by Institute for Global Dialogue
by Institute for Global Dialogue
Unlike many sports that require extensive technology, elaborate facilities and specialized training, football can be played anywhere there is a ball, a patch of ground to serve as a pitch, and enough players to form two sides with the drive to compete against one another. The merit of FIFA’s one nation, one vote governance structure and its practice of dividing equally the revenues from World Cups amongst FIFA’s 209 member states and territories, is that it reflects that notion of equality. In contrast to the voting systems of the UN Security Council, the International Monetary Fund and World Bank, small and poor countries have a vote in FIFA that is substantively equal to their large and wealthy neighbours. FIFA also has the capacity to distribute vast revenues from sponsorship and advertising to developing countries to promote development of the game of football in ways that promote health and social stability, teach skills and create jobs for youth in parts of the world that most need it.
Yet FIFA, a diplomatic venue founded on the equality principle, has been perverted by a political culture predicated on the notion that each of these equal votes is for sale to the highest bidder, as the vast web of corruption alleged by the recently announced US indictments and ongoing Swiss investigations contend. FIFA officials are alleged to have distributed financial largesse in developing countries in return for votes to re-elect FIFA President Sepp Blatter. FIFA’s officials allegedly have enriched themselves by receiving illegal payments from countries seeking to win bids to host the World Cup and from firms seeking sponsorship and broadcasting rights.
To some it seemed incongruous that it was the United States that took the lead in investigating FIFA. The Americans have less interest in soccer than anyone else in the world, people said. But the driving forces behind the US prosecution are twofold: first, one of the more hidden faces of US hegemony, the drive to maintain rule of law in cross-border financial flows; and second, the more obvious stake of US business interests. The initial technology revolution that facilitated cross-border electronic funds transfer in the late 1960s and 1970 combined with widespread financial deregulation in the 1970s and 80s to increase cross-border financial flows dramatically. US financial authorities realized early on that the only way to protect US financial institutions and the US banking system in this changed environment was to promote multilateral financial and banking regulation (the Basel Conventions on Banking Supervision, the Financial Action Task Force, etc.) and to ensure the application of the rule of law to any cross-border financial transactions and capital flows in which a US party might potentially have an interest. As that includes most any cross-border capital flow in the world, it paved the way for the ‘extraterritorial’ application of US law governing financial flows. The US Departments of Justice and the Treasury, along with the Internal Revenue Service (IRS), have an arsenal of legislation at their disposal in this enterprise, including the Foreign Corrupt Practices Act (FCPA), which prohibits US firms from paying bribes to do business with foreign entities, and the Racketeer Influenced Corrupt Organizations Act (RICO), which increases penalties on perpetrators of violations related to organized crime. In the FIFA indictments, senior FIFA officials were named as a criminal organization under RICO with the intent to defraud FIFA. It is important to note the extent of US business interests in a world of global football free of corruption. Not only was the 1994 World Cup held in the United States the most successful World Cup in history in revenue terms, but US-based firms, themselves restricted under FCPA from paying bribes, are more likely than many to be losers in bribery-influenced contests for sponsorship and broadcasting opportunities. Witness the strong critical statements from major FIFA sponsors McDonalds and Visa following the announcement of the FIFA indictments.
The cooperation of Swiss authorities in investigating FIFA is equally important to understanding the unusual part that the US Department of Justice has played in calling FIFA to heel. Swiss cooperation itself can be understood as a result of the further ramping up of US rule of law enforcement of cross-border financial flows occasioned by the ‘9/11’ al-Qa’eda terrorist attacks on 11th September 2001. To what had previously been a structural interest in a stable international banking system and business environment, 9/11 added a vital US national security interest, interdicting the ability of terrorist organizations to raise and transfer funds internationally. In pursuit of that goal, US authorities have taken cross-border rule of law enforcement to a new level. For example, the anti-money laundering provisions of the USA Patriot Act (and its recently enacted successor, the USA Freedom Act), requires banks doing business in the United States to gather and verify detailed information about their clients. Switzerland historically complemented its unique role as a ‘neutral’ host country for international organizations (including FIFA) with a banking system that attracted funds globally by offering security and, as needed, anonymity. But since 9/11, US-led pressure for reform of global banking norms brought pressure on Switzerland to change the way that their financial system operated. IRS prosecutions of major Swiss banks for shielding depositors from US tax obligations in recent years have driven home the point. In order to retain the privileged position of Switzerland’s financial institutions and the Swiss franc as a safe haven currency, Swiss authorities have modified their financial regulations and become key players in international cooperation in efforts to fight cross-border financial corruption. Without the cooperation of Swiss authorities, the US investigation of FIFA would have been vastly more difficult and might not have borne fruit.
For whatever their motivations, the United States and Switzerland have done global football a considerable service by changing international norms such that there is now an expectation that corruption is no longer acceptable. Sepp Blatter has resigned, and a new FIFA president is to be elected. Many countries and businesses have been implicated in paying and receiving bribes under the old regime. But such payments were only possible in a culture in which such payments were not only deemed acceptable but were also expected. Going forward, the key question for football authorities in major developing countries, backed by their governments, is how to use their diplomatic leadership amongst the broader developing world, in a one-country, one-vote FIFA, to take decisions that will benefit the game in the broadest sense, in addition to advancing their own interests. South Africa and Brazil, with their long involvement in the sport and experiences of hosting the World Cup, and China with its huge and growing fan base, are particularly well positioned to take up these leadership roles, alongside other football powerhouse nations in the developing world like Mexico, Nigeria and Argentina. In governance of global football, there are not the same oppositions of interests that may exist in governing international trade or development finance, so it should not be as difficult to build alliances with industrial nations on institutional reform of FIFA, selection of future World Cup host countries, and the distribution of revenue to promote development of the global game. Yet in an environment in which votes on key decisions are no longer available to the highest bidder, real leadership and coalition-building skills will be required.
Geoffrey Allen Pigman, D.Phil. Research Associate and Visiting Fellow, Department of Political Sciences, University of Pretoria, Pretoria, South Africa. Adjunct Faculty, School of Diplomacy and International Relations, Seton Hall University, South Orange, NJ, USA. President, Otis Reservoir Associates