THE DEBARMENT OF CORRUPT CONTRACTORS ... Debarment of Corrupt Contractors from World Bank-Financed Contracts

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    Sope Williams (sope.williams@nottingham.ac.uk) is a Lecturer in Law at the University of Nottingham, U.K., and a Member of the Public Procurement Research Group. The author thanks Professor Sue Arrowsmith for helpful comments on an earlier draft and acknowledges a grant from the British Academy, which facilitated this research.

    THE DEBARMENT OF CORRUPT CONTRACTORS FROM WORLD BANK-FINANCED CONTRACTS

    Sope Williams

    I. Introduction ...................................................................................... 278 II. Background to the World Bank Procurement Guidelines ............... 279 III. World Bank Anti-Corruption Policy ................................................ 280 IV. World Bank Debarment Policy and Procedures .............................. 283 V. Grounds for Debarment ................................................................... 286

    A. “Corrupt Practice” ....................................................................... 287 B. “Fraudulent Practice” .................................................................. 287 C. “Collusive Practices” ................................................................... 288 D. “Coercive Practices” .................................................................... 288

    VI. Rejection of a Proposal for Award .................................................... 289 A. Introduction ................................................................................. 289 B. The Persons Who May Be Rejected ........................................... 289

    1. Joint Ventures ......................................................................... 290 2. Subcontractors ........................................................................ 291

    C. Contracting Entities That Must Abide by the Rejection ........... 291 D. Procedure for Rejection............................................................... 291 E. Consequence of Rejection ........................................................... 293 F. The Mandatory Nature of Rejection .......................................... 293 G. Remedies and Recourse for Affected Suppliers .......................... 293

    VII. Debarment ......................................................................................... 294 A. Introduction ................................................................................. 294 B. The Persons Who May Be Debarred ......................................... 295 C. Contracting Entities That Must Abide by the Debarment ........ 296 D. Procedure for Debarring ............................................................. 297 E. Length of Debarment .................................................................. 298 F. Range of Debarment Measures ................................................... 299 G. Avoiding Debarment: The Voluntary Disclosure Program........ 300 H. Relevance of Corruption Convictions ......................................... 301 I. Consequence of Debarment ........................................................ 301 J. The Discretionary Nature of Debarment ................................... 302 K. Remedies and Recourse for Affected Suppliers .......................... 302

    1. Immunity ................................................................................. 302

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  • 278 Public Contract Law Journal • Vol. 36, No. 3 • Spring 2007

    2. International Law ................................................................... 302 3. Interest in Providing Recourse for Aggrieved Persons .......... 303 4. Administrative Burden ............................................................ 303 5. Bank Objectives ...................................................................... 303

    VIII. Conclusion ...................................................................................... 305

    I. INTRODUCTION

    The World Bank1 is globally the largest development bank. The Bank came into existence in 1946 to provide post-war reconstruction aid to countries dev- astated by the Second World War,2 but later changed its focus to provide devel- opment fi nance for developing countries.3 Like most multilateral development banks, the Bank imposes good-governance and anti-corruption requirements4 on borrower countries where it provides structural lending or fi nances a de- velopment project. The Bank also requires that the procurement process for funded projects is conducted according to Bank procedures.5 An important as- pect of its procurement procedures is focused on controlling corruption within these projects. To this end, Bank procurement guidelines provide for the de- barment of corrupt contractors from Bank-fi nanced contracts.

    This article will analyze Bank measures requiring the debarment6 of cor- rupt suppliers from Bank-fi nanced projects. Although these measures are jurisdictionally limited to procurements funded by the Bank, Bank practice provides some insight into the challenges created by a debarment requirement irrespective of the nature of the legal system or limits of its jurisdiction. As the fi rst multilateral development bank to utilize debarment where corruption was established within a project, the Bank led the way for other development

    1. The World Bank Group is a generic term that refers to fi ve institutions—the International Bank for Reconstruction and Development (IBRD), the International Development Agency (IDA), the International Financial Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). However, strictly speaking, the term “World Bank” refers to the IBRD. In this article, the term “World Bank” (the Bank) will refer to the IBRD and the IDA as the procurement procedures for both institutions are the same.

    2. See Articles of Agreement of the International Bank for Reconstruction and Development art. I, July 22, 1944, 60 Stat. 1440, 2 U.N.T.S. 134, amended Dec. 16, 1965, 16 U.S.T. 1942, 606 U.N.T.S. 294 [hereinafter Articles of Agreement].

    3. See Michael P. Malloy, Shifting Paradigms: Institutional Roles in a Changing World, 62 Fordham L. Rev. 1911, 1911, 1923 (1994); Herbert V. Morais, Testing the Frontiers of Their Mandates: The Experience of the Multilateral Development Banks, 98 Am. Soc’y Int’l L. Proc. 64, 64 (2004).

    4. Concrete anti-corruption measures taken by the Bank include loans to developing coun- tries to build accountable public sectors and direct technical assistance to assist in outlawing brib- ery, nepotism, and other corrupt practices and promoting transparency. See Saladin Al-Jurf, Good Governance and Transparency: Their Impact on Development, 9 Transnat’l L. & Contemp. Probs. 193, 203 (1999); Lawrence Tshuma, The Political Economy of the World Bank’s Legal Framework for Economic Development, 8 Soc. & Legal Stud. 75, 78–79 (1999).

    5. World Bank, Guidelines: Procurement under IBRD Loans and IDA Credits ¶ 1.1 (2004) [hereinafter Procurement Guidelines].

    6. Mario A. Aguilar et al., Preventing Fraud and Corruption in World Bank Projects: A Guide for Staff 9 (2000).

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  • Debarment of Corrupt Contractors from World Bank-Financed Contracts 279

    banks that have, with slight modifi cation, since adopted similar policies.7 As a result, Bank practice in relation to debarment informs the practices of these institutions.

    This article sets out the background to the Bank’s procurement regulatory framework, offers an introduction to the Bank’s anti-corruption policy, and then critically examines the exclusion and debarment measures as used by the Bank. The article concludes that the costs of improving the effectiveness of the debarment policy may outweigh any benefi ts, and the limitations on the debarment mechanism may need to be accepted as inherent in the nature of the debarment mechanism.

    II. BACKGROUND TO THE WORLD BANK PROCUREMENT GUIDELINES

    As an international development institution, the World Bank funds capital- intensive projects in developing countries, which are implemented by means of procurements in these countries. By its Articles of Agreement,8 the Bank is required to ensure that loan proceeds are used for the purposes for which the loan was granted, with due regard to considerations of economy and effi ciency.9 The Articles also prohibit the Bank from taking political or noneconomic considerations into account10 or interfering in the political affairs of its members.11 This raised a quandary for the Bank in deciding how to ensure that the disbursement of loan proceeds through project pro- curements is conducted in an open, transparent, and competitive manner in countries that might have weak public administration systems, or lax or nonexistent public procurement regulation, without interfering with the borrower’s internal administration. To circumvent this problem, the Bank makes it a condition of its fi nance that project procurement is done accord- ing to Bank procurement guidelines.12 Although the procurement process is subject to Bank rules, the process is managed by the borrower, with the Bank merely taking a supervisory role to ensure that the process is properly conducted.13

    The fi rst formal direction on Bank procurement, issued in 1964, contained the procedures to be used by Bank staff in conducting international com- petitive bidding (ICB).14 These initial documents have undergone signifi cant

    7. See