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The Bank Group maintains an administrative process for sanctioning firms and individuals accused of having engaged in one or more sanctionable practices in connection with Bank Group financing. This is intended to provide the accused party, designated as the 'Respondent', with an appropriate level of due process before it is decided whether the Respondent will be sanctioned and, if so, which sanction is appropriate.
Legal Framework for Substantive Norms Applicable to the Sanctions Process
There are various sources of the substantive legal norms that govern the sanctions process. First and foremost, the underlying legal basis for the sanctions regime is the 'fiduciary duty' to protect the use of Bank financing in the Articles of Agreement. In addition, the policy framework for the Bank's sanctions regime constitutes an independent source of law second in precedence only to the Articles themselves. While these sources of law take precedence over all others, they rarely have a direct effect on the disposition of individual sanctions cases. The main source of law, and the one that governs every sanctions case, is the legal framework for the Bank finance in connection with which the alleged sanctionable practice took place. The sources of law for IBRD/IDA sanctions cases are described in detail in Chapter 2 of the Sanctions Manual.
The legal framework applicable to the sanctions process contains certain provisions that delimit the types of cases that may be brought into the sanctions process, as well as the firms and individuals who are subject to sanction, effectively functioning as a basis for the subject matter and in personam jurisdiction of the system. These provisions are described in detail in Chapter 3 of the Sanctions Manual.
The Bank Group has agreed with other multilateral development banks (MDBs) on harmonized definitions of sanctionable practices. These practices are corrupt practice, fraudulent practice, collusive practice and coercive practice. In addition, the Bank Group may also sanction a firm or individual for having engaged in ‘obstructive practice’ in connection with an INT investigation. Collectively, these practices are referred to as ‘sanctionable practices’ (World Bank Sanctions Procedures, dated April 15, 2012)
The Bank’s Integrity Vice Presidency (INT) is charged with investigating allegations and other indications that sanctionable practices have occurred in connection with Bank Group financed projects. If, after investigation, INT believes that there is sufficient evidence that a firm or individual has engaged in a sanctionable practice, it may launch a sanctions case by submitting a Statement of Accusations and Evidence to the Suspension and Debarment Officer (SDO).
The Bank has a mechanism for suspending firms and individuals from eligibility to be awarded Bank Group-financed contracts during the investigation phase. The SDO, upon request by INT, may impose a temporary suspension on the subject of an INT investigation prior to the commencement of formal sanctions proceedings, if the SDO finds that: (i) there is already sufficient evidence that the subject has engaged in at least one sanctionable practice, and (ii) had the accusations been included in a Statement of Accusations and Evidence, the SDO would recommend, as an appropriate sanction, debarment for a minimum period of no less than two years. Respondents may petition the SDO for the lifting of the suspension and provide rebutting evidence. (See Section 4.2 of the Sanctions Manual for details.)
The core of the sanctions process lies in formal sanctions proceedings, which consist of the following two tiers:
A first tier review of the Statement of Accusations and Evidence by the SDO for sufficiency of the evidence. If the SDO finds that the accusations are supported by sufficient evidence, he/she issues a Notice of Sanctions Proceedings to the Respondent, appending the Statement of Accusations and Evidence and recommending an appropriate sanction. In cases where the SDO recommends a sanction including a minimum period of debarment exceeding six (6) months, the Respondent, effective from the date of issuance of the Notice until the date of the final outcome of the sanctions proceedings, is temporarily suspended from eligibility for award of Bank-financed contracts. The Respondent may file an Explanation with the SDO seeking either dismissal of the case or a reduction in the recommended sanction. If the Respondent does not contest the SDO’s final determination, the recommended sanction (if any) is then imposed on the Respondent. (See Chapter 4 of the Sanctions Manual for details of the SDO phase of proceedings.)
In cases where the Respondent wishes to contest the SDO’s final determination, the Respondent may trigger a second tier review by filing a Response with the World Bank Group’s Sanctions Board, a body composed of three Bank staff and four non-Bank staff, which considers the case de novo and takes the final decision on an appropriate sanction, if any. This phase of the proceedings may include hearings if the Respondent or INT requests them or upon decision by the Sanctions Board Chair. The name(s) of the sanctioned party(ies) and the sanction(s) imposed are made public. (See Chapter 5 of the Sanctions Manual for details on Sanctions Board decisions.)
Any kind of evidence is admissible in the course of sanctions proceedings, with the weight to be afforded the evidence decided in the discretion of the SDO and Sanctions Board. The burden of proof lies initially with INT, which is charged with proving that it ‘more likely than not’ that the Respondent(s) engaged in sanctionable conduct. Once INT has met its initial burden of proof, the burden then shifts to the Respondent. (See Chapter 6 of the Sanctions Manual for details on evidentiary matters.)
The same basic procedures apply to cases relating to IFC, MIGA and Bank Guarantee operations, with adjustments appropriate to their different business models, in particular separate SDOs with more expansive standards of review and the appointment of alternate members of the Sanctions Board to hear cases relating to private sector operations.
Click image to enlarge Sanctions System Flowchart
In addition to the Articles of Agreement, the policy framework, and the operational legal framework for Bank financing, the rules governing the sanctions proceedings are contained in certain key documents. The functioning of the Sanctions Board is governed by a Sanctions Board Statute, which, among other things, lays out the process for appointing and removing the members of the Sanctions Board, and appends a Code of Conduct for members of the Sanctions Board (see Annex A of the Sanctions Manual). The SDO is Bank staff and has formal terms of reference (see Annex B of the Sanctions Manual) and Management has developed and issued detailed Sanctions Procedures (also attached as Annex C of the Sanctions Manual) that, together with the Sanctions Board Statute, govern the administrative process by which the Bank determines whether or not to sanction parties alleged to have engaged in a sanctionable practice. In addition, basic documents include the Sanctioning Guidelines (see Annex D of the Sanctions Manual and discussion below) and the Rules on Delivery (see Annex G of the Sanctions Manual), which govern the delivery of notices and submission of other materials in sanctions proceedings, including rules on constructive delivery. Importantly, the Sanctions Procedures, Sanctions Board Statute, Sanctioning Guidelines, and Rules on Delivery are included as annexes to the Notice of Sanctions Proceedings.
The Sanctions Procedures provide for a range of five possible sanctions:
Debarment with Conditional Release: The ‘baseline’ or default sanction is to impose a minimum period of debarment (i.e., ineligibility to be awarded a Bank Group financed contract or otherwise participate in Bank Group financed activities) of three years, after which the sanctioned party may be released if it has complied with certain defined conditions. The conditions normally include the debarred party putting in place or enhancing, and implementing for an adequate period, an integrity compliance program satisfactory to the World Bank Group. Respondents must apply for release and provide evidence that they have met the conditions for release. The Integrity Compliance Office (ICO) determines whether the conditions for release have been met. If the decision is negative, the Respondent has the right to appeal the decision to the Sanctions Board, but solely on grounds of abuse of discretion (i.e., if the ICO’s determination lacks an observable basis or is otherwise arbitrary, is based on disregard of a material fact or a material mistake of fact, or was taken in material violation of the Sanctions Procedures).
Indefinite or fixed-term debarment. In cases where no appreciable purpose would be served by imposing conditions for release, sanctioned parties may be debarred for a specified period of time, after which they are automatically released from debarment. This would occur, for example, in cases where a sanctioned firm has already in place a robust corporate compliance program, the sanctionable practice involved the isolated acts of an employee or employees whose employment contracts have already been terminated, and the proposed debarment is for a relative short period of time (e.g., one year or less). At the opposite extreme, in exceptional cases where there is no realistic prospect that the Respondent can be rehabilitated, it may also be debarred permanently.
Conditional Non-Debarment. Under this sanction, the sanctioned party is not debarred provided the party complies with certain defined conditions within a set time frame. If the conditions are not met, the party is debarred for a defined period of time. Compliance with conditions for non-debarment is determined by the ICO and subject to the same procedure as for conditions for release from debarment. Conditional non-debarment is normally applied in cases where the Respondent has already taken comprehensive voluntary corrective measures and the circumstances otherwise indicate that it need not be debarred. It may also be applied to parents and other affiliates of Respondents in cases where they were not engaged in misconduct but a systemic failure to supervise made the misconduct possible.
Letter of Reprimand. In some cases, debarment or even conditional non-debarment may be disproportionate to the offense. In such cases, the Bank issues a letter of reprimand to the sanctioned party. Examples include cases where an affiliate of the Respondent has been found to have some shared responsibility for the misconduct because of an isolated lapse in supervision, but the affiliate was not in any way complicit in the misconduct.
Restitution. In appropriate cases, the sanctioned party may be required to make restitution to the Borrower or to any other party or take actions to remedy the harm done by its misconduct.
The choice of the appropriate sanction by the SDO or the Sanctions Board is guided by Sanctioning Guidelines, a public document that seeks to enhance predictability, while maintaining sufficient room for the exercise of discretion by the SDO and the Sanctions Board to reflect the unique circumstances of each particular case. The Guidelines include detailed treatment of aggravating and mitigating factors, with indicative ranges for increases (in the case of aggravating factors) and reductions (in the case of mitigating factors). Detailed guidance for determining the appropriate sanction is also set out in Chapter 7 of the Sanctions Manual. Except when permanent debarment is imposed, parties debarred for a minimum period in excess of 10 years may petition for a reduction of the minimum period of debarment after 10 years have elapsed. The Bank Group’s Integrity Compliance Guidelines for use in connection with debarment with conditional release and conditional non-debarment are set out in Annex E of the Sanctions Manual.
The Sanctions Procedures provide that affiliates of Respondents may also be sanctioned, and that sanctions may be applied to the successors and assigns of sanctioned parties. Management has developed guidance for dealing with sanctioning of corporate groups, as well as corporate restructurings which may occur after a firm is sanctioned. The guidance provides flexible principles for the application of sanctions to affiliates of the Respondent(s) and successors and assigns. The guidance also allows targeted sanctions in cases where the sanctionable practice is shown to have been limited to a particular division within a firm. The Sanctions Procedures afford parent or ‘sister’ entities the opportunity to defend themselves against charges of culpability or responsibility for the Respondent’s wrongdoing, with substantially the same procedural rights as Respondents themselves. Detailed guidance for dealing with corporate groups is set out in Chapter 8 of the Sanctions Manual.
Decision on compliance with conditions for release from debarment and conditions for non-debarment are taken by the ICO, who is located in INT. Details of the role of the ICO and guidance on carrying out that role is set out in Chapter 9 of the Sanctions Manual.
In appropriate circumstances, sanctions may also be imposed on a Respondent through a negotiated resolution of the case. Under this mechanism, sanctions cases may be resolved by negotiations at any stage of the sanctions process up to the issuance of a decision by the Sanctions Board, including during the investigation stage prior to the commencement of sanctions proceedings.
Settlements are subject to a number of procedural and substantive safeguards to ensure fairness, transparency and credibility, including criteria for entering into settlements and a number of procedural checks and balances’. Among other things, the Bank Group General Counsel clears all settlement agreements, in agreement with the General Counsel of IFC or MIGA in cases involving IFC or MIGA projects. Settlements are subject to review by the relevant SDO to confirm that: (i) the agreement was entered into voluntarily and without duress and (ii) the agreed sanction, if any, is broadly consistent with the Sanctioning Guidelines. The settlement is then embedded within a sanction imposed by the SDO. Detailed guidance for undertaking settlements is set out in Chapter 10 of the Sanctions Manual.
Respondents and other affected parties may appeal decisions of the ICO and certain other discretionary decisions taken by Management to the Sanctions Board on the limited grounds of abuse of discretion. Guidance on handling such appeals is set out in Chapter 11 of the Sanctions Manual.
The General Services Department's (GSD) Vendor Eligibility Policy prescribes standards and procedures for determining whether a vendor is excluded (and thereby debarred), either permanently or for a specific period of time, from receiving future corporate contract awards from the Bank Group based on a finding by the GSD Director that the vendor is “non-responsible”. The Director of GSD may suspend a vendor pending a final responsibility determination, during which time the vendor is afforded an opportunity to show cause why it should be found responsible. The Director of GSD may determine that a vendor is non-responsible based on fraudulent, corrupt, collusive, coercive or obstructive practices, or based on any other action that the Director determines is so serious in nature that it affects the present responsibility of the vendor or could result in harm to the Bank Group's reputation. GSD's definitions of fraud and corruption under the Vendor Eligibility Policy are identical to the definition of fraud and corruption under the Bank Group’s Sanctions Regime, and GSD's sanctions guidelines are similarly aligned with those applicable to the SDO and the Sanctions Board.
Firms and individuals debarred by the SDO or Sanctions Board are ‘cross-debarred’ by GSD. GSD debarments (on fraud and corruption grounds only) are also ‘cross-debarred’ to Bank operations through a referral mechanism set out in the Sanctions Procedures. Section 12.1 of the Sanctions Manual below details the referral process.
The Bank Group imposes sanctions based on a debarment decided by another MDB. Under an agreement signed on April 9, 2010, each MDB informs the other MDBs of its debarments of over one year in duration and, subject to an ‘opt out’, the other MDBs enforce those debarments. Such ‘cross-debarments’ by the Bank Group of other MDBs’ debarments are not subject to the sanctions process, but are implemented by Bank Group staff. Decisions to opt out are taken by Management, based solely on legal or policy considerations, and are highly exceptional. Section 12.3 of the Sanctions Manual describes the internal protocol for handing MDB cross-debarments, and the relevant internal protocol is set out in Annex F of the Sanctions Manual.
The Bank has also developed rules governing the delivery of Notices of Sanctions Proceedings and other documents in connection with the sanctions process. These rules are described in Section 12.4 of the Sanctions Manual and Annex G of the Sanctions Manual. Sanctions Proceedings are confidential; the steps taken in order to safeguard that confidentiality, as well as exceptions allowed, are outlined in Section 12.5 of the Sanctions Manual.
- Legal Framework for Substantive Norms Applicable to the Sanctions Process
- Jurisdiction of the Sanctions Process
- Sanctionable Practices
- Investigation and Preparation of a Statement of Accusations and Evidence
- Early Temporary Suspension
- Sanctions Proceedings
- Basic Documents
- Corporate Procurement
- MDB Cross-Debarment
- Delivery - Confidentiality