ONE of the more extreme recent cases of corporate bribery is that of LafargeHolcim, a giant Swiss-French cement-maker which was accused in 2016 of funnelling money to armed groups controlling roads and checkpoints around a factory in Syria. The firm still cannot be sure who pocketed its payoffs, via middlemen, that were intended to keep its facility running at all costs. The money may well have ended up funding Islamic State terrorists.
The investigation into LafargeHolcim is one sign of a wider change. The era when European firms could talk up lengthy “ethics codes” at home and behave badly abroad is over. Long gone are the days when German law counted bribes paid by the country’s industrial champions as tax-deductible. A spate of scandals in Europe suggest that prosecutors, as well as the politicians who influence how much freedom judicial investigators enjoy, are becoming ever less tolerant of corporate corruption.
Another big firm under pressure is Novartis, a Swiss drugmaker. Since 2016 it has been probed over whether it bribed politicians to help its position in Greece’s drugs market (the firm has conducted an internal investigation). This month it admitted to paying $1.2m to a firm, Essential Consultants, owned by President Donald Trump’s personal lawyer, after Mr Trump’s election in 2016. The goal, said Novartis’s ex-boss, Joe Jimenez, was to “get out ahead” in understanding Mr Trump’s plans for health care. The firm says the fees were legitimate, though admits that it should have thought harder before proceeding. But investigators might yet ask if Novartis, and other clients, were buying political access.
A similar question has been put to Vincent Bolloré, one of France’s most successful tycoons, whose sprawling interests range from African logistics to French media. Last month he suffered the humiliation of detention during two days of interrogation in Paris. A close colleague complains that judicial investigators treated him harshly (unusually, Mr Bolloré was reportedly kept in a cell overnight) as they asked if bribes were paid to politicians in Togo and Guinea a decade ago to win contracts to run two ports. Mr Bolloré and his firm deny any wrongdoing.
It is unclear how far that legal process will get—investigators stopped short of pressing formal charges. Yet the much-publicised interrogation of a tycoon who is intimate with France’s political establishment sent a strong message. Germany has taken a tougher line since the shock of Siemens, an engineering giant, having to agree on a $1.6bn legal settlement in 2008 with American and European authorities for bribery, but France still has a reputation for turning a blind eye to the behaviour of its firms abroad. That is changing. “The French have undoubtedly upped their game,” says a defence lawyer who helps companies accused of white-collar crimes.
New laws are making it harder for European companies to misbehave. America passed its Foreign Corrupt Practices Act (FCPA) back in 1977. Over the years it has ensnared many European firms, whose activities it regulates if they have operations in America or have listed shares or raised debt there. Some of the biggest FCPA fines have been levied against European companies. Compared with America, European governments have pursued relatively few cases in recent years (see chart).
Now local legislation is catching up. A French law, Sapin II, enacted last June, gives courts the jurisdiction to try firms for bribes in third countries, even if no other state has complained. Like Britain’s Bribery Act of 2010 it was shaped by an anti-corruption convention from the OECD, a club of rich countries, agreed on in 1997.
European-level laws on money-laundering, and new rules such as MiFID 2, an EU directive for financial firms that came into force this year, also shape new habits, for example by making firms publish who gets paid for what services. Organisers of fancy events such as this month’s Chelsea Flower Show, in London, already blame MiFID for companies sending fewer guests their way. European rules are soon likely to outlaw anonymously owned firms, used as shell companies for hard-to-trace transfers of funds. Britain, which already bans such anonymous firms, is set to extend the law this month so that it applies to several overseas territories.
As important as new laws, anti-corruption activists say, is the readiness of investigators, prosecutors and others to enforce them. Politicians’ actions count here. Since the financial crisis, voters are less likely to view graft as an acceptable cost of doing business abroad. Among the first acts of Emmanuel Macron after becoming president of France a year ago was to pass another anti-corruption law aimed at politicians and officials.
Non-governmental groups are becoming more assertive, too. LafargeHolcim’s case erupted, for example, after investigations by Sherpa, a legal activist group, and Le Monde, a French newspaper. In Italy Global Witness, a London-based activist group, and others did much to generate evidence now being used against Eni and Shell, two oil-and-gas titans. They are being prosecuted for alleged bribe-paying in Nigeria in 2011 (both firms deny wrongdoing). So many people, including figures from Nigeria’s government, attended the initial hearing in a cramped court in Milan on May 14th that the judge quipped “next time we’ll have to get a bigger room”.
Among the 15 defendants are the current boss of Eni and some former bigwigs from Shell. Putting pressure directly on individual bosses and executives is no accident. Senior management often know when decisions are made to pay bribes. A study of 427 corporate corruption cases published by the OECD in 2014 found that the CEO or other high-ranking staff knew about decisions to pay bribes in 53% of the cases. And being in the spotlight changes things. “What matters are the incentives for you personally,” argues Robert Barrington, head of the British bit of an anti-corruption group, Transparency International. Personal shame, or the prospect of prison, are powerful deterrents, he says.
On the face of it, anti-bribery pressure on European firms should increase further still. America’s regulators will surely continue imposing big fines. A Nordic telecoms firm, Telia, was fined nearly $1bn last September, for example, after an investigation by American and Dutch prosecutors into bribery in Uzbekistan.
Striking, too, are efforts in some emerging countries to hold Western firms to account. A spokesman from Thales, a French defence firm, says it will “continue co-operating with local authorities” in South Africa, for example, over a newly restarted investigation into bribes allegedly paid by a subsidiary (it denies doing so) over an arms deal involving Jacob Zuma, a former president. Malaysia’s new government has just begun fresh probes into 1MDB, a state development agency from which $4.5bn mysteriously went walkabout.
Authorities in some places have been increasing incentives for firms to “self-report”, handing over some of the job of policing to firms themselves. In 2016 Airbus, Europe’s aerospace giant, reported itself to Britain’s Serious Fraud Office (SFO) and to French authorities for lying to export-credit agencies about bribes given by consultants; it may end up paying as much as $3bn in fines—but could otherwise have faced a higher fine or even prosecution.
The SFO has also made enthusiastic use of “deferred-prosecution agreements” (DPAs) since 2014, following their widespread use in America. These let firms negotiate to suspend a prosecution if they pay a fine and co-operate with other investigations. Rolls-Royce, a British engine-maker, for example, reached a DPA in 2017 under which it paid about £500m ($666m) to settle bribery allegations. Critics say such agreements let firms off too lightly, but they do have an effect on behaviour.
Not that anti-corruption activists are relaxing. A “really positive trend right across Europe” in the past few years could yet be reversible, worries one. Nationalist politicians are a risk. Mr Trump, for example, talks of helping national corporate champions abroad and has called the FCPA a “horrible law”. In November he took America out of the Extractive Industries Transparency Initiative, a 15-year-old global standard against corruption in managing revenues from oil, gas and mineral extraction, which is common (see chart).
Britain is another worry. Some fear that, despite its crackdown on Russian oligarchs, the country may back-pedal on fighting corruption out of desperation to show the economy can thrive after Brexit. The recent overseas-territories amendment on shell firms was opposed by the government. Theresa May, the prime minister, and her ruling Conservative Party made a manifesto promise in 2017 to fold the SFO into the National Crime Agency, which activists and lawyers say would be a big step backward. A candidate to take over from the SFO’s outgoing head, David Green, has in the past backed that course.
Western firms in the mining and oil-and-gas industry meanwhile grumble that rivals from China, Russia or elsewhere have “advantages” bidding for contracts in, say, parts of Africa, as they face few limits on bribe-paying. A French business body, MEDEF, says competitors are not subject to the same rules as Europeans. If such complaints grow loud, pressure not just to stand still on anti-bribery standards but actually to lower them could return. “I fear that we may be at a peak of anti-bribery efforts,” says Mr Barrington, worried that weaker political leadership on the issue in the West will have a knock-on effect that will only be seen in time. Even if staff at European firms never again pay off armed factions in civil wars, there is always scope for standards to fall again.