 |
 |
View this email in your browser <https://mailchi.mp/law/perspective-349?e=763bcf158c> 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看: https://ccsi.columbia.edu/content/columbia-fdi-perspectives <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=fa6106f485&e=763bcf158c> . *Columbia FDI Perspectives* Perspectives on topical foreign direct investment issues Editor-in-Chief: Karl P. Sauvant ([log in to unmask]) Managing Editor: Abigail Greene ([log in to unmask]) *The Columbia FDI Perspectives are a forum for public debate. The views expressed by the authors do not reflect the opinions of CCSI or our partners and supporters.* No. 349 January 23, 2023 *Corruption and FDI: The role of social brokers* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=aceeccee01&e=763bcf158c> by Jose Godinez and Mahmoud Khalik[*] <#m_-8932811553212415825__edn1> A growing number of policymakers, non-governmental organizations and academics are recognizing the importance of intermediaries utilized by firms when investing in highly corrupt host countries. Such intermediaries can be experienced professionals in host countries’ socio-economic environment who help avoid or minimize MNEs’ exposure to corruption. To reduce MNEs’ engagement in corruption, these firms should be held accountable for the behavior of their intermediaries through strict auditing and reporting obligations.1 Little attention has been placed on the intermediaries that arrange the initial meetings between MNEs and potential local partners, the so-called “social brokers.” Social brokers are mainly local intermediaries, including public relations agents, local consultants, law firms, and accounting firms, among others. Social brokers include, to a lesser extent, private individuals who have international commerce expertise and established relations with local firms and institutions. The role of these brokers is basically to help MNEs find appropriate local partners ready to engage in corruption on their behalf, where this is required or would facilitate establishing MNEs’ businesses in host countries. Social brokers make it unnecessary for MNEs to approach local firms directly and engage in corruption. Social brokers rely on their social capital to arrange meetings with potential local partners. In countries like Egypt and Guatemala, foreign MNEs seldom approach unknown local businesses to collaborate in operations, especially if such businesses are expected <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=56c220988c&e=763bcf158c> to operate in a corrupt environment. Before early meetings take place, social brokers gather information from MNEs to see what kind of services they require and find a match with local companies, to which they communicate the MNEs’ expectations. Fees for this service can reach up to 15% of the value of a single business deal, i.e., helping MNEs to circumvent their own anti-corruption policies when establishing local businesses. To decrease engagement in corruption by firms investing overseas with the aid of local intermediaries, some countries have enacted legislation, such as the US Foreign Corrupt Practices Act <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=dbba3d65ae&e=763bcf158c> (US FCPA) or adhered to international conventions like the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=5a72c7cd70&e=763bcf158c> (OECD Convention). These instruments generally create liability for foreign firms in instances where the corrupt act is carried out by a third party. Specifically, the US FCPA requires MNEs to create and maintain internal controls to ensure that there is no participation in corruption abroad, including through consultants and partners. Likewise, the OECD requires that representatives of all the ratifying countries be represented in the Working Group of Bribery in International Business Transactions <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=095c3d8441&e=763bcf158c>. The OECD controls the implementation of anti-bribery provisions through a peer-review mechanism to ensure that all member countries comply with the OECD Convention. Concurrently, some host countries have also enacted local laws prohibiting corrupt acts, although proper enforcement is sometimes neglected. For instance, in Guatemala <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=ec90d11a8e&e=763bcf158c>, where we have conducted extensive research, while bribing public officials is illegal, public officers have been accused of protecting political allies to gain political favors. Both at the international and domestic levels, however, it is not always clear whether legal instruments and their enforcement effectively target social brokers. For instance, while the OECD Convention addresses the responsibility of foreign firms for bribery through intermediaries, in practice, its implementation focuses more on local firms with which MNEs collaborate, rather than social brokers arranging the MNE-local business collaboration. Furthermore, since there is a shift in the world economy in which emerging regions, such as Asia and the Middle East, are gaining more prominence in the world economy, existing international legislation may not apply to them. For this reason, home and host countries should include in their anti-corruption legislation specific requirements for MNEs to disclose their partnerships with local firms and to disclose the steps taken to generate the first contact with those firms. This would help clarify the nature of the deals being agreed on by MNEs and intermediaries. Specifically, these kinds of disclosures should become part of the MNEs’ compliance obligations when the need for social brokers arises and also include background investigations and information on those brokers. Important factors to be considered are the reputation of social brokers, the MNEs’ connections with them and their connections with local firms, the reputation of local firms, and any compensation requested by social brokers from local organizations. Action along these lines would make it more difficult for foreign firms to gain unfair advantages when entering foreign markets. Governments should implement more transparency policies that require foreign firms to document their practices regarding social brokers. This transparency should help improve the compliance of anti-corruption regulations of foreign firms’ foreign operations. Stricter policies would also reinforce developing countries’ credibility and legitimacy when attracting more and/or higher-quality FDI. ------------------------------ [*] <#m_-8932811553212415825__ednref1>Jose Godinez ([log in to unmask]) is Assistant Professor of Management at the University of Massachusetts Lowell; Mahmoud Khalik ([log in to unmask]) is Associate Lecturer at the University of St. Andrews. The authors wish to thank Damien Charlotin, Kimberly Kay Hoang and Patrick Moulette for their helpful peer reviews. 1See John Graf Lambsdorff, “Corrupt intermediaries in international business transactions: Between make, buy and reform,” *European Journal of Law and Economics*, vol. 35 (2013), pp. 349-366. *The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Jose Godinez and Mahmoud Khalik**, ‘**Corruption and FDI: The role of social brokers,**’ *Columbia FDI Perspectives* No. 349, January 23, 2023. Reprinted with permission from the Columbia Center on Sustainable **Investment (**http://ccsi.columbia.edu* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=d26ed3293a&e=763bcf158c>*).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at **[log in to unmask]* <[log in to unmask]>*.* For further information, including information regarding submission to the *Perspectives*, please contact: Columbia Center on Sustainable Investment, Abigail Greene, [log in to unmask] *Most recent Columbia FDI Perspectives* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=51680a2e37&e=763bcf158c> - No. 348, Gary Gereffi, “How to make global supply chains more resilient <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=7466f9f309&e=763bcf158c>,” *Columbia FDI Perspectives*, January 9, 2023 - No. 347, Bernard M. Hoekman and Petros C. Mavroidis, “Investment facilitation in the WTO: The case for early harvesting <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c7678543fa&e=763bcf158c>,” *Columbia FDI Perspectives*, December 26, 2022 - No. 346, Yulia Levashova, “The way forward in reforming the legitimate expectations test <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=da86fcc508&e=763bcf158c>,” *Columbia FDI Perspectives*, December 12, 2022 *All previous FDI Perspectives are available at https://ccsi.columbia.edu/content/columbia-fdi-perspectives <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=fd105322dd&e=763bcf158c>* . *Other relevant CCSI news and announcements* - CCSI and the Sabin Center for Climate Change Law are hiring for the position of *Senior Legal Researcher, Climate Law & Finance. *The researcher will work collaboratively with CCSI's and the Sabin Center’s Leadership and Research Staff to analyze the interrelated legal, finance, and policy pathways critical to achieving global climate goals and facilitating the energy transition, and the corresponding implications for public, private, and institutional financial sector actors, regulators, and alliances. *More details on the position and instructions for applying can be found here <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=51c5dd6f2c&e=763bcf158c>* . - *Apply now* for our 2023 virtual *Executive Training Program on Extractive Industries and Sustainable Development* from* June 5–16, 2023*. The interdisciplinary program is designed to equip participants with the necessary skills to promote the responsible development of the extractive industries in resource-rich developing countries and to encourage a rich dialogue about best practices from around the globe. Applications will be considered on a rolling basis until March 31, 2023. *For more information, and to apply, visit our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=61fdf8b370&e=763bcf158c>. * - *Apply now* for our 2023 virtual *Executive Training Program on Sustainable Investments in Agriculture* from May 2-12, 2023. This interdisciplinary program explores challenges and solutions for advancing sustainable investments in agriculture. It includes asynchronous and synchronous components, including short and interactive live sessions dedicated to engagement with course lecturers and participants from around the world. Applications will be considered on a rolling basis until March 15, 2023. *For more information, and to apply, visit our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=5bf63e890e&e=763bcf158c>* . Karl P. Sauvant, Ph.D. Senior Fellow Columbia Center on Sustainable Investment Columbia Law School - Columbia Climate School *Copyright © 2023 Columbia Center on Sustainable Investment (CCSI), All rights reserved.* [log in to unmask] *Our mailing address is:* Columbia Center on Sustainable Investment (CCSI) Columbia Law School - Columbia Climate School, Columbia University 435 West 116th Street New York, NY 10027 Add us to your address book <https://columbia.us6.list-manage.com/vcard?u=ab15cc1d53&id=a61bf1d34a> unsubscribe from this list <https://columbia.us6.list-manage.com/unsubscribe?u=ab15cc1d53&id=a61bf1d34a&e=763bcf158c&c=fcfa3b8ac2> update subscription preferences <https://columbia.us6.list-manage.com/profile?u=ab15cc1d53&id=a61bf1d34a&e=763bcf158c&c=fcfa3b8ac2> [image: Email Marketing Powered by Mailchimp] <http://www.mailchimp.com/email-referral/?utm_source=freemium_newsletter&utm_medium=email&utm_campaign=referral_marketing&aid=ab15cc1d53&afl=1> -- *Karl P. Sauvant, PhD* *Senior Fellow* *Columbia Center on Sustainable Investment* Columbia Law School, Columbia University 435 West 116th St., Rm. JGH 825, New York, NY 10027 | p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | w: www.ccsi.columbia.edu | t: @CCSI_Columbia <https://twitter.com/CCSI_Columbia> "Three Reasons Why a WTO Agreement on Investment Facilitation for Development is Important", "Six Reasons for Emphasizing Responsible Business Conduct in the Nascent WTO Agreement on Investment Facilitation for Development", "The WTO Investment Facilitation for Development Agreement Needs a Strong Provision on Responsible Business Conduct", *Investment Facilitation for Development: A Toolkit for Policy Makers. Second Edition,* "Agenda for Practice-oriented Research", "How Would a Future WTO Agreement on Investment Facilitation for Development Encourage Sustainable FDI Flows, and How Could it be Further Strengthened?”, "Incentivising Sustainable FDI", "Green FDI: Encouraging Carbon-neutral Investment", "Extending International Legal Aid from Trade to Investment: An Advisory Centre on International Investment Law", "More Attention to Policies! Improving the Distribution of FDI Benefits", "Facilitating Sustainable FDI in a WTO Investment Facilitation Framework: Four Concrete Proposals", "An Inventory of Concrete Measures to Facilitate the Flow of Sustainable FDI: What? Why? How?", are available at https://ssrn.com/author=2461782 . ____ AIB-L is brought to you by the Academy of International Business. For information: http://aib.msu.edu/community/aib-l.asp To post message: [log in to unmask] For assistance: [log in to unmask] --- You must be an active AIB member to post to AIB-L . AIB-L has a moderator which checks messages for basic relevance. However, AIB does not edit or screen messages for accuracy or reliability of content. All subscribers are recommended to perform their own due-diligence before responding to any requests or calls. AIB accepts no liability for the content of this email, or for the consequences of any actions taken on the basis of the information provided.