IILJ Working Paper 2009/4

Civil Remedies for Corruption in Government Contracting: Zero Tolerance versus Proportional Liability

Kevin E. Davis

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Bribery in public contracting is a serious problem, particularly in societies with weak public institutions. The trend in the law applicable to contracts between governments and foreign firms is to refuse to enforce contracts procured through bribery. This zero-tolerance approach may have perverse consequences. Proof that a firm obtained a contract through bribery does not necessarily indicate the extent to which the firm has fallen short of its obligations to combat bribery. The zero-tolerance approach fails to take into account the extent to which the firm has not only attempted to prevent bribery but also monitored and punished employees who engage in bribery, cooperated with law enforcement authorities, and created value for the government in the course of performing its side of the contract. Subjecting bribe-payers to liability that is more proportional to fault seems preferable on a number of grounds.