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Monday
Jul182016

Practice note: New insights from World Bank about its sanctions process

The World Bank’s Office of Suspension and Debarment (OSD) released its latest “Report on Functions, Data and Lessons Learned” this spring. The Report (pdf) provides important insights into the World Bank’s sanctions process.

That process starts with the World Bank’s integrity vice presidency (“INT”), which investigates any allegations of sanctionable practices in the performance of a World Bank project. The OSD then evaluates the information gathered by the INT and, if it deems the evidence sufficient, will issue a notice of sanctions proceedings and recommend an appropriate sanction. 

According to the OSD Report, the sanction most often recommended is debarment with conditional release.

If the respondent chooses not to contest the allegations or the recommended sanction, then the proposed sanction is imposed. According to the Report, respondents contested only about one third of cases.

The OSD goes forward with the vast majority of cases submitted by the INT. According to the Report, the OSD has rejected only 4 percent of the cases brought by the INT in their entirety, and has referred 36 percent of cases back to the INT for revision.

The respondent may appeal the case to the World Bank’s Sanctions Board. The Sanctions Board reviews cases de novo and may hold hearings. According to the Report, appeals were taken to the Sanctions Board in only 33 percent of cases.

The World Bank’s sanctions procedures also provide that a party can seek settlement at any time in the sanctions process. According to the Report, a total of 52 cases brought during the last eight years resulted in settlement agreements. The majority of these settlements occurred during the most recent part of the time period covered by the Report, suggesting that settlement activity may also be increasing.

In total, the Report states that 368 firms and individuals were sanctioned in the 2008-2015 period. The majority were sanctioned during the most recent part of this time period.

If the sanction imposed is debarment with conditional release or conditional non-debarment, the World Bank normally requires the implementation of an integrity compliance program. The Report notes that the World Bank has developed detailed guidance on the conditions for release from debarment, and that these conditions focus on the debarred party demonstrating the adequacy of its integrity compliance program.

The Report also reveals that the vast majority of sanctions cases -- 83 percent -- involved allegations of fraud.  Only 18 percent involved corruption, 8 percent collusion, 4 percent obstruction and 1 percent coercion.

Of the cases involving fraud, about half involved forged third party documents, while most of the remainder involved misrepresentations by the respondent.

One important lesson from the Report is that the World Bank has ramped up its enforcement activities in recent years. Therefore, companies that wish to continue working on World Bank projects would do well to adopt rigorous compliance regimes.

The Report also suggests that the Bank may be increasingly interested in settling sanctions cases. The Report specifically highlights the timeliness of cooperation, the fast payment of restitution reflecting genuine remorse, and the prompt acceptance of responsibility as mitigating factors in determining sanctions. However, even in settlements, the World Bank has often insisted on the imposition of onerous conditions.

Therefore, although a settlement may result in a shorter period of debarment, the onerous requirements that the World Bank often insists upon as part of a negotiated settlement may outweigh the advantages of taking this path.

____

Dave Nadler is a partner in Blank Rome's Washington, D.C., office and chairman of the firm's government contracts practice group. He represents companies in anti-corruption matters, including sanctions proceedings before the World Bank and other multilateral development banks.

Adam Proujansky is a partner in the firm's Washington office.