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In a recent trial in Lesotho, the Court found the chief executive of the Lesotho Highlands Development Agency (LHDA) guilty of accepting brides from multinationals to secure tenders in the Lesotho Highlands Water Project (LHWP). The court has subsequently brought various multinationals to court for their part in the bribery.
Lesotho is a small, mountainous country, poorly endowed with natural resources, except for water. Since the 1950’s there has developed a strategy to export Lesotho ’s water to neighbouring South Africa. The manifestation of these plans has resulted in a massive construction of dams and channels known as the Lesotho Highlands Water Project, involving an estimated US$8 billion. The Project promises huge royalties from water sales as well as from hydroelectric power. The Project also promises the development of the rural areas of Lesotho and compensation for those who have been displaced and otherwise affected by the dams.
However, in most past cases, the construction of large dams has been controversial; greater then expected costs, poor bottom-line returns, non-deliverance of promises of benefits to the people, as well as high environmental damage and disruption of displaced people’s lives. The business of Big Dam construction has in the past been wracked by corruption, bribery and a lack of transparency in the tender-process. Corruption and bribery distorts the tendering process and may substantially increase the cost of the dam to the host country and its backers.
In the High Court of Lesotho, key players in the LHWP have been accused of taking part in bribe-payments made by bidding companies to Mr Ephraim Sole, Chief Executive of the LHDA. Through an extensive, international network of bank accounts and ‘agents’, bribes have been paid to Mr Sole, who was able to materially influence the tendering procedure and outcome through his unchecked power as CE of the LHDA. Sole was accused of accepting more than $6 million in bribes from multinationals. Sole has been convicted and sentenced to 18 years in prison.
Sole’s conviction and the strong and independent stance taken by the court against a senior government official is a good showing of a commitment to the rule of law and of tackling corruption by the Lesotho Government.
However, even more significant is the subsequent trials of the bribe-paying multinationals. Acres International (Canada) and Lahmeyer International (Germany) and Spie Batigonells / Schneider Electric (France) have been tried and convicted of bribery and inflating the costs of the LHWP. Cases against a further three multinationals are still pending. This is a significant move in international business in which multinationals from developed countries could largely evade prosecution for wrong-doings in developing countries. The home countries of these firms actively support and promote these multinationals through export-credit agencies to conduct business in developing countries. It can be argued that bribery too often forms part of the business of multinationals’ foreign operations with government officials. In many cases, these multinationals escape liability as home governments turn a blind-eye to their operations- despite new laws such as the OECD Anti-Bribery Convention which is meant to police this form of conduct.
This case also has significant due to the World Bank’s involvement in the funding of the LHWP. The World Bank has been criticized for showing reluctance to blacklist the convicted firms from further contracts in which The Bank is involved. A further issue has arisen: the Government of Lesotho does not have sufficient resources to take on bribe-paying multinationals in complicated, draw-out trials and therefore further attempts to convict bribe-paying firms and enforce the rule of law may in the past have been stifled. It has called on donors to direct aid to developing countries to assist in this regard.
The high profile given to the ‘LHWP Trials’ and the involvement of the World Bank has created a North-South, David and Goliath-style debate. The Government of Lesotho has been commended for its strong stance on corruption. This case will serve as a precedent for future cases involving corruption and bribery by multinationals around the world. It is an example to other developing countries that it is possible to take on multinationals and it will be a test of whether these multinationals and supporting institutions will accept the validity of decisions made by foreign courts.
This case study contains a broad range of articles documenting the background to the LHWP and the details of the corruption and bribery involved and the various trials of Mr. Sole and the multinationals. It further documents the significance of the trials for future multinationals conduct in developing countries and the important debate around the World Bank’s stance on the issue.
(Photo- Henner Frankenfeld/PictureNET Africa: March 1997 Katse dam; part of Lesotho highlands water project dam construction)
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