This post is contributed by Gillian Dell of Transparency International
As world leaders arrive today at the OECD Ministerial meeting in Paris, they’ll be celebrating the 50th anniversary of the OECD. There’s much to be commended in the OECD’s wide programme of work over the last 50 years. For Transparency International, the NGO leading the fight against corruption, one of the OECD’s greatest accomplishments is the landmark 1997 OECD Convention on Bribery of Foreign Public Officials in International Business Transactions, the 2009 Recommendation and the laudable peer review follow-up of the OECD Working Group on Bribery. There has been some progress over the years, notably in the way Germany has joined the battle against foreign bribery. But for most parties to the Convention, there’s a long way to go. At the 50th anniversary Ministerial, a renewed commitment is needed and a concrete programme that increases the scrutiny and spotlight on lagging governments.
One of the key causes of stalled enforcement is a lack of political will. Pressure must be exerted at the highest political level. The key recommendations of the report are:
- Governments with lagging enforcement should promptly prepare plans for strengthening enforcement and a timetable for such action.
- The Secretary-General and the Chairman of the Working Group on Bribery should meet with top leaders of governments with lagging enforcement to review plans and timetable for strengthening enforcement.
- A full review of the status of foreign bribery enforcement should take place at the May 2012 Ministerial.
- The Working Group on Bribery should publish a list of governments with lagging enforcement. This would make clear that a higher level of due diligence is needed to do business with companies based in these countries.
These recommendations can be found in Transparency International’s seventh annual “Progress Report on Enforcement of the OECD Anti-Bribery Convention,”. The report concludes that a majority of OECD Convention governments are still failing to translate their Convention commitments into action. After seven years of TI reporting on the Convention, this is the first year there is improvement in the numbers of states with active – or even moderate – enforcement. More action is needed, not just noble words.
Of the 38 governments party to the OECD Anti-Bribery Convention only seven states are actively enforcing the Convention, meaning that they are actively pursuing companies and individuals for bribing abroad. Another nine have moderate enforcement—meaning they have brought a couple of major prosecutions– and the vast majority – twenty-one – are doing little or nothing to enforce the Convention in their countries. This is not enough to motivate multinational companies implement serious internal measures to stop foreign bribery. The result: the foreign bribes continue to be paid worldwide, distorting governance and development in developing and developed countries alike.
In a panel today at the OECD Forum conference ahead of the Ministerial, Mark Pieth, the Chair of the OECD Working Group on Bribery said that “Law enforcement is quite a good business for governments” noting the billions in fines and disgorgement that have been recovered in the US by the SEC and Department of Justice in recent years in FCPA cases. But more importantly, as he put it “It’s also a matter of self-respect for countries to enforce their own laws.”
The Anti-Bribery Convention is a collective commitment for good reason—no country can single-handedly tackle the foreign bribery problem and all countries are harmed by it. All countries have an interest in putting an end to the distortions created by foreign bribery. But they all may be tempted to be free riders and fail to enforce the rules while others follow them, thereby benefiting their own companies.
The case for enforcement is strong. First and foremost, it stems the damage of foreign bribery to developing countries. By way of example, one noteworthy target country for multinational bribery is Nigeria. The 2011 TI Progress Report provides information on numerous investigations and settlements relating to such bribery. It reports on investigations are under way in the US and Germany as well as in Nigeria itself. Nigeria has recently reached settlements with Halliburton, Royal Dutch Shell, Siemens and Snamprogetti Netherlands (a unit of the Italian ENI Spa) and in so doing is following a trail blazed by Lesotho and Costa Rica. These countries are demonstrating that developing countries can and should pursue and impose penalties in domestic cases of multinational bribery. This causes multinational companies to take notice. During an OECD Forum panel this morning on the Anti-Bribery Convention, Massimo Mantovani, General Counsel of Legal Affairs of ENI SpA called for more weight to be given to compliance programmes and complained about the problem of multiple proceedings in multiple jurisdictions. He said that as a result “a company might have double disgorgement of profit, once for the parent and once for the subsidiary”. This sounds like it might really act as a deterrent.
But enforcement against foreign bribery doesn’t only benefit developing countries. It also curbs damage caused by developed countries to one another. For example, the 2011 TI Progress Report informs about investigations into alleged bribery in connection with sales of German submarines to Greece and Portugal a few years ago, valued at about US$ 1.5 billion in each of the two countries. In Czech Republic the authorities are looking into possible improprieties in purchases of defence equipment from Austrian and UK companies. In Finland a defence company’s sale of armoured vehicles to Slovenia is under investigation. The cases show how time after time bribes are paid from large slush funds through large networks of middlemen, shell companies and banking centres that don’t have sufficient oversight.
With only seven parties adequately enforcing the Convention, its progress its future is in serious jeopardy. The classification of states parties is as follows:
Active Enforcement: Seven countries: Denmark, Germany, Italy, Norway, Switzerland, United Kingdom and United States
Moderate Enforcement: Nine countries: Argentina, Belgium, Finland, France, Japan, Korea (South), Netherlands, Spain and Sweden
Little or No Enforcement: 21 countries: Australia, Austria, Brazil, Bulgaria, Canada, Chile, Czech Republic, Estonia, Greece, Hungary, Ireland, Israel, Luxembourg, Mexico, New Zealand, Poland, Portugal, Slovak Republic, Slovenia, South Africa and Turkey
With Russia joining the OECD Working Group on Bribery, that body has to step up its efforts to demonstrate that Convention countries mean business. In an OECD Forum session today on the Convention, Elena Panfilova of TI-Russia made an appeal to the OECD: “In accepting Russia in this club of the chosen, the OECD should be ready to ask uncomfortable questions”. She added “The only thing to restore trust is action not words.” That applies to all the laggard countries not enforcing the Convention.