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Exclusion and rehabilitation: how multilateral development banks address corrupt behaviour

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Abstract

This article considers administrative sanctions used by multilateral development banks in response to corruption in development projects. The paper covers the backgrounds, purposes, and current practices of these similar but non-identical systems, and searches for lessons to be learned as the MDBs continue to tackle the problem of corruption through sanctions of private companies and individuals. A particular focus is the institutions’ balanced approach to risk management that uses both exclusion and tools of rehabilitation with respect to culpable companies and individuals.

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Notes

  1. For purposes of this paper, which focuses on administrative sanctions, the term “MDBs” encompasses the institutional parties to the 2010 Cross Debarment Agreement. World Bank Group, Inter-American Development Bank Group, African Development Bank Group, Asian Development Bank, and the European Bank for Reconstruction and Development, http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35154738.

  2. This list includes the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group, and the World Bank Group.

  3. See, African Development Bank, African Development Bank Sanctions Procedures Of The African Development Bank Group, (Nov. 18, 2014) ("AFDB Sanctions Procedures"), https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/AfDB_Sanctions_Procedures _ -_November_2014.pdf; European Bank for Reconstruction and Development, European Bank for Reconstruction and Development Enforcement Policy and Procedures, (Oct. 4, 2017 ("EBRD Sanctions Procedures")), http://www.ebrd.com/news/publications.html. (In fact, MDB sanctions systems target much more than corruption. With some variation among institutions, sanctionable prohibited practices include fraud in procurement or contract execution, collusion among bidders, obstruction of investigations, coercion of third parties, as well as misuse of institutional resources and assets.)

  4. See, European Bank for Reconstruction and Development, Note on EBRD’s Enforcement Processes, including Settlement Agreements (Jan. 2018), http://www.ebrd.com/documents/occo/enforcement-processes-including-settlement-agreements.pdf.

  5. See, World Bank, The World Bank Group’s Sanctions System: Addressing Fraud and Corruption Through a Two-Tiered Administrative Process, http://siteresources.worldbank.org/EXTOFFEVASUS/Resources/Two-Tier-Sanctions-brochure-Final.pdf.

  6. See, Inter-American Development Bank, IDB Transparency: Sanctions Officer, https://www.iadb.org/en/topics/transparency/the-sanctions-officer%2C8630.html.

  7. See, World Bank Sanctions Procedures, Procedure: Sanctions Proceedings and Settlements in Bank Financed Projects § IIIA (Jun. 28, 2016), ("World Bank Sanctions Procedures") http://siteresources.worldbank.org/EXTOFFEVASUS/Resources/3601045-1377105390925/Procedure_Bank_Procedure_Sanctions_Proceedings_and_Settlements_in_Bank_Financed_Projects(6.28.2016).pdf. (In World Bank (IBRD/IDA) sanctions cases, this applies to all cases where the first-tier officer’s recommended sanction exceeds debarment of six months’ duration. In African Development Bank Cases, the temporary suspension must be requested by the investigative unit (the Integrity and Anti-Corruption Department). AFDB Sanctions Procedures supra note 3.)

  8. See, EBRD Sanctions Procedures § IIIA (Oct. 4, 2017), http://www.ebrd.com/documents/occo/enforcement-policy-and-procedures-2017.pdf.; AFDB Sanctions Procedures.

  9. See, AFDB Sanctions Procedures, supra note 3.

  10. See, Vinay Bhargava, Curing the Cancer of Corruption, in Global Issues for Global Citizens: An Introduction to Key Development Challenges (2006).

  11. See, World Bank, World Bank Group Archives: James David Wolfensohn, http://www.worldbank.org/en/about/archives/history/past-presidents/james-david-wolfensohn.

  12. Asian Development Bank, Uniform Framework for Preventing and Combating Fraud and Corruption (Sept. 2006), https://www.adb.org/publications/uniform-framework-preventing-and-combating-fraud-and-corruption.

  13. Asian Development Bank, General Principles and Guidelines for Sanctions, http://lnadbg4.adb.org/oai001p.nsf/0/CE3A1AB934F345F048257ACC002D8448/$FILE/Harmonized%20Sanctioning%20Guidelines.pdf. (joined by the signatories to the Cross-Debarment Agreement as well as the European Investment Bank (EIB).

  14. Inter-American Development Bank, Agreement for Mutual Enforcement of Debarment Decisions (2010), http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35154738.

  15. Id., at 3. (Specifically, provisions in the Cross-Debarment Agreement apply to sanctions of debarment for certain types of misconduct where the duration of exclusion exceeds one year).

  16. See, Nadine Tushe, How to Prevent a Suspension and Debarment Disaster Before it Happens, FCPA Blog (Feb. 1.,2016), http://www.fcpablog.com/blog/2016/2/1/how-to-prevent-a-suspension-and-debarment-disaster-before-it.html.

  17. World Bank, World Bank Group Sanctioning Guidelines 1 (2011), http://siteresources.worldbank.org/EXTOFFEVASUS/Resources/WorldBankSanctioningGuidelines.pdf.

  18. See, World Bank, Sanctions Board Decision No. 49, ¶ 43, (2012), http://siteresources.worldbank.org/EXTOFFEVASUS/Resources/WebsiteDecision49.pdf. (observing that “the imposition of sanctions including debarment is a protective and deterrent measure within the explicit scope and purpose of the sanctions system.”)

  19. European Bank for Reconstruction and Development, Note on EBRD’s Enforcement Processes, Including Settlement Agreements (Jan. 2018), http://www.ebrd.com/documents/occo/enforcement-processes-including-settlement-agreements.pdf.

  20. General Principles and Guidelines for Sanctions adopted by the MDBs (2006); World Bank Group Sanctioning Guidelines (2011); IFC Sanctions Procedures (2012); MIGA Sanctions Procedures (2013); World Bank Private Sector Sanctions Procedures (2013); (World Bank (IRBD/IDA) Sanctions Procedures (2016).

  21. See, AFDB Sanctions Procedures, supra note 3.

  22. See, The World Bank Office of Suspension & Debarment, Report on Functions, Data and Lessons Learned 16 (2007-2015) (2nd ed.), http://siteresources.worldbank.org/EXTOFFEVASUS/Resources/OSD Report.pdf; World Bank, Integrity Vice Presidency: Annual Update 30 (2017), http://www.worldbank.org/en/about/ unit/integrity-vice-presidency/publications.

  23. See, World Bank Sanctions Procedures, § III.A, sub-paragraph 9.03.

  24. See, African Development Bank Group, African Development Bank Group: Overview of the Sanctions System, https://www.afdb.org/en/topics-and-sectors/topics/sanctions-system/.

  25. Leroy & Fariello, The World Bank Group’s Sanctions Process and Its Recent Reforms 23 (2012), http://siteresources.worldbank.org/INTLAWJUSTICE/Resources/SanctionsProcess.pdf.

  26. See, United States Department of Justice, United States’ Foreign Corrupt Practices Act 15 U.S.C. §§ 78dd-1, et seq. (1977).

  27. See, Inter-American Development Bank, IDB Sanctions System: Overview, https://www.iadb.org/en/about-us/idb-sanctions-system%2C8619.html.

  28. For instance, the internal procedures and guidance may be assessed and revised by the stakeholder institutions in a less time-consuming manner than the equivalent provisions in federal law.

  29. Dick Thornburgh, et. al., Report Concerning the Debarment Processes of the World Bank, (Aug., 2002), http://siteresources.worldbank.org/PROCUREMENT/Resources/thornburghreport.pdf.

  30. Id., at p. 86.

  31. World Bank Sanctions Procedures, § III.A, paragraph 8; See also, Ivy Mungcal, World Bank Opens Up Sanctions Board’s Decision-Making Process, Devex, (Dec. 12, 2011), https://www.devex.com/news/world-bank-opens-up-sanctions-board-s-decision-making-process-76949.

  32. World Bank Sanctions Procedures, § III.A, sub-paragraph 10.01(b).

  33. See, EBRD Integrity & Compliance Portal, http://www.ebrd.com/integrity-and-compliance.html.

  34. See, Asian Development Bank, ADB Anti-corruption & Integrity: Case Summaries, https://www.adb.org/site/integrity/case-summaries.

  35. European Bank for Reconstruction and Development, EBRD’s List of Ineligible Entities Allows for A Cross-Institutional Comparison, http://www.ebrd.com/ineligible-entities.html.

  36. African Development Bank Group, Debarment and Sanction Procedures, https://www.afdb.org/en/projects-and-operations/procurement/debarment-and-sanctions-procedures/.

  37. Inter-American Development Bank (IADB), Sanctions Procedures of the Inter-American Development Bank (Jun. 9, 2015) § 8.2, http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=39676437.

  38. Sanctioning Guidelines, supra note 18; African Development Bank Group, Debarment and Sanction Procedures, https://www.afdb.org/en/projects-and-operations/procurement/debarment-and-sanctions-procedures/.

  39. World Bank Sanctions Procedures § III.A, sub-paragraph 9.01.

  40. Sanctions Board Decision No. 54, Sanctions Case No. 164. WB Sanctions Board, (Oct. 16, 2012); See, World Bank Debars Nihon Kohden Europe for Three Years, World Bank Press Releases, (Apr. 13, 2016), http://www.worldbank.org/en/news/press-release/2016/04/13/world-bank-nihon-kohden-europe-three-years.

  41. AFDB Sanctions Procedures, supra note 3; Sanctions Procedures of the Inter-American Development Bank (Jun. 9, 2015) §. 8.2, http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=39676437.

  42. African Development Bank, AFDB Interview with Anna Bossman, Director of IACD, on Settlement Agreements, (May 28, 2014), https://www.afdb.org/en/news-and-events/interview-with-anna-bossman-director-of-iacd-on-settlement-agreements-13242/; See also, African Development Bank, AFDB Establishes Africa Integrity Fund, (Nov. 10, 2016), https://www.afdb.org/en/news-and-events/afdb-establishes-africa-integrity-fund-16359/.; African Development Bank, Integrity in Development Projects: The African Development Bank and GERMS Consulting Conclude a Settlement Agreement and Resolve Fraud Allegations (Dec 19, 2017), https://www.afdb.org/en/news-and-events/integrity-in-development-projects-the-african-development-bank-and-germs-consulting-conclude-a-settlement-agreement-and-resolve-fraud-allegations-17701/; African Development Bank, Integrity in Development: AfDB and Hitachi, Ltd. conclude settlement agreement (Dec. 2, 2015) https://www.afdb.org/en/news-and-events/integrity-in-development-afdb-and-hitachi-ltd-conclude-settlement-agreement-15118/.

  43. See, Pascale Helene Dubois, Domestic and International Administrative Tools to Combat Fraud & Corruption: A Comparison of US Suspension and Debarment with the World Bank's Sanctions System, 12 U. Chi. LEGAL F. 233, (noting that settlements may be reached at any point during sanctions proceedings).

  44. See, Integrity in Development: AfDB and Hitachi, Ltd. Conclude Settlement Agreement, AFDB Press Releases, (Dec. 2, 2015), https://www.afdb.org/en/news-and-events/integrity-in-development-afdb-and-hitachi-ltd-conclude-settlement-agreement-15118/.

  45. See, ADB, supra note 34.

  46. AFDB, supra note 3.

  47. IADB, supra note 37.

  48. See, World Bank Sanctions Procedures §. III.A.

  49. Asian Development Bank, Uniform Framework for Preventing and Combating Fraud and Corruption, (Sept. 2006), https://www.adb.org/publications/uniform-framework-preventing-and-combating-fraud-and-corruption.

  50. General Principles, supra note 13.

  51. MDBs, supra note 1.

Acknowledgements

The author would like to thank Gerry Ferguson, Distinguished Professor at the University of Victoria Faculty of Law and a member of the United Nations Office on Drugs and Crime Experts Group on Anti-Corruption Academic Materials, for his valuable input and encouragement, and the editorial staff at the Osgoode Hall Law School of York University and the Jindal Global Law Review for their work and contributions. The observations, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the World Bank Group, its Board of Directors, or the governments they represent.

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  1. Sanctions Board Secretariat, World Bank Group, Washington, DC, USA

    Eugenia A. Pyntikova

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Correspondence to Eugenia A. Pyntikova.

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Pyntikova, E.A. Exclusion and rehabilitation: how multilateral development banks address corrupt behaviour. Jindal Global Law Review 9, 43–55 (2018). https://doi.org/10.1007/s41020-018-0064-4

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