The frameworks used in many Western countries to provide compensation to overseas victims of economic crime have been criticised as insufficient. Global Insight assesses what can be done.

In early 2020, multinational aerospace corporation, Airbus, agreed to pay €3.6bn to anti-graft agencies in France, the UK and the US to settle a string of bribery offences committed in 20 countries over the course of several years. This remains the largest global foreign bribery settlement on record. The UK’s share, settled in a deferred prosecution agreement (DPA), amounted to €991m. Lisa Osofsky, Director of the UK’s Serious Fraud Office (SFO) at the time, said Airbus had ‘admitted its culpability [and] cleaned its house’.

Despite having assisted the SFO in the investigation into bribes paid by Airbus employees to executives at the country’s state-owned airline, Garuda, Indonesia was excluded from the settlement. This exclusion left Jakarta ‘very unhappy’ and ‘questioning whether Indonesia and the UK really do have a good relationship’, said Cahyo Muzhar, Director General of Legal Administrative Affairs in Indonesia’s Ministry of Law and Human Rights, in early 2023. In autumn 2023, Indonesia reportedly vowed to sue the UK for a share of the settlement.

The SFO couldn’t speak to Indonesia’s comments directly as they relate to an ongoing case, but in relation to similar issues discussed in a podcast produced by the IBA Anti-Corruption Committee in early 2024 and entitled Compensation for overseas victims of corruption (the ‘ACC Podcast’), a spokesperson for the SFO told Global Insight that ‘seeking justice for victims is at the heart of what we do and, subject to UK law, we will always compensate victims of corruption, whether they are based here or abroad’. The Indonesian government didn’t respond to Global Insight’s request for comment.

This case, though significant in isolation, is symptomatic of a wider sense of dissatisfaction with approaches taken by Western countries to the compensation for overseas victims of economic crime. Helen Taylor, Senior Legal Researcher at Spotlight on Corruption, a non-governmental organisation working to shine a light on the UK’s role in corruption at home and abroad, says ‘what we've really seen, in the last couple of years particularly, is increasing discomfort and a recognition that the UK Treasury bringing in big fines from UK companies engaging in corruption abroad while communities in affected countries are left empty handed is really not a good look’. The UK Treasury hadn’t responded to Global Insight’s request for comment at the time of going to press.

This isn’t only an issue in the UK. A 2021 study by the UN Office on Drugs and Crime (UNODC) found less than one per cent of non-trial settlements concluded in UN Convention against Corruption (UNCAC) enforcement countries had been returned to affected countries. Non-trial resolutions, including DPAs, are becoming the global norm for foreign bribery cases, with over 80 per cent being settled in this way. However, the frameworks for ensuring that victims, including states, communities and/or individuals, are properly compensated are often insufficient.

Avenues for compensation

‘This is an issue that is not really being fully addressed in the existing legal instruments. Compensation of victims is not mentioned at all in the OECD [Organisation for Economic Co-operation and Development] Anti-Bribery Convention; there are a few mentions in the UNCAC, but the real focus of UNCAC is on asset recovery’, says Nicola Bonucci, Member of the IBA Anti-Corruption Committee Advisory Board and former Director of Legal Affairs at the OECD.

Bonucci doesn’t believe the OECD Convention will be amended to include a provision for victim compensation, or indeed that changes will be made in any respect, ‘firstly, because it is always a very cumbersome and long process’, he says, and secondly, because in this ‘very, very tense geopolitical context’ the threshold for making an amendment is even higher.

Although the OECD Anti-Bribery Convention has been criticised for lacking any provision to address the compensation of victims, the OECD Working Group on Bribery did adopt an ambitious recommendation in 2021 that complements the Convention and includes guidance on non-trial resolutions, in addition to encouraging compensation for whistleblowers where appropriate.

Still, a fundamental issue with these international agreements is that the UN and OECD lack powers of enforcement. ‘I am an absolute defender and supporter of international agreements’, says Cristián Francos, Co-Chair of the IBA Business Crime Committee and a partner at Lewis Baach Kaufmann Middlemiss, based in the US, ‘but the problem with them is that you don’t have an organism that can enforce those agreements, so you depend on countries to incorporate those agreements and act in accord with them’. This issue was further highlighted in a 2022 OECD report, which observed that most countries continued to fall short of their obligations and only two countries – Switzerland and the US – could, at that time, be considered ‘active enforcers’.

An upcoming EU directive on combatting corruption, expected later in 2024, could potentially go some way to addressing this issue. The directive will seek to harmonise anti-corruption legislation across all EU Member States and make it compulsory to criminalise offences outlined in the UNCAC within EU law.

But there’s a question about domestic legislation and whether it can offer an avenue through which compensation for overseas victims of corruption can be ensured. Currently, the situation is disparate and varied, though developments to address this are under way.

The Parquet National Financier (PNF), France’s financial prosecutor, issued updated guidance in early 2023 on its approach to offering and negotiating convention judiciaire d’intérêt public (CJIPs, the French version of a DPA). The updated guidance outlines that, in deciding whether to offer a CJIP, the PNF will consider the extent to which a company has sought to identify the victims. Additionally, the compensation of victims will now be used as a significant mitigating factor in the calculation of a fine.

The PNF’s new guidance intends to incentivise companies to identify and compensate victims, but it doesn’t ensure compensation will be given. Transparency International France, in a report published in June, expressed concern over the provision, highlighting that ‘the inclusion of prior compensation to victims as a mitigating factor in the amount of the fine is overall puzzling’. The organisation added in the report that, in the event that victims haven’t been previously compensated, the compensation is added to the amount of the public interest fine, which exists separately to it. ‘On the other hand, when the company has previously compensated the victims, this parameter is taken into account as a reducing factor in the public interest fine’, add Transparency International France, ‘as an apparent reward for the company, the amount of its fine can thus be reduced by up to 40%’.

A spokesperson for the PNF told Global Insight that ‘the objective of the reduction factor of the fine provided for in the PNF guidelines, linked to the prior compensation of victims, is to promote the compensation of victims of corruption and to ensure that their situation is fully taken into account. It is difficult to see how this would constitute a favourable measure for the benefit of the company responsible for the corruption.’

Regarding compensation within the UK criminal justice system, a spokesperson for the SFO explains that UK law requires an overseas country to meet three criteria to be eligible for compensation: firstly, that the victims are identifiable; secondly, that their loss must result directly from the offence; and lastly, that their loss can be quantified. The SFO spokesperson highlighted that in two recent cases, the SFO obtained and returned £200,000 in compensation to Nigeria and $7m in compensation to the Tanzanian central bank respectively. In both instances all three criteria for compensation were met, as there were identifiable and quantifiable losses to the states involved.

A criticism of this approach, however, has been that the bar for achieving compensation orders is too high. ‘Current case law holds that compensation is intended only for clear and simple cases, where the loss to victims is straightforward to assess. However, economic crime and financial crime, including corruption, is, of course, inherently complex’, said Lord Edward Garnier KC, a barrister and former Solicitor General for England and Wales, who was speaking on the ACC Podcast. Lord Garnier highlights two of the principal areas regarding overseas compensation that he sees as requiring attention and reform: the identification of victims and the calculation of damages to be awarded in compensation.

The identification of victims

Victim identification is a complex issue. Corruption often harms multiple groups or entities, including the state, individuals, institutions, communities and societies more broadly. This harm can be direct – for example, injury – or, as is often the case due to the inherently complex nature of corruption cases, more generalised. Consequently, proving harm, causation and proximity between the defendant’s actions and the harm suffered by the claimants can be challenging.

The problem of identifying victims is compounded by the fact that in some jurisdictions, it’s only states that can be recognised as victims. For example, in Italy, the law specifically provides that corruption is a crime against the public administration – as a result, except in cases of extortion, only the state can be granted victim status.

Other jurisdictions, such as the US, consider the states of victim countries to be potential co-conspirators in the corruption. This results in a hesitancy to provide compensation. ‘You may recover billions of dollars, but in order to justly compensate victims, you may run into the problem of, well, if I return this to the state, am I returning this to the main corrupt actor?’ says Francos.

In contrast, Sam Tate, a partner at RPC in London and an expert in financial crime proceedings, argued in the ACC Podcast that in the British context, the most appropriate candidate for being approached as a victim is the state. ‘Our government will have relationships with states, and it often has memorandums of understanding on how to return funds to them’, he said.

Yet, there’s recent precedent to suggest that engaging with the state as victim is not always so straightforward within the current UK compensation frameworks. In 2022 mining giant Glencore pleaded guilty to paying $29m in bribes to secure beneficial oil deals in a number of African countries, with company Chairman Kalidas Madhavpeddi stating that ‘the Company has taken significant action towards implementing a world-class Ethics and Compliance Programme’ following the case.

A week prior to Glencore’s sentencing, Nigeria applied for a court compensation order, claiming victim status, as two of the bribery counts in the case involved Nigeria. The Crown Court in this matter rejected the application and said the Nigerian government had no legal standing to seek compensation and only the prosecution or defence could ask for such an order, neither of which did so. In reaching this conclusion, the Court fell back on existing case law to declare that compensation orders could only be given in ‘clear and simple’ cases.

Speaking to the situation in the UK, Taylor says that ‘our practical experience observing the major corruption cases by the SFO and NCA [National Crime Agency] is that victims aren't heard in the courtroom. They aren't represented […] You have to rely on the prosecutor to advance any claim on behalf of victims or to represent victims’.

In response to the ACC Podcast in the spring, the SFO spokesperson highlighted two recent cases, in which it obtained and returned £200,000 in compensation to Nigeria and $7m in compensation to the Tanzanian Central Bank, respectively. In terms of proceeds of crime, the spokesperson said that the SFO’s Proceeds of Crime Division confiscated over £95 million in proceeds of crime in 2022-23 – more than every other UK authority combined. Global Insight contacted the NCA, but hadn’t received a response at the time of publication.

The importance of giving victims a human face and allowing them a stake in the enforcement process has received attention in recent years. Not only does involvement allow victims to advocate for their losses and shed light on less publicised harms of corruption, making the human impact more tangible for the perpetrators, but it places corruption on a level with the most serious crimes – where victims have extensive rights with regards to representation.

Several international organisations have advocated for the right of the victim to be included in pre-trial investigations and criminal proceedings in corruption cases. In a 2023 report (the ‘Victims Report’), the Stolen Asset Recovery Initiative – involving the World Bank and the UNODC – recommended that legislators should consider granting victims the right to participate in the pre-trial investigation; to contribute evidence and present it at trial; to request the prosecution to gather such evidence and gain access to it; and to pursue separate and independent lines of inquiry.

The practical enforcement of the involvement of victims of corruption in pre-trial investigation and criminal proceedings is complicated. In the first instance, the lack of publicity surrounding corruption investigations leaves victims reliant on information provided by law enforcement agencies and creates an environment in which it’s difficult for the victim to identify themselves as such. This issue is exacerbated in cross-border cases.

Drawing a distinction between victim involvement in pre-trial investigation and criminal proceedings, Bonucci highlights some issues that might arise in the former. ‘Let’s assume that you have a situation in which the victim is, for example, a local community. You have issues of language; who represents the local community; what kind of capacity building and assistance [is required], who should be doing it?’ he says. As a consequence of the complicated reality of enforcement, Bonucci suggests that ‘maybe the right positioning is the moment in which the case is concluded at the level of the investigating authority and the matter is brought to trial or to settlement’.

‘It's not always going to be […] easy to identify the victim’, said Lord Garnier in the ACC Podcast. ‘It's not always going to be easy to identify the quantum of the compensation. But these are not insoluble problems. They just require a bit of effort’.

The ‘quantum of the compensation’

Feelings of unfairness relating to the allocation of foreign bribery settlements can in some cases lead to a breakdown in international anti-corruption partnerships. Fundamentally, however, the impact of corrupt behaviour on – often indirect – victims on the ground shouldn’t be forgotten.

Increasingly, there’s a dialogue between human rights groups and anti-corruption organisations that recognises the interrelated nature of the two issues. ‘The issue of victim compensation really brings to the fore that many of the harms caused by corruption are actually human rights harms’, says Taylor. ‘It's a lens through which we might assess and quantify that harm. If [the case is centred] around a corrupt procurement deal for example, the quality of services provided in healthcare or infrastructure might not be up to scratch. So, there could be quite tangible social damage that we can measure in human rights terms’.

In 2022, the UN Human Rights Council (OHCHR) conducted an intersessional seminar ‘on the negative impact on human rights of the non-repatriation of funds of illicit origin to the countries of origin’. During the seminar, OHCHR officials explicitly linked acts of corruption to the undermining of Africa’s prospects for achieving the UN Sustainable Development Goals. Although promising progress was identified with regards to the achievement of the goals of the UNCAC, Shervin Majlessi, UNODC Chief of Section, Corruption and Economic Crime Branch, said that ‘returns needed to be increased in comparison to the estimated amount taken out of countries annually’. Majlessi also drew attention to the ‘ongoing discussion on the need for transparency in the recovery and return of the proceeds of corruption and the use of returned funds’.

Compensation, then, is needed to redress the many harms of corruption, while transparency is required to ensure funds are used appropriately. But – assuming a victim is identified – the ‘quantum of compensation’ is measured differently between jurisdictions.

In UK DPAs, compensation for an identifiable victim is considered dependent on the loss being quantifiable. The SFO, in explaining what’s meant by ‘quantifiable’, gives a few examples. ‘In bribery cases, this could be the cost by which a contract has been inflated to take into account a bribe payment. If defective goods were sold on a corrupt contract, this could also be the value of an adequate replacement.’ Critics argue, however, that this approach may fall short as the harms of corruption reach much further.

In France, the amount of victim compensation included in a CJIP is calculated independently to the cost of the fine. A report published by Transparency International France in June identified an issue of transparency where the compensation is calculated. ‘Of the 24 CJIPs that compensated victims (and, a fortioti, the 37 that identified victims), only 10 explicitly state the amount of compensation sought or how this amount was calculated’, said the report. ‘This lack of clarity makes it difficult for victims to understand the CJIP’s parameters and its predictability as a legal tool’.

Reparation funds are also increasingly being considered and implemented, with countries such as Australia, Canada and the US establishing general victims’ funds financed by penalties and fines from criminal offenders. In the US, however, such funds don’t cover victims of bribery, whether domestic or foreign.

Additionally, Taylor argues, although it’s right to ensure the perpetrators are punished for their transgressions and compensation is provided to victims, we can’t solely rely on large fines to act as deterrents. It’s important to acknowledge that a dichotomous power dynamic exists, not only between developed enforcer countries in the Global North and the jurisdictions in which the bribes are paid – most often located in developing regions of the Global South – but between the victim country and the companies engaging in the corrupt behaviour.

For companies turning over immense sums, fines for corruption can be written off simply as the cost of doing business. ‘It has to be about individual accountability, it’s got to be about who was actually behind the corporate bribery, who were the individuals calling the shots, signing off on the deal?’ says Taylor.

Threats to anti-corruption action

Legislative change to tackle compensation for victims after the fact is only one part of the puzzle. Effort should also be made, within both government entities and private companies, to dissuade corruption at the source and create a culture of zero-tolerance. Western governments can help maintain the legitimacy of anti-corruption regimes internationally by taking proactive steps to tackle corruption closer to home.

Transparency International’s 2023 Corruption Perceptions Index (CPI) revealed the average score given to countries in Western Europe and the EU dropped for the first time in almost a decade, to 65 out of 100. The CPI reveals anti-corruption efforts have stagnated or declined in more than three-quarters of the countries in the region. In particular, Iceland, the Netherlands, Sweden and the UK recorded their lowest-ever scores – 72, 79, 82 and 71 respectively. ‘If the UK wants to champion anti-corruption and be a leader on the global stage, it has to clean up its act at home’, says Taylor.

The Stolen Asset Recovery Initiative’s Victims Report makes further recommendations for measures beyond legislative and policy frameworks to tackle corruption. ‘When comparing the dearth of cases with the internationally existing substantive and procedural laws, it appears that in some cases, the legal frameworks are not necessarily too restrictive. Rather, the avenues are not exploited due to insufficient precedent and knowledge or financial capacities’, reads the report. ‘Thus, countries should consider taking measures to enhance access to data, continued research, and the active involvement of civil society, academia, and victims of corruption in efforts towards recovering corruption damages.’

While the situation relating to the compensation of overseas victims of corruption is undoubtedly complex, given the importance of, for example, international anti-corruption partnerships and the need for just compensation of victims, the issue must be addressed effectively and promptly. ‘The issue will not go away’, says Bonucci, ‘I don't think it's an easy issue to tackle, but I'm not sure that putting [our] heads in the sand is a sustainable attitude’.

Isabelle Walker is the IBA Junior Content Editor and can be contacted at Isabelle.walker@int-bar.org

Image credit: Adobe stock