CAIRN-INT.INFO : International Edition

1Driven by concerns about competitiveness, multinationals have been hostile toward any regulation decided by a single country; yet they are also blocking international treaties that would increase their responsibilities. The result is a widespread lack of accountability, a problem that affects both Europe and its member states.

2Pope Francis has written: “While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control.” [1] The solution to these problems will not come from economic actors. The challenge for states is to make ever more powerful transnational corporations accountable in an effective way. The sheer extent of corruption and tax avoidance drives us to conceive new legal frameworks—a new strategic challenge that is a major issue for state sovereignty.

A lack of ethical constraints

3When corruption is widespread, the risk of being condemned for it, of facing moral disapproval, is low. States or firms therefore become reluctant to take action against it. The price is high for those like whistle-blowers who refuse to play the game. Corruption spreads quickly in such circumstances. But it is possible to establish a virtuous circle. We should resist the argument—often made in France to oppose economic transparency measures—that regulation would give others a competitive advantage.

4In 2003, the United Nations Commission on Human Rights proposed that transnational corporations “shall recognize and respect applicable norms of international law, national laws and regulations, as well as administrative practices, the rule of law, the public interest, development objectives, social, economic and cultural policies including transparency, accountability of corruption, and authority of the countries in which the enterprises operate.” [2] The International Organization of Employers and the International Chamber of Commerce opposed this, on the grounds that respect for human rights is the responsibility of states alone.

5The UN appointed a special rapporteur on the issue, but their work produced only non-binding guidelines. The International Chamber of Commerce believes rules of conduct alone are enough to combat extortion and corruption, and that further constraints are unnecessary.

6Of course, most of the world’s five hundred largest corporations have adopted anti-corruption programs or measures. [3] In the absence of any external checks, however, these measures may amount to nothing more than publicity campaigns.

7French power and transportation multinational Alstom is a good example of the gap between the image a company projects and its actual practices. It adopted a code of ethics in 2001, and in 2009 was the first CAC 40 company [4] to have its integrity program certified (by ETHIC Intelligence). However, the United States Department of Justice learned that foreign public officials were being bribed by the company up until 2011, with management approving consultants hired for just this purpose. In 2014, an American judge sentenced Alstom to pay $772 million after it pleaded guilty to these charges. Other lawsuits are pending in the United Kingdom.

8Many other groups have drawn up ethical charters, which are applied in a very uneven way. Enron’s motto, after all, was “Integrity and Excellence,” with its code of ethics sixty-two pages long. Yet the company established 881 overseas companies, 692 of them in the Cayman Islands, which enabled it to avoid paying taxes all the way up to the point when it declared bankruptcy.

9Information on companies’ standards compliance is becoming increasingly difficult to access. The recent European Trade Secrets Directive illustrates this: information that “has commercial value because it is secret” or “has been subject to reasonable steps to keep it secret” is protected. The text does waive punishment when revealing such facts is justified due to “exercising the right to freedom of expression and information,” or is “for the purpose of protecting the general public interest,” or “protecting a legitimate interest recognized by Union or national law.” [5] But these justifications must be given case by case. Journalists and whistle-blowers will remain the defendants in such cases—an uncomfortable position, to say the least.

Rethinking responsibility

10While there is at present no international mechanism to punish human rights abuses by multinationals, this situation could change. In France, the National Consultative Commission on Human Rights issued a major report on corporate responsibility in September 2008. The report emphasized that such responsibility was particularly important because companies, as legal persons, themselves enjoy the protection of the European Convention on Human Rights. Meanwhile, on October 22, 2014, the European Union adopted a Non-Financial Reporting Directive. [6] At the United Nations, Ecuador led a group of governments demanding a genuinely binding treaty to protect human rights from corporate abuses. In 2013, more than 250 organizations formed the Treaty Alliance to support these efforts.

NGOs at work

The challenge is to think about companies’ legal responsibility in a new way and to develop new tools of evaluation and inspection, activities that naturally involve the input of anti-corruption groups. French law association Sherpa has made forty-six proposals for regulating transnational companies, and Transparency International has ranked 124 of the largest publicly traded companies based on the information they provide about their corruption prevention efforts, their subsidiaries, their financial interests, and their financial operations abroad.
NGOs are pushing for transnational corporations to provide country-by-country reports on their activities. In France, the Plateforme contre les paradis fiscaux et judiciaires (French Platform on Tax Havens) successfully pushed for the inclusion of such an obligation on the part of banks in the Banking Law of July 26, 2013. We were thereby able to learn that, in 2015, more than a third of French banks’ foreign subsidiaries were located in tax havens. [1] Similarly, the Law of December 30, 2014 requires mining and forestry firms to publish any payments they make to the governments of the countries they operate in. But public country-by-country reporting is only slowly being adopted more widely.
A law on the duty of vigilance for contractors was adopted on March 27, 2017, making it possible for companies to be held civilly liable for damages they could have avoided. A number of existing voluntary agreements anticipated this sort of obligation. In May 2015, for example, trade unions and brands working with the textile industries in Bangladesh signed an agreement on safe manufacturing conditions that made provision for on-site inspections. [2]

11Public actors and those closely associated with the state—including COFACE (the Compagnie Française d’Assurance pour le Commerce Extérieur, or French Foreign Trade Insurance Company), the French Development Agency, Proparco, and Expertise France—should also be involved in tackling corruption and threats to human rights. [7]

12In the United Kingdom, the Bribery Act makes it an offense for legal persons to fail in their anti-corruption responsibilities. While the parent company may not be responsible for the bribery itself, it can be held responsible for failing to take the steps necessary to avoid corruption within its projects. In France, the law of December 9, 2016 mandates companies with more than five hundred employees and a revenue exceeding 100 million euros to implement procedures aimed at preventing and detecting corruption, both in France and abroad. The Agence française anticorruption (French Anti-Corruption Agency, AFA), created as part of this law, is responsible for publishing guidelines for preventing and detecting corruption. It monitors the quality and effectiveness of procedures that have been implemented, and can impose sanctions on companies who do not comply.

Rethinking European mutual legal assistance

13In 1996, seven European judges signed the Geneva Appeal: “The Europe of anonymous accounts and money laundering is being used to money from drugs, from terrorism, from sects, from corruption, and from organized crime. . . It has become necessary to establish a genuine European legal space, within which magistrates can seek and exchange information on current inquiries with no constraints beyond the rule of law.” [8]

14A year later, a team led by jurist Mireille Delmas-Marty proposed a “corpus juris,” a set of guiding principles for criminal law. This recommended common definitions for a number of offenses, the unification of essential rules of criminal procedure inside the EU, and the creation of a European Public Prosecutor’s Office. This proposal was finally implemented with the introduction on October 12, 2017 of Council Regulation 2017/1939, “implementing enhanced cooperation on the establishment of the European Public Prosecutor’s Office.” [9]

15The American legal system will no longer be the only one able to punish foreign companies (the US fined Siemens $800 million in 1998, Alstom $772 million in 2014, British Aerospace $400 million in 2010, Total $398 million in 2013, Technip $338 million in 2010, and so on). The absence of a European public prosecutor’s office up until now has made it even more difficult to establish a balance of power with the United States and counter the near-total monopoly of their prosecutors. French prosecutors’ lack of independence has undermined their credibility: prosecutions can easily raise suspicions of state intervention. As Barack Obama responded when questioned about François Hollande’s request for him to intervene on behalf of BNP Paribas: “The tradition of the United States is that the president does not meddle in prosecutions [. . .]. I do not pick up the phone and tell the attorney general how to prosecute cases that have been brought. I do not push for settlements of cases that have been brought. Those are decisions that are made by an independent Department of Justice. [. . .] Perhaps it is a different tradition than exists in other countries, but it is designed to make sure that the rule of law is not in any way impacted by political expediency. And so this will be determined by US attorneys [. . .] and I’ll read about it in the newspapers just like everybody else.” [10]

16And we can see just how difficult it is to get a grip on tax avoidance without major international cooperation. In 2011, the World Bank and the United Nations Office on Drugs and Crime published a report examining how bribes, misappropriated public goods, and other proceeds of crime are hidden behind legal structures—shell companies, foundations, trusts, and so on. [11] In 2016, the “Panama Papers” offered a remarkable supplement to this report.

A largely unpunished crime

17In December 2003, the UN Convention against Corruption (also known as the Merida Convention) became the first global anti-corruption tool. It recommends, above all, the criminalization of unlawful enrichment, which it defines as a substantial increase in a public official’s wealth that cannot reasonably be justified by their legitimate income. This was the first time a convention had laid down principles for restituting illegally acquired assets.

18But the results were disappointing. The evaluation mechanism remains optional, and many states have refused to allow teams of evaluators to carry out field visits. Similarly, asset restitution has been dealt with in very general terms, without any specific, restrictive measures being imposed.

19There is no longer any question of decriminalizing business law in France, as Nicolas Sarkozy had led us to fear. [12] But a more subtle decriminalization is underway. The law only exists through the ability of institutions or individuals to implement it. While the creation of the financial prosecutor’s office in 2013 in the wake of the Cahuzac scandal showed a political desire to combat financial crime, the staff numbers originally intended for the project have, by 2018, still not been met. Specialized anti-corruption police units face a similar situation. After the Panama Papers were published, the trade union Solidaires Finances Publiques asked the President of the Republic “to put a stop to mass firings in precisely the office which ought to have found out about these dealings.” [13] The total number of convictions and criminal charges for all offenses combined in 2016 was nearly 582,142. The 297 convictions for misconduct and the thousand cases of tax evasion represent a tiny fraction of those offenses that are ultimately punished. [14]

20Without effective national courts and with little coordination between member states, the European Commission estimates that the EU loses €120 billion to corruption each year, and €1,000 billion to fraud and tax evasion. Not everyone loses that money though; increasingly, it goes to help organized crime, a new strategic challenge.


Éric Alt
Éric Alt is a judge. He is a member of the board of directors of Sherpa, a French law association aimed at protecting and defending victims of economic crime, and is vice-president of French anti-corruption organization Anticor.
Uploaded on on 14/09/2018
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