The World Bank Debarment System – Part II
In the previous post, the World Bank’s system for debarment was discussed. This post discusses the collateral impacts of a World Bank debarment in the context of the World Bank’s debarment of Alstom SA.
What did the World Bank debarment of Alstom mean in the broader context of international procurement? Are there potential collateral consequences for companies and for governments as a result of the World Bank’s actions?
The African Development Bank Group, the Inter-American Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the World Bank have a cross-debarment agreement such that if one bank debars a company or individual, that company or individual is also debarred from pursuing contracts with the other two banks. Therefore, the World Bank’s debarment of Alstom also applied to the other development banks.
Currently, the United States does not automatically recognize a World Bank debarment and exclude contractors on that account. A Suspension and Debarment Official could, however, still review the causes for the World Bank’s debarment and make an independent determination that debarment is appropriate for the United States Government. A company with circumstances similar to Alstom’s could see itself being simultaneously debarred from the World Bank and United States Federal contracting.
The European Union’s new procurement directives update the current exclusion regime at the member state level to require contractors to self-certify as part of every procurement that there have been no convictions for a company or individual officers of a company for integrity related offenses. In the Alstom Zambia case, there was no criminal conviction; therefore, a company with similar circumstances would be free to continue to win and perform government contracts.
The current Canadian regime also limits exclusions to convictions or discharges for integrity offenses. Therefore, the debarment consequences would be very similar to those within the European Union.
As the international suspension and debarment regime grows and continues to become more sophisticated, contractors need to be ever more aware that the consequences of corruption and fraud can have impacts beyond the state where the corruption occurs. Additionally, it is not just the actions of the legal system such as convictions that can have significant consequences on a business but suspensions and debarments as well. With the harmonization of debarment regimes, the consequences of one debarment by one government could eventually become an automatic debarment in another. While this is not currently the case, the European Union’s new procurement directives and the Canadian debarment system demonstrate the potential avenues that an automatic cross-debarment could take. If a company is convicted for corruption, even outside of the respective state’s borders, the company is still automatically debarred from government procurement activities for a period of time. The development banks cross-debarment agreement demonstrates a similar automatic exclusion between governments for debarment actions is practicable and possible.