New Myanmar laws for foreign investment and anti-corruption

Street market in Yangon, Myanmar. (Photo courtesy of Wikimedia Commons)As part of the reforms by President Thein Sein to open up Myanmar after decades of economic isolation, the parliament has approved a new foreign investment law.

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Is Aid Money Ailing Africa?

Not everyone agrees that aid creates poverty. But we thought of the aid-to-poverty cycle this week.

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Indexing Personal Danger

A post on the Risk Management Monitor last week by Christine Kane talked about the most dangerous countries for expats to work in.

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Journalists Killed For Covering Graft

More than half the journalists murdered in the line of duty were working to expose corruption.

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The Bribes Of War

War is not only hell, it's corrupt too. Of the bottom ten countries on Transparency International's 2010 Corruption Perception Index, six have active wars, insurrections, or major civil disturbances.

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Passing The Test

We talked a week ago about Somali pirates and the Foreign Corrupt Practices Act. We're on the subject of piracy again, but we can't pretend this post is on topic. That's OK, though -- on Fridays we have a license to wander a bit. So here's what's on our mind.

The rescue of the American merchant marine captain last week went well, we thought, with everyone in the chain of command making good decisions along the way, including the White House. So we were surprised to hear about an authoritative-sounding story that was highly critical of the Commander-in-Chief.

While Barack Obama is basking in praise for his "decisive" handling of the Somali pirate attack on a merchant ship in the India Ocean, reliable military sources close to the scene are painting a much different picture of the incident – accusing the president of employing restrictive rules of engagement that actually hampered the rescue of Capt. Richard Phillips and extended the drama at sea for days.

That's from a publication called the G2 Bulletin by Joseph Farah (here). He's the founder of World Net Daily and has a big audience.

He also said multiple opportunities to free the captain of the Maersk Alabama from three pirates were missed, according to his sources -- because a Navy SEAL team was not immediately ordered to the scene and was then forced to operate under strict, non-lethal rules of engagement. The White House, he said, "refused to authorize deployment of a Navy SEAL team to the location for 36 hours, despite the recommendation of the on-scene commander."

So we asked our own expert -- an active-duty Marine Corps officer who recently spent time off the Somali coast aboard a US Navy ship, in charge of maritime security.

Here's what he said:

I think this is quite ridiculous. The on-scene commander was acting within the established ROEs [rules of engagement]. The piracy area is not a declared combat zone or (to my knowledge) a hostile-fire area. The governing order on deadly force states that it may be used to 1) protect assets involving national security, 2) protect assets not involving national security but inherently dangerous to others, 3) protect public health or safety, 4) effect arrest, apprehension, or prevention of escape, or 5) in self-defense or defense of others. The only applicable condition is #5.

There wasn't, to me, a compelling reason to push the limits of the ROEs in this case. The pirates were not capable of reinforcing or withdrawing. The US Navy had 100% of the initiative, and legally they were bound to wait until an imminent threat of harm to the hostage.

As far as the timeline goes, the decision to move a tier-one asset (such as a SEAL team) around the globe is made at a very high level and I doubt Mr Farah is privy to the deliberations. (When the Faina was hijacked with the Ukrainian weapons aboard, we were en route as the story was breaking on CNN.)

The SEALs were evidently ashore when the incident began, and the BAINBRIDGE was 300 miles offshore, beyond helo range. To get to the BAINBRIDGE, the SEALs did a parachute jump into the ocean and were recovered by a small boat. This sort of thing doesn't happen in a few hours. The guy who wrote the article is criticizing the Pentagon because the SEALs showed up 36 hours later. Getting there the next day is not bad, given the circumstances.

I have a good friend who is a drill instructor at Parris Island. I once asked him if he ever ran out of things to yell at the recruits. He said, No, because even if they do everything right, they didn't do it fast enough. I think that's what's happening here with the critics of the administration.

At any rate, the correct decisions are the ones that lead to good outcomes, so this passes the test.
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Paying The Pirates

This month's online edition of Foreign Policy magazine has an article (here) saying Somali pirates are handing over part of their proceeds to the regional Puntland government in exchange for being allowed to operate in areas it controls.

So what? Stay with us a minute.

The State of Puntland is a semi-autonomous region in northeastern Somalia that's been self-governing since 1998. With 2.4 million people, Puntland has a president and cabinet, a house of representatives and a court system. It has a website. It deals directly with other countries and with international institutions such as the World Bank. It levies taxes and spends money on public projects -- it's operating one airport, for example, and developing another. In other words, it's an actual government.

With the connection between the pirates and the Puntland government in mind, the author of the Foreign Policy article, J. Peter Pham, thinks there's an opportunity to choke off the supply of funds to the bad guys. His idea is to use various anti-terrorism and anti-corruption laws already in place to stop all ransom payments. A case to do that, he says, can be made under the Foreign Corrupt Practices Act.

Is that possible? Let's take a look.

First, not everyone has to obey the FCPA. Issuers and domestic concerns and those acting for them are subject to the law. That probably means some but not all of the shipping companies, insurers and security firms that are dealing with the pirates are covered. A fuller discussion about the reach of the law can be found in our post here.

Next, the FCPA outlaws corrupt payments directly or indirectly to a "foreign official." That's a human being, not a government entity. Payments to a government entity do not violate the FCPA. So even if the pirates are known to be paying the government of the State of Puntland for operating rights, that doesn't mean payments to the pirates violate the FCPA. As we've said before -- no foreign official, no FCPA offense. For more on this, see our post here.

But what if some of the ransom money is known to be going directly into the pockets of members of the Puntland government? They're foreign officials under the FCPA. So wouldn't there be a violation? The answer is still no.

Under American law, a payment that's extorted is not a bribe. Judge Shira Scheindlin, in a ruling in U.S. v. Kozeny last year, explained it this way: The legislative history makes clear that while the FCPA would apply to a situation in which a "payment [is] demanded on the part of a government official as a price for gaining entry into a market or to obtain a contract," it would not apply to one in which payment is made to an official "to keep an oil rig from being dynamited." Quoting from S.Rep. No. 95-114, at 10-11 (1977), reprinted in 1977 U.S.C.C.A.N. 4098, 4108.

Judge Scheindlin said the difference is that in the former situation, the bribe payer made the conscious decision to pay the bribe. So he cannot argue that he lacked the intent. "In other words," she said, "in the first example, the payer could have turned his back and walked away -- in the latter example, he could not." See generally United States v. Gonzalez, 407 F.3d 118, 122 (2nd Cir. 2005).

When pirates hold crews hostage and threaten to kill them and destroy their ships and cargo, it's extortion. Where there's duress, there cannot be a voluntary decision "to enter a market or obtain a contract." So the ransom payments -- no matter where they end up -- aren't illegal under the FCPA or any other United States criminal law.
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