Thursday, May 25, 2017

Currently, one of the hottest and most politicised files debated in the EU bubble is on tax transparency. Tax scandal after scandal, the numerous leaks by investigative journalists and the ever-growing calls by civil society and European citizens have finally prompted the European Commission to act. Last year they published a legislative proposal which will increase transparency requirements around multinationals’ financial information with the aim of ending the secrecy surrounding their activities, whereabouts, structures and tax payments. This proposal, published in April 2016, has been the most concrete and tangible reaction by the European Commission to the Luxleaks scandal.
Fast forward to over one year later. Despite the urgency of the issue, the Commission’s proposal has generated a heated debate among EU institutions and Member States. The European Commission’s proposal requires very large European and non-European companies with substantial operations in the EU – those with an annual turnover of minimum 750 million euros – to publicly report on a country-by-country basis on where they generate their profits, and where they pay their taxes. However, this obligation is limited to their operations in EU Member States and in a group of tax havens to be determined by EU governments. For the rest of the world companies would only be required to publish global figures, lumping together their data from all countries.
This will make it impossible for those wanting to scrutinise that information – be it citizens, journalists or policy makers – to have the full picture on multinational companies’ activities and payments, effectively contradicting the whole purpose of the legislation we are aiming for. Citizens of most countries, in particular the poorest ones, will not have access to any information regarding what European companies are doing in their tax jurisdiction. Multinationals will still be able to engage in aggressive tax planning practices behind the usual veil of secrecy, shifting their profits to jurisdictions not covered by the reporting requirements.
During the last six months the European Parliament has been working on this file in an attempt to improve the Commission’s text. The Co-Rapporteurs from the Economic and the Legal Affairs Committees published a draft report, which included all of Transparency International EU’s key demands – from extending the geographical scope, to lowering the threshold for companies, from increasing the list of reporting items, to including a requirement for publication in a central repository in open data format.
However, the liberal and various conservative political groups have submitted amendments that would completely change the final result in the European Parliament. These groups are pushing to include all sorts of exemptions and opt-out systems for companies. In particular, they insist on maintaining a blanket exemption that would allow companies to avoid disclosing the required information if it is “seriously prejudicial to the commercial position of the undertaking”.
The two Committees in charge of the file will vote on the text next Tuesday 30th May. One week before the vote the result is still highly unpredictable and negotiations will go on until the day before the vote.
What is bizarre is why this is still an issue. During the last two years the European Parliament has set up special and inquiry committees dealing with tax issues (TAXE I and II as well as PANA). The Parliament’s interest and expertise on these topics has grown significantly. One would expect that after all this work, Members would also be able to take bold steps when it comes to having concrete impact on mandatory legislation. Legislation which could help shed light on the causes and consequences of corporate tax avoidance, raise red flags on corruption risks and potential cases of collusion, as well as give the public and policy makers the opportunity to identify the necessary reforms to combat tax avoidance and aggressive tax planning.
The European Parliament – and all political groups – have one more week to prove that its commitment to transparency is real beyond rhetoric words and despite big companies’ interests. In any case, the strong appetite for transparency in Europe is not going to stop until real public country-by-country reporting becomes a reality.
The work of investigative journalists and leaks on tax scandals will not stop. Our research has shown that multinationals may be better off being transparent and publishing their financial information than keeping it in the dark. When it comes to reputation, multinationals have been much more damaged by the current system of opacity through scandals alone than by the much-needed transparency we are advocating for.

Wednesday, May 17, 2017

Dutch timber baron and arms dealer Guus Kouwenhoven was recently sentenced to 19 years imprisonment for illegal arms trading and complicity in war crimes in Liberia and Guinea. This is a rare example of a foreign crook, masquerading as a businessman as they too often do, actually being held accountable for the damage they have wreaked on the African continent.

Ironically it’s Africa’s misfortune that it is vastly rich in natural wealth. It has an abundance of oil, iron ore, diamonds, gold, copper tantalum, tin, rubber and timber - strategic resources that the world needs. It also possesses those that the world simply wants, like ivory, rhino horn and, until not that long ago, the bloodiest resource of all: slaves.This means that for centuries Africa has attracted the wrong sort of foreign interest - colonialism, multinational companies and carpetbaggers alike, ranging from Belgium’s King Leopold and his explorer friend Henry Morton Stanley, to the modern day buccaneers; losers, opportunists and often  criminals who could play the big men in Africa, like  Mark Thatcher. Guus Kouwenhoven was one of these. 
In the 1990s, Kouwenhoven ran Hotel Africa in Liberia’s capital Monrovia, a magnet for the country’s elite and those who wanted to profit from them. But his real notoriety began when, at the behest of his political patron, then president and now war criminal Charles Taylor, he acquired vast forest concessions and set up two logging companies. One of these was Liberia’s largest, the Oriental Timber Company (OTC), which Taylor called his ‘pepperbush’ because it was especially precious to him. And so began Kouwenhoven’s illegal plunder of Liberia’s forests.
When the UN Security Council sanctioned Liberia’s diamond trade in 2001, the timber trade became Taylor’s main revenue generator. The ships that took the timber from Liberia brought arms in, in contravention of a UN arms embargo. This supplied Taylor’s brutal regime with both the money and logistics he needed to wage his wars in Sierra Leone and at home.
Responding to a request for help from Liberian NGO activist Silas Siakor,  Global Witness entered into a covert partnership with his organisation. I took part in the first of what became many investigations in Sierra Leone, Guinea and Ivory Coast, and in the main markets for Liberian timber in China and Europe. Silas and his colleagues carried out a forensic and highly dangerous investigation of the Liberian logging industry, and OTC in particular. We couldn’t go there – Charles Taylor already had us in his sights.
Our subsequent campaign with Silas played a significant role in getting the UN Security Council to impose sanctions on Liberian timber imports in May 2003, thereby cutting Taylor’s means of waging war. By August, Taylor had fled into exile in Nigeria and was subsequently convicted of planning, aiding and abetting war crimes in Sierra Leone, for which he is serving a 50 year sentence.
In a far-sighted move, of a kind that many European and other countries would do well to follow, the Netherlands began the prosecution of Kouwenhoven in 2005, and so began a convoluted legal process which eventually culminated in his conviction last month.
Kouwenhoven is far from the only businessman to break laws in Africa or elsewhere, but as far as we know he is the only one to have been held accountable for a crime of this magnitude.
This begs a question: if Kouwenhoven is complicit in war crimes, which he now seems set to appeal, where does that leave companies that purchased his timber in full knowledge of its links with Taylor and arms trafficking? Global Witness, Greenpeace and others had written to many of the timber buyers - like Swiss German Company Danzer, and one of the world’s largest timber traders, the Danish company Dalhoff, Larsen and Horneman (DLH) informing them of the role of timber in the Liberian conflict. The UN Panel of Experts on Liberia also documented the timber for arms trade in their reports to the Security Council, and the issue was widely covered in the press. President Taylor's own spokesperson confirmed in a 2003 media interview, "It is true that, as Global Witness has said in its report, revenues from Liberia's logging industry had been used to import weapons recently despite the UN arms embargo...” Yet these companies continued to export Liberian timber right up until sanctions were imposed.
These companies are just one chequebook removed from Kouwenhoven and his complicity in the destruction wrought on Liberia, its people and its natural resources, yet there has never been a case brought against them. They have never compensated Liberia for the damage they helped cause, and yet their websites trumpet their credentials as responsible timber suppliers. Meanwhile the people of Liberia and foreign tax payers have picked up their bill, to rebuild a country that was shattered by war.
Kouwenhoven’s conviction can never make up for the agony and destruction of Liberia’s civil war, which left more than 250,000 dead, but it will hopefully act as a deterrent to those businesses that think they can act with impunity. It also sends an important message that corruption and the trade in conflict resources is not just a problem in host countries, it’s a global problem whose perpetrators and facilitators can be very close to home.

SourcePatrick Alley,  Founding Director of Global Witness,   the winner of the CGD/Foreign Policy 2007 Commitment to Development Ideas in Action Award, Global Witness Blog
Patrick Alley
Patrick Alley

Sunday, May 14, 2017

If you gather anti-corruption professionals from six continents in a classroom for intensive discussion, extraordinary things are bound to happen. 

Here are five lessons I’ve learned in my years of teaching in the Master in Anti-Corruption Studies program at the International Anti-Corruption Academy.
1. Corruption is not cultural, not anywhere. The tired trope that “corruption is cultural” is just plain false. There are indeed countries in the world where corruption is pervasive or routine, and where citizens seem tolerant or even resigned to it. 
But there is simply no culture in the world which teaches that a suitcase full of cash exchanged under the table for an illegal benefit is good. We can argue about marginal forms of bribery, like gift-giving, or nepotism. And bribery’s beneficiaries may do their best to rationalize it. But no culture endorses straight-up bribery. None.
2. Fighting corruption is a universal value. The second principle follows from the first. It could be that we all thought corruption was bad, but nobody (or few) thought we could do anything about it. That was probably the case twenty years ago. But year after year, professionals from Liberia and Azerbaijan and Afghanistan and many other countries demonstrate to me that it is no longer true. The world has changed.
3. The main task is to generate global political will. Still, large swaths of the global population still need to believe that corruption is a problem they can effectively address. They need to study the examples of Brazil and South Korea and Uruguay and Georgia and see the reforms now being adopted. We need as much education as we can get.
4. Experience breeds innovation. Place thoughtful, bright people in challenging circumstances and they will innovate. I’m struck by the array of novel ideas these classes produce for educating the public, generating political will, and building the foundation for effective anti-corruption reforms. So you need some new ideas on how to address corruption? Come hang with these students for a bit.
5. We are witnessing, and participating in, history. The very existence of IACA is itself evidence of the remarkable moment in which we now live. Think about it: when in history would professionals from such diverse countries regularly gather in a single location to discuss the pursuit of a shared anti-corruption goal?
So many extraordinary events were necessary to make this possible: the end of the Cold War’s ideological rivalry; the mid-90s “Corruption Eruption” and globalization; the technological development that makes the gathering possible; the economic development that makes it affordable. 
Our parents and grandparents were not having these meetings. There were no global meeting spots, no solicitations of applications, no curriculum, no faculty, and no blogs. Witnessing, and indeed shaping, this moment is the unique privilege of our day. 
Source:Andy Spalding is a Senior Editor of the FCPA Blog and a Professor at the University of Richmond School of Law.

Wednesday, May 3, 2017

The tension between the International Olympic Committee (IOC) and the World Anti-Doping Agency
(WADA) has never been greater than this year, when WADA recommended a ban on all Russian athletes from participating in the Rio Olympic Games, only to have the IOC reject that position. This points to a fundamental challenge for the relationship between the two organisations. As WADA is half run and funded by the IOC, its independence can be questioned.
In a vote to maintain the status quo, 75 year-old Sir Craig Reedie, an IOC member since 1994, was re-elected on 20 November as WADA President for a further three year term. Many of WADA’s decision-makers appear not to see a conflict in their dual/multiple roles. As IOC member and former WADA President, Dick Pound put it: “Tell me what the conflict of interest is between your capacity as an IOC member espousing clean, doping-free sport and sitting as representative of that organisation on [the] foundation board of WADA, which has the same objective.”
The fact that both WADA and the IOC have as a common goal the desire to achieve ‘drug free’ sport, does not negate the inherent conflict that arises in the space where the aims differ.
Despite creating WADA with inbuilt conflicts, the IOC now realises that WADA needs to change. The Declaration of the 5th Olympic Summit of 8 October recognised the fundamental philosophical tension within international sport on WADA’s role. Recommendation 3 emphasises that: “WADA [is] to strengthen its governance structure” and “[must] Ensure compliance with the highest ethical standards in particular with regard to the resolution of conflicts of interests and integrity.”
The Declaration went on to indicate that WADA should both be better resourced to operate independently and have greater powers. Hopefully this is also an indication that the IOC may now be willing to relinquish control and allow for greater independence.

Organisational objective conflicts

The IOC owns the Olympic Games and receives much of its revenue from the broadcasting and sponsorship of these events. It’s in the IOC’s interest to have the best athletes from all member nations there to keep the Games relevant and competitive. The proposal to ban Russia created a difficult dilemma for the IOC.
The challenge created when common interests raise a potential conflict is also demonstrated in WADA’s appointment of Dick Pound as the lead investigator in the first “independent” report into international athletics (IAAF) and Russia’s state sponsored doping. For the report to be ‘independent’, Pound’s current and former positions should have made him ineligible for this role.
In the most recent demonstration of the challenge posed, IOC members Gian-Franco Kasper and Dr. Ugur Erdender currently sit on both the committees that considered whether the athletes nominated by the Russian Olympic Committee should be barred from competing at the Rio 2016 Olympic Games, namely the IOC and WADA Executive Boards.
The IOC’s decision not to accept WADA’s recommendation on Russia’s eligibility sends the message that Olympic goals, including supporting one of the IOC’s strongest members, are prioritised over the aims of WADA. At the meeting of the broader IOC membership, only the former British skeleton athlete, and WADA Foundation member, Adam Pengilly, voted to support WADA’s recommendation, while Reedie abstained.

Composition of WADA’s Decision-Making Bodies

WADA’s mission is to: “promote and coordinate at [the] international level the fight against doping in sport in all its forms”.  To strengthen WADA’s governance and remove the conflicts between the different stakeholders, as recommended by the IOC, requires rewriting WADA’s constitutional documents to allow for the appointment of independent decision-makers.
As it stands now, WADA’s constitution provides for a two-tiered decision making system: the large Foundation Board made up of representatives from both governments and the Olympic movement, and a sub-set of that group sits as the Executive Committee. Most of the policy-makers sitting on WADA’s Executive Committee are also on its decision-making body, the Foundation Board. In order for the Foundation Board to truly play an oversight role, there should not be an overlap of personnel.
To have any claim to ‘independence’, WADA must also sever the tie between receipt of funding, and eligibility for a seat at the WADA board table.
As detailed elsewhere, this bind creates a number of issues for WADA, including: the danger of WADA being manipulated or held hostage by the dominant funder (see reference 1 below) and wasting resources on solving the struggles and disagreements between stakeholders with competing agendas (see reference 2 below).
The separation will help to diminish, but not completely avoid, the issues around funding bodies influencing the way WADA operates. How ‘independence’ is defined and achieved is a challenge that needs to be worked through in consultation with all the major stakeholders. Athletes have the ultimate vested interest in ensuring that sport is played fairly, and that ‘innocent’ athletes are supported and protected (see reference 3 below).
The current financial and rights model must be turned on its head to give athletes the ultimate say on how sport is governed and policed. Inverting the power pyramid will open up dialogue around ensuring greater justice and economic benefits for athletes. A more representative WADA would see a broad, inclusive group of skilled people reflecting the demographics of the community, including athlete alliances, anti-doping specialists, scientists, professional team sport employers and sponsors.
Opening up the nomination process would also provide the opportunity for other organisations with an interest in supporting ‘clean’ sport, such as the UN Office for Drugs and Crime and the Global Organization of Parliamentarians Against Corruption, to increase their involvement.  There is also capacity to expand UNESCO’s role in monitoring the implementation of the anti-doping convention.
An independent Foundation Board and Executive Committee will “strengthen [WADA’s] governance structure” by creating an additional internal accountability mechanism.  The challenge will be to then develop a fair, inclusive process so the views of athletes can be more comprehensively reflected, replacing the current Athlete Commission model.
The IOC’s plea for the “resolution of conflicts of interests and integrity” can be answered by ensuring that WADA’s decision-making bodies are composed of a diverse range of independent thinkers who are answerable to the athletes, not representative stakeholders.  Managed carefully, having experts from a range of disciplines available to set WADA’s strategic direction will ensure that anti-doping serves those most impacted by it.

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