MDB and Other Enforcement
Multilateral Development Banks Enforcement
As described in last year’s report, while the primary function of global multilateral development banks (MDBs) is to provide financial support in the form of loans and grants, along with professional advice, to projects in developing countries, they also play an important role in preventing, rooting out, and punishing corruption affecting the projects they finance. Anti-corruption developments in 2022 at two of the most prominent MDBs—the World Bank and the Inter-American Development Bank (IDB)—are discussed in this section. As set forth in more detail below, the US Court of Appeals for the District of Columbia Circuit upheld IDB’s immunity in an action brought by two individuals and a business whom the IDB debarred and highlighted the significant impacts of cross-debarment. Elsewhere, the World Bank invested in an anti-corruption presence in Senegal, potentially signaling a shift in the World Bank’s investigative strategy and showing the institution’s interest and commitment in West Africa.
MDB Immunity Upheld In Us Courts
In a decision in June 2022, the US Court of Appeals for the District of Columbia Circuit upheld IDB’s immunity from suits challenging its debarment actions. The decision, Rosenkrantz v. Inter-American Development Bank,[1] limits debarred entities’ ability to challenge their debarment in US court.
On September 20, 2021, US national Noah Rosenkrantz, Canadian national Christopher Thibedeau, and Barbados company TTEK, Inc. were placed on the IDB debarment list by the IDB Sanctions Committee.[2] Rosenkrantz is debarred until 2029,[3] on grounds of alleged corruption and fraud related to contracts entered into with the government of Barbados.[4] Thibedeau and TTEK are debarred until 2025 for alleged collusion.[5] On December 14, 2020, Rosenkrantz, Thibedeau, and TTEK filed a suit against the IDB in the federal district court for the District of Columbia asserting claims of breach of contract, breach of the implied covenant of good faith and fair dealing, and tortious interference with contract.[6] The plaintiffs alleged that the IDB committed breaches of the IDB’s internal administrative debarment procedures by blocking the plaintiffs’ access to records that the plaintiffs believed were necessary to defend themselves against debarment, among other claims.[7] The IDB moved to dismiss the lawsuit, arguing that it was immune from suit under the International Organizations Immunities Act of 1945, 22 USC §§ 288-288l.[8] The district court granted the IDB’s motion to dismiss.[9]
Rozenkrantz, Thibedeau, and TTEK appealed, and the DC Circuit affirmed the district court’s dismissal of the action.[10] The DC Circuit explained that under US law, international organizations like IDB are generally immune from the jurisdiction of US courts, unless narrow statutory exceptions to immunity apply.[11] The DC Circuit then rejected the plaintiffs’ arguments that their case fell within the commercial-activity exception.[12] The court explained that IDB’s sanctions procedures are designed to “root out and deter fraud and waste in the use of public funds, in the same manner as many sovereigns.”[13] Although the plaintiffs argued that numerous private market actors use similar disciplinary action to prevent wrongdoing, the DC Circuit rejected that argument, pointing to the considerable implications of MDB disbarment. The court explained that—particularly in light of cross-debarment with other development banks and governments—the consequences of IDB disbarment are severe, potentially leading to “total exclusion of a particular party from the market.”[14] IDB’s exercise of its authority in this realm, the court concluded, is more akin to sovereign power and thus is not “commercial” in nature.[15] Following precedent, the court also rejected the plaintiffs’ argument that a waiver provision in the IDB charter operated as a waiver of immunity to the plaintiffs’ claims.[16]
World Bank Pilots Use of Overseas Investigators
The World Bank’s arrangement for investigating and punishing corruption includes the office of the Integrity Vice President, which investigates sanctionable conduct and may seek sanctions or enter a settlement; the Office of Suspension and Debarment (OSD), which reviews settlements, conducts first-tier adjudication, and may recommend sanctions; the Sanctions Board, which provides a second and final adjudication in contested cases; as well as an Integrity Compliance Office, which advises on and assesses respondents’ implementation of remedial measures imposed as conditions of non-debarment. The investigators in the office of the Integrity Vice President have long been based in the World Bank’s headquarters in Washington, DC.[17] In 2022, the World Bank launched a pilot program of employing investigators overseas.[18] The program, which began with an effort to hire investigative staff in Senegal, will continue over the next two years.[19] In addition, in the past year, the World Bank opened 48 new and closed 31 existing external investigations and submitted 18 sanctions cases and 15 settlements for review and adjudication. The World Bank ultimately debarred or otherwise sanctioned 35 firms and individuals and released from sanctions 22 entities.
Footnotes
[1] 35 F.4th 854 (D.C. Cir. 2022).
[2] https://www.iadb.org/en/transparency/sanctioned-firms-and-individuals
[3] https://www.iadb.org/en/transparency/sanctioned-firms-and-individuals
[4] Memorandum Opinion, Rosenkrantz et al. v. Inter-American Development Bank (Apr. 5, 2021) (D.D.C. No. 20-3670).
[5] https://www.iadb.org/en/transparency/sanctioned-firms-and-individuals
[6] Noah J. Rosenkrantz, Christopher Thibedeau, TTEK, Inc. v. Inter-American Development Bank, 1:20-cv-03670 (D.D.C.).
[7] Memorandum Opinion, Rosenkrantz et al. v. Inter-American Development Bank (Apr. 5, 2021) (D.D.C. No. 20-3670).
[8] Memorandum Opinion, Rosenkrantz et al. v. Inter-American Development Bank (Apr. 5, 2021) (D.D.C. No. 20-3670).
[9] Memorandum Opinion, Rosenkrantz et al. v. Inter-American Development Bank (Apr. 5, 2021) (D.D.C. No. 20-3670).
[10] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).
[11] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).
[12] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).
[13] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).
[14] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).
[15] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).
[16] Rosenkrantz v. Inter-American Development Bank, 35 F.4th 854 (D.C. Cir. 2022).