Testing the convention
The OECD Anti-Bribery Convention is ten years old in November, yet rarely has it been in the public spotlight quite as much as in recent months, thanks to headline-grabbing investigations of possible bribery of foreign officials by companies from member countries. We asked Mark Pieth, chair of the Working Group on Bribery, to explain.
OECD Observer: The international resolve to stamp out bribery of government officials by businesses appears to be intensifying, but at the same time, bribery is a growing problem. Are you satisfied that the OECD Anti-Bribery Convention is working?
Mark Pieth: Bribery is indeed still out there. Perhaps part of the problem is that the closer you look, the more you find. Whereas before cases went unreported, our tighter vigilance means we are uncovering more cases. Furthermore, globalisation, while driving international business, has at the same time brought new players into the bidding. That inevitably means more activity and so a greater risk of bribery. Of course, this also makes it all the more important that we fight corruption, to ensure a fair, open, competitive global market that works in the public interest.
The OECD Convention is an important weapon in that fight. Its 36 signatories are major exporters. Because of the Convention, business people from their countries who bribe officials in other countries are committing a criminal act. Attacking this supply side of bribery is a major boon. Not long ago, writing off bribes against tax was even allowed in several OECD countries; no longer.
The OECD relies on strict monitoring of performance to ensure that all participants implement the Convention seriously. Each country agrees to be scrupulously reviewed by the other participants or “peers”. In a first phase we examine the legislation that each party uses to implement the Convention. Then in what we call “Phase 2”, we examine how the legislation is enforced on the ground. When the Working Group on Bribery considers that there are weaknesses in the legislation or its enforcement, it makes recommendations for improvements. And this is one case where the OECD does not operate on the basis of consensus: examined countries cannot water down the review or the recommendations. We call this “consensus minus 1”. We are not a court of justice. Rather, we exert pressure on each other to perform better. We may be colleagues but we talk tough to each other, albeit “in camera”. This system is a proven and effective way of getting the job done.
By the end of 2006, some 27 countries had been examined, including all of the G7. The remaining nine countries will have their Phase 2 reviews by 2008, including Turkey, Brazil and Argentina. Anyone can find the reports online, it is all very transparent, and as you will see, comprehensive.
The results are clear: today, over 100 foreign bribery investigations are being conducted by our signatories. And since the Convention came into force in 1999, at least 30 individuals and companies that committed foreign bribery have been penalised with fines in some cases of up to $28 million. That may sound small, but it is progress that would not have happened without the Convention.
The recent decision by the UK to halt a foreign bribery investigation has disappointed the OECD’s Working Group on Bribery, and has been widely reported in the media. Could you explain the reasons for your concern?
Let me quote from a media release from 14 March. “At its March 2007 meeting, the OECD Working Group on Bribery reaffirmed its serious concerns about the United Kingdom’s discontinuance of the BAE Al Yamamah investigation and outlined continued shortcomings in UK anti-bribery legislation. It urged the UK to remedy these shortcomings as quickly as possible and decided to conduct a further examination of the UK’s efforts to fight bribery.”
Our fundamental objective is to encourage change. It is because of concerns uncovered during the second phase examination of the UK that the Working Group decided to examine the UK further–a process we call Phase 2bis. We are doing this for other countries as well–Ireland and Japan, and also Luxembourg. So far, the UK case has grabbed the headlines.
The UK has done some excellent work on raising awareness, promoting fair trade, transparency, and recently increasing resources for the fight against corruption. But now we wish to look more closely at how the UK deals with pushing investigations forward, and how it translates the Convention into practice. In the Phase 1 review of the UK we found that the main anti-bribery law in the UK dated from 1906. The 2001 law which we encouraged is better, but still problematic. One sticking point is the inclusion of an analysis of the relationships between public officials and those who have authority over them–what is called the “the agent-principal” concept. We are concerned that specific laws to implement the Convention have not been enacted.
The 2005 Phase 2 report on the UK expressed surprise at the absence of prosecutions for foreign bribery in the UK since the country signed the Convention. We found a number of possible reasons, such as a need to present a relatively high amount of evidence to commence an investigation and limited resources for investigations. We were also concerned that the impact on the UK economy had apparently been taken into account in deciding not to investigate in one major case, contrary to Article 5 of the Convention.
While some action has been taken since 2005, there are still no prosecutions. We see cases arising, investigations, and we now see substantial amounts of money devoted to the process. Why isn’t there more impact? Is there a systemic blockage? Is the apparatus there capable of dealing with the issues at hand? These are questions we will ask when considering the UK in the next round.
How can you be sure that countries under examination will play ball?
Never underestimate the power of peer pressure. People care. Colleagues care. The recommendations of the Working Group on Bribery and our country reviews are a powerful impetus for change. Many countries have amended their legislation and there are more investigations and prosecutions taking place every day right across the OECD area. This is evidence that the Anti-Bribery Convention works. Countries attempting to justify bribery are likely to find themselves in a minority, if not completely isolated. This hardly helps build trust with international partners and risks backfiring against other economic interests. That is how peer pressure operates.
Where does the convention go from here?
I have no doubt the Anti-Bribery Convention will go from strength to strength. Difficult cases and situations are an opportunity to confirm the instrument’s effectiveness, and to demonstrate the support of our members. They are also awkward because they involve issues of competition, high standards and trust among the parties to the Convention. Such cases also raise an issue about our determination in applying the Convention. People will watch how we apply it to the larger members. We must have no double standards. All the signatories have accepted obligations and all will be assessed on whether they fulfil these obligations. We are determined to treat all participants fairly.
Remember, without the Convention, there would be no cases to uncover, investigations and prosecutions would not happen. We would be none the wiser, and certainly none the cleaner. By promoting high standards, the Convention has contributed to levelling the competitive playing field for companies dealing across borders. This is an important achievement, which will be built on as other strategically important countries join the Convention and as the OECD enhances its relationship with more countries around the world.
- OECD (2005), “United Kingdom: Phase 2, Report on the Application of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the 1997 Recommendation on Combating Bribery in International Business Transactions”, March. See www.oecd.org/bribery , go to Country Monitoring Reports.
- OECD Anti-Bribery Convention, see www.oecd.org/bribery
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