RUMOURS OF CORRUPTION: REFERRALS FROM THE WORLD BANK SANCTIONS SYSTEM TO NATIONAL LAW ENFORCEMENT AUTHORITIES.

• Author: Agnew, S.J. Calum

INTRODUCTION 24 I SANCTIONS AT THE WORLD BANK 26 A. Corruption and development 28 B. The foundation: just doing business, but with due process 31 C. The goals: prevention and deterrence 54 D. The enabling condition: international immunities 55 II THE WORLD BANK'S REFERRAL PROGRAM 38 A. The criminalization of corruption 59 B. Referrals from the World Bank 41 III REFERRALS ON TRIAL: WORLD BANK GROUP V WALLACE 45 A. The Padma Bridge investigation 45 B. World Bank Group v Wallace 50 C. Reassessing referrals 52 IV AT THE LIMITS OF SANCTIONS 57 A. The question of vires 58 B. Lawfulness and legitimacy 60 V ANNEX: REFERRALS (2009-2019) 62 INTRODUCTION

On June 14, 2014, Bombardier issued a press release celebrating its expertise in the relatively obscure field of rail control systems across Russia, Uzbekistan, Kazakhstan, Mongolia, Azerbaijan, and Latvia. (1) The president of the Berlin-based subsidiary Bombardier Transportation affirmed the company's "long-term commitment" to its customers in Central Asia and Eastern Europe, and touted the company's ambitions to grow its business throughout the region. (2) But just four years later, the Montreal-headquartered engineering giant found itself in the centre of an international firestorm, fending off the Canadian press while facing Swedish and Russian investigations into those very activities. (3)

The scandal concerned corruption in a project undertaken by the company just a year earlier. The Swedish National Anti-Corruption Unit reportedly accused Bombardier Transportation of paying bribes to Azerbaijani and Russian officials to secure a contract to install Bombardier's prized Ebi Lock 950 systems on Azerbaijan's railways. (4) The funds in question, said to have been channeled to Swiss bank accounts and shell companies registered in Belize, Panama and Cyprus, gave rise to money laundering allegations. (5)

The origin of these investigations was not an intrepid Russian journalist, a diligent banker, or a savvy Swedish detective. It was the very organization providing financing to Azerbaijan for the railway upgrade: the World Bank Group ("WBG" or "the Bank"). The Bank provided a 220 million USD loan to the Government of Azerbaijan, which subsequently awarded the contract to Bombardier. (6) The Bank believed that the award of the contract to Bombardier was secured through the payment of bribes. After conducting its own investigations into the project's financing, the Bank provided details of the scheme to the Swedish Government in August 2016, some two months before Swedish authorities raided Bombardier Transportation's offices. (7) This referral was the fruit of the Bank's internal sanctions process, which may independently result in Bombardier's banishment from World Bank financed projects.

Corruption in the tendering process for large government contracts in Azerbaijan is, perhaps, not surprising. But the World Bank's role in facilitating criminal investigation of such corruption might be. Few think of the Bank as a law enforcement agency. However, over recent years, the World Bank has taken a leading role in the international investigation and prosecution of corruption. It has made hundreds of referrals to national law enforcement authorities, and blacklisted scores of companies and individuals from internationally financed projects. Among the most high-profile of these was the 2013 debarment of SNC-Lavalin, another Canadian multinational engineering firm, for its alleged conspiracy to bribe Bangladeshi officials. (8)

This article considers the origins, nature, and effectiveness of the Bank's sanctions regime and, in particular, the Bank's practice of referring investigations to national authorities. Such referrals play an important role in the Bank's development goals. However, the ambiguities in the Bank's mandate place this practice on unsteady ground. The Bank's referrals rely on the Bank's continued freedom from the judicial processes of its member-states, under its international privileges and immunities. This asymmetry--between the Bank's interventions in prosecutions and the Bank's immunization against scrutiny of its processes--places pressure on those immunities. Furthermore, the Bank's anti-corruption activities sit uneasily, at times, with the Bank's prohibition on political interference. The Bank's anti-corruption activities operate at the outer bounds of what the Bank's immunities make possible and the empowering documents permit.

This article begins with the origin of the Bank's anti-corruption efforts, and how those efforts relate to the Bank's core mandate: promoting development. It examines the legal foundation for the sanctions regime, and the particular role immunities play in the Bank's sanctions-related activities.

1 then discuss the Bank's practice of referring the results of its investigations to national law enforcement authorities, how the Bank's referrals operate within the context of domestic anti-corruption statutes, and the effectiveness of this program.

The Bank's referral practice was given judicial scrutiny in the recent Supreme Court of Canada decision World Bank Group v Wallace, which concerned the prosecution of SNC-Lavalin employees. (19) Examining the Bank's activities in this case, the Court's treatment of the Bank's immunities, and the subsequent history of the underlying criminal prosecution, I highlight potential concerns and limitations regarding the Bank's practice of collaborating with national authorities.

These concerns, in my view, give reason for pause. While the Bank's anti-corruption efforts are important, a more robust legal framework would likely increase the effectiveness of referrals and provide protection to the Bank, as its anti-corruption efforts may place both its legitimacy and its immunities at risk.

I SANCTIONS AT THE WORLD BANK

The World Bank's sanctions activities flow from the Bank's core mandate: the promotion of development. One of the principle objectives of international law is to promote peoples' right to development. (10) Multilateral development banks ("MDBs") are one of the means by which the international community gives effect to its collective commitment to this end." These international organizations finance development projects and provide technical assistance to lesser developed states that may lack the capacity or credit to embark on significant investments in infrastructure; the MDBs are themselves funded through capital markets and the equity paid into them by their shareholders: wealthier member states.

The largest of the MDBs is the World Bank, which is comprised of five affiliated entities, including the International Bank for Reconstruction and Development ("IBRD") and the International Development Association ("IDA"). (12) As of December 2017, all but five UN states are members of the Bank; in 2016, it committed 61.8 billion USD in loans, grants, and guarantees. (13) These monies supported activities ranging from the development of a rapid-transit bus network in Tanzania, to the resettlement of Syrian refugees in Jordan and Lebanon. (14) According to the Bank's 2017 annual report, the IBRD and the IDA's assets together totalled over 602 billion USD. (15)

Initially, the World Bank was tasked with post-war reconstruction. Conceived at the Bretton Woods Conference of July 1944, the framers' expectations for the Bank's role in international affairs were expansive; in the words of the US Treasury Department, the IBRD and its sister institution, the International Monetary Fund, were to "establish the economic foundations of peace on the bed rock of genuine international cooperation." (16) The ambitious spirit animating the Bank was reflected in the IBRD's empowering documents. Like all international organizations, MDBs are the creation of international conventions; specifically, in this case, articles of agreement. Analogous to incorporating documents in municipal law, these agreements--treaties, of a kind--set out the institution's membership, commit member-states to providing capital, and articulate the institution's mandate and governance structure. In doing so, the articles of agreements also establish and set limits upon the institution's legal powers. (17) Article I of the IBRD's Articles of Agreement set out the Bank's purpose as, in addition to post-war reconstruction, "the encouragement of the development of productive facilities and resources in less developed countries." (18)

1. CORRUPTION AND DEVELOPMENT

   The Bank's anti-corruption practices arise out of a concern regarding the effect of corruption on development. But corruption, while freighted with moral undertones, is admittedly a somewhat amorphous term. It can encompass practices ranging from petty bribery, to embezzlement, to nepotism, to 'high corruption' and use of state apparatus for personal benefit. (19) Transparency International, a global anti-corruption NGO, suggests that corrupt practices are linked by a shared feature: "abuse of an entrusted power for private gain." (20)

   In part due to the scope of this broad definition, the effects of 'corruption-as-such' on development have sometimes been contested. (21) But today, the consensus among economic, political, and legal theorists is that corruption is both a political toxin and a severe impediment to long-run economic growth. Corruption is associated with substantially reduced human development indicators; in the words of one commentator, "the bitter fruit of corruption is poverty, ignorance, and death." (22) One of the UN's Sustainable Development Goals is "substantially reducing corruption and bribery," an objective reflected in the World Bank's operating policies. (23)

   This is a welcome change. For the first 50 years of its operations, corruption was widely perceived as being of low priority for the World Bank--both generally and in World Bank operations--with an internal report describing the institution's posture as "willful blindness." (24) This...