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November 11, 2014updated 01 Feb 2016 10:38am

Forget China's corruption and start looking at our own

By Spear's

Robert Amsterdam says we very easily criticise Xi Jinping and his politburo for corruption, but the UK and America are hardly immune

For the past two years under President Xi Jinping, China has made the topic of corruption part of its central narrative, featuring ambitious prosecutions of both foreign corporations as well as a few selected bureaucrats.

Described by Harvard professor Anthony Saich as ‘the most ambitious anti-corruption campaign since at least Mao’s days’, President Xi’s crackdown has attracted more criticism and doubt than praise from the international community.

An editorial published this past May in the Wall Street Journal denounced the political motivations behind China’s bribery case against executives of GlaxoSmithKline and American companies, arguing that the selective prosecution represented ‘a convenient opportunity to deflect anger about high drug prices’ while the authorities turned a blind eye to well-connected local competitors.

The Journal editorial noted that the ‘perception of politicized and selective prosecution is as bad for business as a genuine corruption crackdown would be good for it’.

It’s quite easy to criticise the glaring deficiencies of China’s anti-corruption campaign, and there are many of them. Confessions are sometimes obtained under torture, non-independent courts treat due process like a menu rather than a rulebook and there is an abysmal record with regard to human rights. Still, with that in mind, it is particularly concerning that there are similarities in the way these anti-corruption processes are handled in the United States and United Kingdom.

For many years, my law firm was hired by clients facing political problems in so-called ‘lawless’ countries, but now the work is beginning to migrate back home to the US and UK, where targeted harassment by prosecutors can also take on a political tone.

Thanks to an ever-expanding international web of regulatory agencies and laws, businesses are facing overlapping and simultaneous liabilities that are exceedingly difficult to navigate. Many companies find themselves spending more than double on compliance programmes from just a few years ago — a fact that simply delights lawyers from large law firms.

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The emerging regime of ‘self-reporting’ is particularly destructive for Western companies operating abroad, who, attempting to comply with far-reaching Foreign Corrupt Practices Act liability, face the question: ‘Where else can we turn?’

The widely cited case of due diligence consultant ChinaWhys, which was convicted by Chinese anti-corruption authorities of illegally obtaining private information while assisting a company intending to self-report an alleged fraud, is one example of how absurd the demands of self-reporting have become.

Observers wryly note the deepening problem of ‘overcriminalisation’ in the enforcement of the FCPA and the UK Bribery Act. But the main problem is that anti-corruption as a concept has been turned into a campaign.

Into a toxic mixture of prosecutors with expanded powers and media-seeking careerism, there is a near-total destruction of the presumption of innocence. Becoming the target of an investigation, much less being named in a charge, carries a reputational cost so great that it bleeds over into court proceedings, as the process of tainting a defendant in the media impacts the decisions counsel will make in defence.

China is often criticised because you need to have strong political connections to achieve the desired outcome in court. Now there is a reflection of this guanxi in the way former prosecutors from the DoJ and CPS are eagerly hired by Big Law, where their duties to clients are not necessarily mounting a defence but rather cutting a deal with former colleagues on the regulatory side.

Anti-corruption in China is dismissed by many Western observers as a fa’ade used to sort out power struggles and benefit well-connected national companies. But there are much deeper, more complex drivers, including a political strategy for the party to survive as economic growth softens, as well as a potential political purge and a realignment of patronage networks.

The United States and United Kingdom can’t claim to be immune from legal processes that are driven by the headlines. What we need to do is have our prosecutors take a much lower profile in the press. Rule of law is not a concept that is strengthened by the press offices at the SFO and DoJ, and no amount of chest-beating and campaigning will serve to improve the functioning of the regulatory system.

We see the problems in China so clearly. Isn’t it time that we saw our own issues as well and did something about them?

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