[Transcript] Cross-border investigations & global trade – Interview with Senator George J. Mitchell
Ahead of the Global Investigations Summit on 14 & 15 October 2014, Craig Sharp, Editor of PEXNetwork.com had a chance to sit down with former US Senate Majority Leader, Senator George J. Mitchell to discuss the complexities of cross-border negotiations, a facet of legal process which; due to an ever-growing global marketplace, is becoming increasingly important.
Also, you can listen to the full audio interview here.
Craig Sharp: Hello and welcome to Process Perspectives, a podcast series produced by the Process Excellence Network. PEX Network is an online and events community for process professionals. I’m your host, Craig Sharp, editor of PEXNetwork.com.
Coming in today’s programme we will be discussing the complex process of cross-border negotiations with a very special guest, Senator George J Mitchell. Senator Mitchell is an incredibly accomplished public figure. He’s been practising law since 1960 when he served as a trial attorney for the anti-trust division of the United States Department of Justice in Washington.
To list some of the Senator’s many achievements, he served as a United States Senator of Maine for the Democratic party from 1980 until 1995, and as Senate Majority Leader from 1989 until 1995. Senator Mitchell was the United States Special Envoy for Middle East Peace from 2009 to 2011, and prior to this the Senator was instrumental in the Northern Ireland peace process, serving as United States Special Envoy for Northern Ireland, and chairing the All Party Peace Negotiations which led to the Belfast Peace Agreement.
Senator Mitchell is currently a partner and Chairman Emeritus at International Legal Practice, DLA Piper LLP. Senator Mitchell, thank you for joining us today.
Senator Mitchell: Thanks for having me.
Craig Sharp: Senator, I’ll begin by asking, what do you see as the most important themes and trends in the area of cross-border investigations in 2014?
Senator Mitchell: In the post World War Two period, and now going into the 21st Century, there’s been a dramatic increase in cross-border trade. International organisations have been created to establish legal regimes to facilitate trade and to reduce barriers to trade. As a consequence, we have seen this dramatic increase and a corresponding growth of multi-national corporations and other business forms to accomplish and accommodate that trade. And as a result, we are now seeing a catch up in regulation of that trade as regulators in individual countries increase their funding, their resources, their technology to try to keep pace with the increase in trade. I think there’s every indication that this will continue; it will accelerate and expand, because overall it’s been a good thing for most of the people in most of the countries who have engaged in such trade.
I think that, increasingly, businesses will find more effective regulation on the part of national regulators and a growing level of co-ordination and co-operation. I think it will take quite a bit of time before there is uniformity around the world and across borders and regulation, but the trend is certainly in that direction.
Craig Sharp: You mentioned uniformity, Senator. I had a look at a KPMG survey which came out earlier this year. One of the disparities was data regulations, particularly pertaining to privacy issues. I wondered if you had seen that 46% of global executives say that the greatest challenge for cross-border investigations is the data privacy issue?
Senator Mitchell: That’s no surprise. I think you’d find the same figures internally among businesses operating in, certainly in developed countries. And I think that’s going to grow as well. The speed with which data collection, data storage and data dissemination is occurring has outpaced not only the capacity of regulators, but often outpaced the capacity of businesses and governments themselves to make sound judgements on how to use such data, how to control it and how to protect it where necessary. And I don’t think that trend’s going to decelerate at any time soon.
So that’s a growing concern that businesses have, internationally, but I think it’s quite clear domestically as well.
Craig Sharp: That’s interesting! So, looking ahead, what other developments are we likely to see in the area of cross-border investigations?
Senator Mitchell: I think you’re going to see increasingly, certainly in the United States and probably elsewhere, the pursuit of individuals and the assignment of personal responsibility for business executives, at all levels, when investigations into wrongful behaviour do occur. There had been a pattern of accepting pleas from the corporations themselves without any personal responsibility. Often in some civil cases in the United States, a company would do that, by a denial of wrongdoing, but by a payment of a fine or some penalty of that type.
I think we’re now seeing a trend toward greater assignment of personal responsibility, even the insistence on guilty pleas in criminal cases - certainly with respect to large banks doing business in the United States. And that may well spread to other regulators as well. The regulator in the UK is now talking to several of the large banks regarding allegations of wrongdoing in certain areas of trading, and the US Department of Justice is doing so as well. So that’s a worrisome trend for businesses.
The other issue is being able to deal effectively with the substantial growth in these businesses. What you see in many of these large multi-national corporations is very large enterprises with tens of thousands, in some cases hundreds of thousands, of employees spread around the world, often the product of a series of mergers. So the desire to standardise and to establish universally accepted standards of ethics and good behaviour is very difficult to implement.
What may be a customary practice in one country may be regarded as inappropriate in another country, and indeed may be regarded as criminal in yet another. And taking people, bringing them together in these large organisations, trying to establish a good, effective and meaningful universal set of ethical standards - and then to comply with all of the relevant laws and relevant regulations - is proving to be a very difficult task.
I think business is going to face that in the future which is one reason why law firms like DLA Piper and others that provide services to large corporations are also expanding worldwide to try to meet the need on the ground when necessary.
Craig Sharp: So do you feel that the international mergers and acquisitions that have become the trend for these corporations does kind of muddy the waters with regards to internal processes? That the clash of regional and international requirements confuses things from a process perspective?
Senator Mitchell: Well I think first it’s a benefit of course, because as I said earlier, enhanced trade has been beneficial. It has a long and interesting history. If I could digress here for a moment… it was in late December of 1942 when a small group of American officials travelled to London to meet with counterparts in the British government. Their goal was to plan for the reconstruction that they knew would be forthcoming at the end of the Second World War.
As you will recall, 1942 had been a time of the major victories by the Allies at Midway in the Pacific, in Stalingrad and North Africa, and it turned the tide. The War lasted for quite a while longer, but nonetheless they planned early, and their central objective was to establish an international trading regime that would limit or prevent (they hoped) the reaction that many of the countries had in the recession and early years of the Depression - of protectionism. And all of them, US and British officials, felt that had accelerated the slide into the Depression, and created the circumstances which led to the Second World War.
So their principal objective was to reduce trade barriers, to create an international trading regime, to encourage trade, not just as a way of improving standards of living, but of preventing conflict among nations that arose from economic issues in the 1920s and 1930s. And ultimately they were remarkably successful.
So I think, overall, increased trade has been beneficial, but as with everything else in life, with benefits come some difficulties and some problems. As these large multi-national corporations have grown, a difficult task for them has been to rationalise and improve the behaviour in terms of ethical and legal compliance of their employees, which is much more difficult to do when you have people all around the world - different cultures, different societies, different practices, even different time zones. I think that they’re making progress in that direction - don’t get me wrong: I think this is a positive development for most people - but there are bumps along the road and problems that have to be solved, and this is one of them.
Craig Sharp: And in your experience, Senator, what are the critical skills for an investigation team in cross-border investigations?
Senator Mitchell: Well I think, first off, there has to be a capacity for immediate response. Often what happens in the first hours or days after learning of an inquiry can be decisive in what transpires down the road.
So the capacity to recognise very quickly what is involved, what the challenges are - which of course then determines what the response will be - can be decisive in how an investigation is handled.
Now there are different types of course. Many of the investigations that we do involve corporations deciding (on their own) that it is necessary to conduct an internal investigation. That doesn’t have the same immediacy as a voluntary disclosure made by the company to the authorities, or, even more difficult, after an investigation is commenced by the authorities, either civil or criminal.
The second skill, after being able to handle the immediate response, has to be the ability to take prompt steps to protect evidence, to preserve it, to make sure that there’s adequate internal notification so that everybody involved who may be called upon to respond does so properly. Also, that all assets are secured, that there’s immediate notification to those outside the corporation who can provide help - like law firms, accountants and others; and to make certain that the legal privileges that exist within an entity are fully understood and properly preserved. That’s extremely important.
Next, it is important to decide if an internal investigation is warranted, and many regulators insist on that as a part of their approach. I’m more familiar of course with the practice in the US where the Department of Justice and the Securities Exchange Commission often request an internal investigation as part of their own process, and rely, to some extent, on the integrity and the results of that investigation.
And finally, you have to use examples of wrongdoing to drive down throughout an entire organisation the importance of compliance. That is not to do what has been alleged in this instance. Each of these occurrences is unfortunate, but they do provide a teaching opportunity to get the message throughout the ranks, which, as I said, can sometimes be difficult. Multi-layered organisations all around the world, with different cultures, get them to understand the high priority given to ethics. Full compliance with the law is challenging, and a continuing challenge for all business enterprises.
Craig Sharp: That’s an interesting point. Do you think that a global, universal set of ethics is a possibility for these multi-nationals?
Senator Mitchell: I think that’s a long way off. There will be movement in that direction. I don’t think it will be accomplished, certainly in my lifetime, or in the immediate future, because the reverse is happening in geo-politics, of course, and the number of countries is increasing.
What you’re seeing around the world is the reality that - for many people in many parts of the world - tribal, family, clan, and historical relationships are larger factors in identity than nationhood. And people increasingly are looking to separate into smaller and smaller units.
You just went through it in the UK with the vote in Scotland. Quebec has had two votes in the last few decades to separate from Canada. Neither of them passed, but the issue remains. You’re now seeing an effort made in the Middle East to establish a Kurdish state. The Kurds certainly would like their own country. You’re seeing the possible fracturing of several countries.
This is a consequence of several factors, one of which, of course, is that many of the national boundaries in the Middle East and in Africa were drawn by colonial powers and were unrelated to the circumstances and the ethnicity and tribal nature of the people who actually lived in these regions.
I think there is a drive toward uniformity in regulation but, at the same time, you have the countervailing drive to more and more separate entities, and those two will continue in some tension. I think there will be some consensus and some degree of uniformity, but I doubt that it will get to the point where you’ll have a single international standard, certainly not in the near future.
Craig Sharp: In your experience, what are some of the biggest challenges in cross-border investigations?
Senator Mitchell: Well I’ve touched on many of them in suggesting what the response should be. First and foremost is the fact that you have different legal standards and different legal requirements. I’ve had some experience in the banking area in this regard, and you have a regulator in the UK, and an active series of regulators in the United States. One problem, or one fact, that people have to deal with is that in the US there are several regulatory agencies involved in banking and in other industries as well. Switzerland is a banking centre, you have a regulator there.
Now there we are seeing, I think, a greater movement toward uniformity than in some other areas of commerce, primarily because banking is itself a heavily regulated industry everywhere, because of the essential role that it plays in national economies. So that’s a significant problem.
The second problem is one that I’ve mentioned earlier: different languages, different cultural standards. The third is different practices that have developed in different countries in terms of how people view issues, whether they regard them as problems or not, and how they’re trained to respond to them.
I think that the importance of voluntary effort and disclosure is gaining ground; it’s been a practice here for some time, that is to say regulators give leniency and some credit to those who uncover problems on their own and bring them forward on their own, as opposed to waiting until they’re discovered by outsiders or by investigators or regulators themselves.
Craig Sharp: Thank you very much. Senator, I believe that’s all the questions we have for you today, so thank you for joining us. It’s been an absolute pleasure.
Senator Mitchell: Thank you. It’s my pleasure. I appreciate being on.
Craig Sharp: That’s all from us here today at the Process Excellence Network. As always, don’t forget that for additional process related resources, including podcasts, articles, webinars and more, log onto www.PEXNetwork.com. Thank you, goodbye.