on 30 November 2021, to further discuss actions necessary to create a culture of zero tolerance towards corruption and to foster business ethics in Uzbekistan.

Kristian Lasslett (2020) suggested the following: ‘As Uzbekistan opens up its capital markets, deregulates industries, and primes privatisation initiatives, economic transactions will increasingly be mediated through the corporate sector. There is a serious need to modernise corporate law in Uzbekistan in order to strengthen corporate governance and corporate transparency.’

Empirical Findings: Cases and Interviews with Representatives from the Retail and Constructions Sectors

According to a survey of entrepreneurs in Uzbekistan conducted by the Centre for Economic Research and Reforms, 53% of respondents often encounter corruption. In addition, 48% of the entrepreneurs surveyed refrain from making new investments for this reason (Centre for Economic Research and Reforms, 2021).

The case involving VimpelCom and Telia Sonera mentioned at the beginning of this chapter represents just one example of foreign companies taking advantage of a country’s corrupt system. Had there been no US SEC involvement, these companies most likely could have gotten away with their crimes. As the exposure to international markets increases, one can already assume that, in the absence of rigid regulations of corporate liabilities, companies are given the wrong incentives which lower their prudential standards and allow them to employ unconventional business methods; thus, frequently they become victims of their own actions. However, healthy regulations based on an ethical corporate culture could not only prevent such occurrences, but also serve as protective to companies and serve as a guarantee that corruption is regulated on both ends.

Another example that made international headlines centred around an International Centre for the Settlement of Investment Disputes (ICSID) case, Metal-Tech v. Uzbekistan, where Metal-Tech (claimant) argued that Uzbekistan (respondent) unlawfully expropriated its investments. The respondent used the fact that the claimant had successfully bribed Uzbek officials during its operations involving millions of dollars. Thus, the tribunal dismissed its jurisdiction over the case since the claimant’s business was established through corrupt acts. This case represents a paradox. Uzbek officials received bribes from a foreign investor reaching in excess of US$4 million, subsequently expropriated the investor’s business, and then used this against the investor in the international tribunal to dismiss the case, all whilst having no local regulations against corporate bribery. This approach was highly criticised as incentivising host states to perpetrate a corruption scheme in order to lay the foundation for the future invocation of corruption defences against investors operating within their territory (Torres-Fowler, 2012). Hence, not only will CCL for bribery locally punish acts of bribery, but most importantly it will provide companies with a roadmap for how to act and what kinds of procedures to establish in their structures to protect themselves from being framed through such schemes.

On a smaller scale and as a part of a qualitative study, we conducted semi-structured interviews with representatives of the retail (chain supermarkets) and construction industries. In doing so, we aimed to understand the risks in the private sector. These interviews revealed a recurring pattern of ‘kickbacks’ between the producers/dealers and the procurement office (warehouse) of chain supermarkets. In order to ensure their product has a spot on the shelves of a supermarket or to make their product more ‘visible’ to customers than competitors’ products, dealers and producers refer to different ‘award’ schemes or even ways of inducing employees to a physical branch of a supermarket for improper performance. Our informants described several versions of such schemes.

The most common approach was to offer money to the employees of chain supermarkets to ensure their products appeared on the shelf. In this instance, two outcomes were possible: either the employee accepts the offer, and they strike a deal to sell the producer’s product throughout the chain, or the employee refuses the bribe and reports this incident to management. In the latter scenario, big chains would involve their security department, and the reporting employee must recount the incident to the security office. However, the security department does not even record or take any measures regarding such incidents. There is no obligation imposed upon corporate bodies by a regulator to report incidents of bribery, or there are no compliance checks by the regulator. Big chains also have their own gifts and bribe policies despite the absence of such a requirement by law. But, according to employees, such policies are not enforced properly or do not contain specific sanctions. Each company has its own internal procedures for dealing with incidents of corruption. In fact, a company may choose not to deal with it at all, and the legal effect is the same because the regulator does not impose any duties, policies, or sanctions for non-compliance with such rules on companies.

Another practice involves giving valuable gifts to procurement department employees. Sometimes, the gift-giving process is disguised to look like a lottery wherein there are no losers. For example, a producer organises a gala night to which a company invites the representatives from all of the big chains. Then, each guest at the gala is given a numbered ticket. These tickets are drawn at random, and different valuable prizes are distributed. However, the organisers know in advance who receives which number and what kind of prize will be awarded to that number. Prizes range in value depending on the size of the chain. Our interviewees named gifts such as smartphones, watches, all-inclusive resort trips, and even cars. All of our interviewees opined that such gifts influence the decision-making process in favour of that particular producer.

Apart from procurement, the marketing departments of retail supermarkets also operate on contracts secured through bribery. According to one interviewee, the founder of a marketing agency that has been operating on the market for fifteen years, marketing contracts which include services such as the promotion of a company, branding, marketing strategies, and so on should be gained through tenders. But, this is often not the case in practice. Instead, tenders are symbolic and contracts are awarded to the company that first bribed the marketing department of the retail supermarket or company which offered more. Our interviewee also disclosed that, in order to renew a contract with the same company, during the operation of the current contract the head of the marketing department often receives gifts on various occasions, such as holidays or birthdays. Gifts vary, but usually include a gift basket featuring expensive imported goods. When asked about the price of an average basket, our interviewee mentioned a value of US$500. By comparison, the average income in Uzbekistan is around US$297 (UZStat, 2022). No legal regulation exists on the provision of tenders between private persons in Uzbekistan.

The above empirical examples allow us to argue that the absence of clear regulations regarding gift giving and receiving creates a potential for corrupt actions. Gifts are not regarded as bribes, and excess hospitality in any business area or public service is almost a norm.

Different schemes are used in the procurement sphere, but across schemes virtually no risk of being caught or reported or even being prosecuted exists. Despite this minimal risk of being caught, most dealers and producers would prefer not to pay an additional price to chain supermarkets and would rather avoid such costs, which are not only monetary, but also reputational. Foreign businesses, which are also increasing (including Asian Development Bank and European Bank for Reconstruction and Development–sponsored ventures) particularly in the retail sector, would also enter the market without hesitation and risk being scrutinised by their own authorities on matters related to bribing foreign officials.

We asked our interviewees their opinions regarding introducing CCL for the crime of bribery. All welcomed the idea, emphasising that it would in fact lighten business and create safe and fair conditions for businesses in which to grow and interact. They also emphasised that, in terms of punishment, monetary fines alone are insufficient; reputational punishment (e.g., publicity and making the company’s criminal records accessible to all via official databases) should also be introduced alongside fines.

Part III: The Relevancy of Corporate Criminal Liability in Uzbekistan

Uzbekistan is a relatively new economy which, following the collapse of the Soviet Union, for a long time maintained the values of the USSR related to state-owned major production sectors, over-regulation of the economy, and subjecting businesses to stringent bureaucratic conditions. Most experts pinpoint 2016 as the year when business liberalisation began, which resulted in the creation of favourable conditions for private business entities (World Bank, 2019). The key reforms launched by the governmental strategy included the liberalisation of the foreign currency exchange market and the unification of several exchange rates, tax and customs reforms, administrative reforms that also included financial decentralisation and the development of public–private partnership, and the privatisation of state-owned enterprises (SOEs) amongst others. Most bureaucratic steps for businesses to register and operate were eliminated. This resulted in a significant increase in the number of registered businesses. According to 2021 statistics, a total of 80,914 small and medium-sized enterprises (SMEs) registered in one year, a 122.3% increase compared with 2020. In 2016, for instance, the annual increase in the number of businesses was only 23,616.Footnote 4

Referring again to Edelman’s Trust Barometer, for the last three years, businesses were looked up to and perceived as more ethical, with individuals expecting them to step in to resolve societal problems when governments could not (Edelman, 2023). Legal instruments should encourage that as well. Reasonably, it would be dangerous to ignore the moving force behind businesses and their role in shaping current society and values. The United Nations Global Compact (UNGC)Footnote 5 encourages businesses to act ethically through its ten principles against corruption in all its forms, including extortion and bribery. Enforcing CCL, along with enacting individual criminal responsibility, has brought more stability to the business environment (OECD, 2020). CCL deters companies from placing their profits ahead of existing laws or even public safety, especially in cases related to responsibility for corporate manslaughter or breach of anti-trust laws. Even if companies consider fines a ‘cost to doing business’, the stigma of criminal liability can ‘do magic’ in reducing the incentives of committing a crime for the sake of business.

In line with this tendency, the Uzbek government has begun drafting new regulations requiring the private sector to introduce corruption prevention mechanisms. Several events were organised to discuss the importance of a zero-tolerance culture towards corruption in business and to enhance business integrity (UNODC, 2021). As a result, seven institutions from Uzbekistan recently became members of the UNGC, a global initiative established in 2000 aimed at guiding and teaching businesses to engage in more sustainable and responsible activities. Their membership includes some large retail companies, such as Anglesey Food LLC (Korzinka).

Another reason to bring CCL to Uzbekistan is that within most companies’ practices exist whereby companies are managed by ‘puppet’ directors and the real governing minds and wills of the companies are hidden from the eyes of the law. In the case of individual criminal liability, the director and usually the accountant of a company are held liable even though they might be innocent in terms of specific conduct (Zamon Yangiliklar, 2022). Thus, CCL would ‘reach’ the pockets of the real culprits in Uzbekistan.

All of these problems stem from cultural ethics, which are also reflected in doing business. That is, the attempt to introduce criminal liability to corporate bodies in Uzbekistan should first aim to enable compliance with appropriate corporate culture.

Introducing more comprehensive legislation against bribery offences will also likely increase the number of foreign investments. At least thirty-seven countries (including the US, the UK, Russia, Argentina, Austria, Australia, Denmark, Sweden, and Turkey amongst others) are members of the OECD convention on bribing foreign public officials which criminalises this type of bribery. Thus, regardless of the fact that a business contract was signed and executed on foreign soil, the company can be charged in the country in which it is headquartered with the offence of bribery. Consequently, companies from jurisdictions which signed on to the convention refrain from doing business in countries with a high level of bribery and corruption since they will face additional scrutiny of their accounting books from their authorities. In cases resulting in charges, this will lead to a rather large body of material and reputational damage, the effects of which can last for years.

Why Administrative Liability Is Insufficient

Currently, companies in Uzbekistan can be liable for public wrongdoing only through administrative liability (so called quasi-criminal liability). However, is administrative justice such a good idea? To answer this question, we should analyse the purpose of administrative liability and only then reach a conclusion regarding whether it serves the purpose for which it was initially designed.

In Uzbekistan, a separate system of administrative justice was established through the 1995 ‘Code on Administrative Liability’ (currently under review) and the 2018 ‘Code on Administrative Proceedings’. Under this legal framework, administrative punishment, unlike the criminal code, is not perceived as severe or serving to deter further misconduct. On the contrary, the sanctions prescribed in the Code are rather inadequate for addressing the misconduct of companies. There is a growing tendency internationally towards developing more stringent legislation around CCL. Even in countries with administrative liability (like Germany or Italy), the intention to move towards a criminal liability model is growing (Lauterwein & Steinert, 2023).

In procedures addressing administrative liability, fewer possibilities allow for investigations of corporate misconduct since the necessary tools exist within criminal procedural law. The rather short statute of limitations (the period when corporations may be held liable) and investigation period alongside the limited avenues for international legal cooperation represent shortcomings of the administrative model.

Moreover, the administrative liability of natural persons relies on a construction in which an individual who committed a certain offence after being administratively liable for the same offence within a one-year period may be criminal liable and tried according to the rules within the criminal law (Criminal Code 1994). However, for companies, there is no such rule. That is, there is no measurement for the severity of their conduct such that everything falls under the umbrella of administrative liability, regardless of the number of repeated violations. This shortcoming acts as an anti-deterrent for a company to comply with regulations.

Administrative liability does not create a record. Thus, following the payment of a fine, future investors, ordinary people, or anyone else cannot access information related to how many times a company has violated a law since such records are not kept. That is, an administrative punishment does not create any stigma akin to a criminal record which sticks with a company for some time. Furthermore, a criminal record could actually create a ‘biting’ punishment, not merely a ‘barking’ punishment.

Which Mode of Corporate Criminal Liability Could Work in the Context of Uzbekistan?

As discussed above, there are three main mechanisms via which to attribute criminal behaviour to a corporate body: the identification principle (where it is necessary to determine the ‘mental state’ of a company), vicarious liability (an employee’s actions lead to an employer’s criminal liability), and a breach of statutory duty.

We established that the identification principle works well when applied to SMEs since it relies on finding a person considered the governing will and mind of a company, which is not easy to accomplish in large companies with multiple management levels. This principle has a rather high chance of working in the current market of Uzbekistan, which primarily consists of SMEs. However, adopting a doctrine of identification knowing that in future, when some of these SMEs become large corporations, enforcement will be problematic is not far-sighted.

By contrast, vicarious liability may lead to unfair decisions and create over-deterrence. Specifically, in vicarious liability, attempts by a company to prevent a crime are not taken into account. Moreover, neither of the abovementioned modes of liability influences corporate culture, which is the actual basis of the problem in Uzbekistan. A common phrase can be heard amongst the people: ‘Being corrupt or engaging in bribery is already part of the culture and people’s mindset.’ This perception must be taken as the basis upon which a legislator acts.

However, a breach of statutory duty through the ‘failure to prevent’ formula might address all of the abovementioned challenges. This formula was successfully used in the UK’s Bribery Act, 2010. In fact, after introducing the new act on CCL to include bribery, the UK, before ranked seventeenth in Transparency International’s Corruption Perception Index in 2009 (Transparency International, 2009), climbed to eleventh (Transparency International, 2021) and is continuing to improve its ranking.

In the UK’s Bribery Act, 2010, a British legislator pushed corporate culture as the primary feature needing regulation. In other words, a company can be criminally liable for a failure to prevent bribery if one of its employees commits bribery on behalf of the company if certain adequate procedures are not in place. By adequate procedures, guidance within the Bribery Act establishes six principles that a corporate entity should demonstrate to defend itself from being charged for bribery committed on its behalf: (1) proportionate procedures, (2) top-level commitment, (3) risk assessment, (4) due diligence, (5) communication (including training), and (6) monitoring and review (UK Ministry of Justice, 2012). Every corporation is legally obligated to demonstrate that the relevant principles are in place in its activities. Moreover, the Act contains provisions about gift giving and hospitality. In other words, the crime of bribery is regulated in a rather detailed and comprehensive manner in the UK Act and covers as many areas as possible with detailed definitions of terms.

When a battle ensues related to a crime involving bribery, which is likened to a ‘cancer’, a tool like radiation should exist with which to combat it leaving no cell within the body untreated. It might sound like an aggressive and radical measure; however, in a system where corruption has spread its roots rather deeply and affecting every sphere, like in Uzbekistan, there is no use from half-measures or rather general regulations. Instead, a ‘catch-it-all’ measure appears to serve such a purpose. Hence, either the new Criminal Code or a separate act dedicated only to the crime of bribery should contain provisions with a more detailed and comprehensive regulation of bribery, including CCL, gift giving, and hospitality limits.

What Kinds of Challenges Might Arise?

It is worth mentioning that in Uzbek criminal law each crime consists of four elements that must be proven in the eyes of the law: (1) the object of the crime, against whom or what the crime was committed, including against a human life, dignity, health, or property amongst others; (2) objective side—or everything related to the process of committing the crime, similar to actus reus; (3) subject—the person who allegedly committed the crime; and, (4) lastly, the subjective side, which relates to the mental element of the crime, such as the intention or knowledge of it as in mens rea.

The primary difficulty in introducing the legal mechanism for CCL in Uzbekistan might arise from the last element. That is, how does one determine the mental component of an abstract entity with no mind of its own. It would be more practical to introduce CCL through the ‘failure to prevent’ formula described above. The identification principle would not be effective, since businesses will quickly outgrow it, and the ‘failure to prevent’ formula requires similar mechanisms of enforcement as those used to identify basic negligence, where due diligence is central. Uzbekistan already has these mechanisms in place, whereby building upon the existing platform of negligence would be much easier.

One concern was raised by some of our interviewees (from the retail sector). Specifically, the police and investigators are not sufficiently qualified to enforce such a novel regulation. However, this problem can be resolved by bestowing the Anti-Corruption Agency with the authority to review company compliance with anti-corruption norms, which would include norms based on maintaining a high ethos and corporate culture. In cases involving non-compliance, the agency could transfer the case to the relevant authority for investigation and proceed to court.

Conclusions

To conclude, as Uzbekistan undergoes the transition to a market economy and expands business activities through privatisation, it is essential to prioritise integrity and transparency within the market. Whilst the government encourages and protects business activities, it is crucial to address corruption in both the public and private sectors. Despite public corruption already being well-regulated and constantly reviewed, private sector corruption has received less attention.

Introducing corporate criminal liability for bribery and focusing on enhancing corporate culture can represent a ground-breaking tool for the Uzbek criminal justice system. This approach aims to prevent bribery within companies and foster fair market practices that safeguard public interests. However, it is important to acknowledge the challenges associated with implementing such advanced reforms.

Furthermore, it is crucial to recognise that the cultural roots of corruption in Uzbek society must be considered when combating corruption. Cultural factors play a central role and need to be taken into account alongside legal and institutional measures.

By addressing corruption and promoting a culture of integrity, Uzbekistan can create a level playing field for all market participants, attract investments, and build a robust and transparent business environment. It is essential for policymakers and stakeholders to collaborate effectively to ensure the success of these anti-corruption efforts and contribute to the long-term sustainable development of the country.