Case Explained: Cornelia Woll on Corporate Crime and Punishment – Legal Perspective

Markets are often seen as systems guided by economic incentives and protected by the rule of law. In Corporate Crime and Punishment: The Politics of Negotiated Justice in Global Markets, Cornelia Woll provides a different perspective on the interaction of law and the economy across boundaries. Over the past two decades, prosecutors -especially in the United States – have increasingly relied on out-of-court settlements to handle corporate wrongdoing such as fraud, tax evasion, and environmental damage. This shift has allowed U.S. authorities to extend their legal reach beyond national borders and has pushed other countries to reform their own legal systems in an effort to reclaim control over justice in global markets. By tracing the rise of negotiated justice, Woll reveals how today’s battles over corporate fines and compliance are in fact struggles over sovereignty and influence in the global economy.

What led you to write a book on corporate crime?

Cornelia Woll: As a scholar of international affairs, I have always been interested in the ways in which the economy shapes politics. Geopolitically, it is clear that the economic reach of the United States underpins much of its dominance in the world, not just since Donald Trump made this explicit through tariffs and trade wars. Besides its military might, the influence of the United States in the world is based on its central role in the global markets. It is not only the importance of the American economy, but also the dollar as a currency, stock markets, payment and settlement systems, and data flows that allow government authorities to control economic activities worldwide.

What struck me is that all of these methods depend on private actors. To pursue its national interest, the U.S. government therefore had to devise the means to enroll companies in the pursuit of political objectives and affect their behaviour. This requires carrots and sticks: persuasion, the provision of benefits and the threat of coercion. My book focuses on the sticks, in particular corporate criminal law and its use across boundaries in global markets.

How would you describe the role of corporate criminal law in global markets?

CW: In Corporate Crime and Punishment, I focus in particular on the benefits of corporate criminal law in the context of American economic strategy. This is most evident in the sanctions policy against hostile states. Here, foreign companies face heavy penalties if they maintain economic relations with sanctioned states despite American requirements. It does not help if the companies are from countries that have not imposed sanctions.

The situation is more subtle in other areas of criminal law. For example, the American judicial authorities have effectively expanded extraterritorial application of domestic law in the fight against corruption, in securities regulation, in competition law, and in cases of fraud and tax evasion. Of course, this can address corporate misconduct, its stated objective, but it is also used to defend American interests abroad.

How so?

CW: When you look at corporate criminal prosecutions at the federal level, it becomes apparent that foreign companies often face higher penalties than American ones. My study analyses a database of more than 3,500 cases of criminal prosecution of companies between 2000 and 2020. Although foreign companies account for only 16% of cases, they pay 57% of the total amount of fines. When a foreign company falls into the clutches of the American authorities, the probability of a fine is considerably higher and the fine is over six times greater than for American companies.

Interestingly, the companies affected primarily come from countries allied with the US. Most often allies have invested in integrated markets and their companies want to avoid losing their access to the American market, their consumers or US investors. The reach of the US authorities over these companies is therefore greater and they can affect the behavior of such companies in the shadow of corporate criminal prosecutions.

How did this strategy evolve?

CW: Under Republican and Democratic administrations, the US has successfully exerted geopolitical pressure by extending the reach of markets and US companies, denying foreign partners access to its commercial networks or by using financial information or data flows for military and strategic purposes.

The extraterritorial application of corporate criminal law has expanded particularly over the last two decades. After 11 September 2001, the US sought new ways to ensure the country’s security in the fight against terrorism. This was achieved through the targeted use of economic networks, which made it possible to control individuals and companies at home and abroad and compel them to bow to American interests. From then on, bank accounts for individuals on blacklists or services provided in connection with criticised projects, such as the construction of Nord Stream 2, were associated with high risk. 

How did other countries respond? 

CW: As this constitutes a de facto foreign policy dictated by the United States, the first Von der Leyen Commission sharply criticised the American approach. To protect European companies from coercive measures by third countries, it developed the EU Anti-Coercion Instrument, which came into force in 2023. It illustrates the geopolitical reaction, where Europe is trying to assert its sovereignty in a multipolar world. We can find similar developments in China as well.

However, the more consequential change happened in the legal framework’s of the countries, where companies found themselves embroiled in legal battles with U.S. prosecutors. Indeed, the governments of these countries faced a twin challenge: regaining judicial sovereignty and effectively addressing corporate malfeasance which foreign prosecutors have brought to light. As a result, we see important institutional changes in corporate criminal law, as other countries adopt instruments that facilitate negotiating corporate settlements. This is why I speak of the rise of negotiated justice, which is more than a geopolitical development. It also shapes how we think about right and wrong in global markets.

Does this mean the fight against corporate criminality will be more effective?

CW: Previous U.S. administrations expanded the reach of American law beyond national borders, but they generally sought the backing of multilateral institutions such as the United Nations or the Organization for Economic Cooperation and Development in their efforts to combat corruption, money laundering, and other offenses. This multilateral approach allowed the United States to exert global influence more subtly and fostered forms of legal convergence that proved more durable over time.

As the current Trump administration turns toward a more explicit, militarized form of imperial power, the effectiveness of influence exercised through markets and law is likely to diminish. When legal enforcement comes to be seen as little more than an expression of raw power, it loses much of its normative force. In such a climate of open geopolitical confrontation, the fight against corporate crime risks becoming simply another tool for securing advantages for those already in power.

Paradoxically, today’s emphasis on overt power politics actually undermines many of the foundations of long-term American influence built in the postwar international order. My book was written for those interested in durably shaping global markets and corporate accountability.

Cornelia Woll is President of the Hertie School in Berlin and Professor of International Economic Policy. Her books include The Power of Inaction: Bank Bailouts in Comparison and Firm Interests: How Governments Shape Lobbying on Global Trade.