International business transactions and corruption icon

International business transactions and corruption




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29 It makes harder decisions on doing business in developing countries.30 The FCPA is also blamed for the creation a bifurcated market. While U.S. firms are prohibited from engaging in illicit payments abroad, their foreign competitors can treat bribes as simply other costs of doing business.31 But now the adoption by other countries provisions of OECD Convention will make the competition fairer for the United States firms.

Among advantages of the FCPA we can name the knowledge of business partners that U.S. companies are under threat of prosecution in their country and presence of interest in business could reduce costs for bribes for a U.S. company.32 Other positive influences are: U.S. businesses have reputation as highly ethical ones and such strategy helps developing countries in some concern.

2. The OECD Anti-Bribery Convention.

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions33 was worked out by the Organization for Economic Cooperation and Development (OECD) and signed in Paris on December 17, 1997 by the 29 OECD member countries and five non-member countries.34 The convention went into effect on February 15, 1999 in 12 countries that had ratified it. As on February 21, 2001 all 34 signatory states have ratified the Convention35 and 31 of them have adopted implementing legislation.36

This instrument obligates the parties to criminalize bribery of foreign public officials, including officials in all branches of government, whether appointed or elected, as well as any person exercising a public function including that of a public agency or enterprise as well bribery of any official or agent of a public international organization. Responsibility of legal persons is proposed as well; wether criminal or civil one depending on the domestic legal system of each party. The Convention requires the parties to take necessary measures, within the framework of their relevant laws and regulations, to prohibit the establishment of off-the-books accounts and similar practices used to bribe foreign public officials or to hide such bribery. Parties are to make bribery of foreign public officials a predicate offense for purposes of money laundering legislation on the same terms as bribery of domestic public officials. Jurisdiction is to be established over offenses that are committed in whole or in part in each party's territory. Participating governments pledged to work together to provide legal assistance relating to investigations and proceedings within the scope of the Convention, and to make bribery of foreign public officials an extraditable offense.37

To make sure that signatory countries follow provisions of the Convention, the Working Group on Bribery in International Business Transactions decided to create a mechanism of monitoring whose purpose is to review each country's regulatory system, institutions and measures to enforce the anti-corruption principles laid down by the Convention.38 It was decided to do this by means of "rigorous" process of multilateral surveillance upon which the Working Group agreed. The process consists of two phases. Phase I focuses on evaluating whether the legal texts through which participants implement the OECD Convention meet the standard set by the OECD Convention and phase II follows and focuses on the performance of countries that have implemented the OECD Convention.39 The OECD has recommended measures on implementing the OECD Anti-Bribery Convention in the aspect of prevention bribery from its officially supported export credits. Among such measures, the OECD suggests that its members: inform all applicants about the adverse legal consequences of bribery in international business transaction; invite applicants to declare in writing that neither they, nor any agents on their behalf, have been engaged in or will engage in bribery; refuse to provide support, deny payment of claims and demand refunds of any claims determined to have been connected to bribery; and refer all evidence in connection with bribery to appropriate national authorities40.
On June 27, 2000, (OECD) adopted the OECD Guidelines for Multinational Enterprises, revising the guidelines first published in 1976 and last revised in 1991. They form part of the OECD Declaration on International Investment and Multinational Enterprises (MNEs). The Guidelines are non-binding recommendations to MNEs made by the 33 governments (29 OECD Member countries and 4 non-Member countries), including the U.S. The goal is to help MNEs operate in harmony with government policies and societal expectations. They provide guidance on appropriate business conduct across the full range of MNE activities including standards as to labor, environment, human rights and corruption issues.41

It’s important to remember that OECD Convention is a free-standing instrument, open to non-member countries and it’s not an instrument of the OECD. The Convention is open to accession by any non-signatory which has become a full participate in the OECD working Group on Bribery by adhering to the Revised Recommendation42 on Combating Bribery in International Business transactions.

3. Inter-American Convention.

The Inter-American Convention Against Corruption43 was adopted at the Specialized Conference on Corruption of the Organization of American States (OAS) in Caracas, Venezuela, on March 29, 1996. It was the first instrument of its kind in the world to be negotiated Twenty-one states signed the treaty on the date of its adoption. The Convention entered into force on March 6, 1997. To date, 26 states have signed, and 18 states have deposited their instruments of ratification.

The Convention requires that the States Party take specific steps to combat corruption. It imposes an obligation on each State Party to enact such legislation as is necessary to criminalize the acts of corruption specified in the Convention. Such acts include, the solicitation or acceptance of bribes; the offering or granting of bribes; any act or omission by a government official to obtain illicit benefits for himself or others; the fraudulent use or concealment of property derived from the above-mentioned acts; and participation in, or association or conspiracy to commit, such acts. One especially noteworthy feature of the Convention is the obligation to criminalize the bribery of foreign officials44.

The Convention also includes provisions on certain forms of international cooperation and assistance. These include extradition, mutual legal assistance, and asset seizure and forfeiture. With respect to all of these forms of cooperation, the Convention expressly provides that cooperation will be subject to the limitations of applicable existing treaties, including bilateral ones, and to the domestic law of each country. The Convention also contemplates technical cooperation and exchanges of experiences. Through such cooperation and assistance, the Convention will facilitate the prevention, detection, punishment and eradication of acts of corruption.45

The United States signed it on June 27, 1996 in spite of the fact that existing U.S. law is already sufficient to satisfy the Convention's provisions regarding requirements for legislation, and the other provisions in the Convention are self-executing and will not require implementing legislation.46 On July 27, 2000, the U.S. Senate gave its advice and consent to the OAS Inter-American Convention against Corruption47 and on 29 September 2000 the United States deposited the instrument of ratification of the Inter-American Convention on Corruption.48

4. GRECO

Group of States against Corruption (GRECO) was established by the Resolution (99) 549 of the Committee of Ministers of the Council of Europe, adopted on 1st May 1999.50

According to its Statute,51 the aim of the GRECO is to improve its members' capacity to fight corruption by monitoring the compliance of States with their undertakings in this field. In this way, it will contribute to identifying deficiencies and insufficiencies of national mechanisms against corruption, and to prompting the necessary legislative, institutional and practical reforms in order to better prevent and combat corruption.

GRECO is responsible, in particular, for monitoring observance of the Guiding Principles for the Fight against Corruption52 and implementation of the international legal instruments adopted in pursuit of the Program of Action against Corruption (PAC), adopted by the Committee of Ministers of the Council of Europe in 1996. So far three such instruments have been adopted, the Criminal Law Convention on corruption, opened for signature on 27 January 1999, the Civil Law Convention on corruption, adopted in September 1999, opened for signature on 4 November 1999 and Recommendation R (2000) 10 on Codes of conduct for public officials, adopted on 11 May 2000.53 The U.S. has joined the GRECO. It declared that it will apply the "Guiding Principles for the Fight Against Corruption" adopted by the Committee of Ministers of the Council of Europe on November 6, 1997 (Resolution (97)24). Twenty-five states have now joined the GRECO agreement.54

5. Criminal Law Convention on Corruption

Council of Europe Criminal Law Convention on Corruption55 was open for signature by the member States of the Council of Europe and the non-member States, which have participated in its elaboration, in Strasbourg, on 27 January 1999. The Convention will enter into force after the deposit of 14 instruments of ratification. Today 30 countries have signed and 956 have ratified the Convention57.

The Criminal Law Convention on Corruption is aimed at coordinating criminalization of a large number of corrupt practices. It also provides for complementary criminal law measures and for improved international co-operation in the prosecution of corruption offences. It covers the following forms of corrupt behavior normally considered as specific types of corruption: active and passive bribery of domestic and foreign public officials; active and passive bribery of national and foreign parliamentarians and of members of international parliamentary assemblies; active and passive bribery in the private sector; active and passive bribery of international civil servants; active and passive bribery of domestic, foreign and international judges and officials of international courts; active and passive trading in influence; money-laundering of proceeds from corruption offences; accounting offences (invoices, accounting documents, etc.) connected with corruption offences.

The Convention also incorporates provisions concerning aiding and abetting, immunity, criteria for determining the jurisdiction of States, liability of legal persons, the setting up of specialized anti-corruption bodies, protection of persons collaborating with investigating or prosecuting authorities, gathering of evidence and confiscation of proceeds. It provides for enhanced international co-operation (mutual assistance, extradition and the provision of information) in the investigation and prosecution of corruption offences.

The Convention is open to the accession of non-member States. As soon as the Covention is ratified, States, which do not already belong to GRECO, will automatically become members.58 United States signed the Council of Europe Criminal Law Convention on Corruption (10 October 2000) as well as the GRECO.59

6. Civil Law Convention on Corruption

Council of Europe Civil Convention on Corruption was opened for signature by the member States of the Council of Europe, the non-member States, which have participated in its elaboration as well as the European Community, in Strasbourg, on 4 November 199960. The Convention will enter into force after the deposit of 14 instruments of ratifications. For today 24 countries signed and 3 countries61 have ratified the Convention.62

This Convention is the first attempt to define common international rules in the field of civil law and corruption. It requires Contracting Parties to provide in their domestic law "for effective remedies for persons who have suffered damage as a result of acts of corruption, to enable them to defend their rights and interests, including the possibility of obtaining compensation for damage"63. The Convention is divided into three chapters, they cover: measures to be taken at national level, international co-operation and monitoring of implementation and final clauses. In ratifying the Convention, the States undertake to incorporate its principles and rules into their domestic law, taking into account their own particular circumstances.

The Convention deals with: compensation for damage; liability (including State liability for acts of corruption committed by public officials); contributory negligence: reduction or disallowance of compensation, depending on the circumstances; validity of contracts; protection of employees who report corruption; clarity and accuracy of accounts and audits; acquisition of evidence; court orders to preserve the assets necessary for the execution of the final judgment and for the maintenance of the status quo pending resolution of the points at issue; international co-operation.

The Group of States against Corruption (GRECO) will monitor commitments entered into under the Convention by the States Party. The Convention is open to Council of Europe member States, to non-member States, which took part in drawing it up64 as well as to the European Community.

^ B. Measures Taken by International Organizations

1. United Nations.

Today, the three most important U.N. documents were drafted to deal with issues of corruption: United Nations Declaration against Corruption and Bribery in International Commercial Transactions65, International Code of Conduct for Public Officials66, and Code of Conduct for Law enforcement Officials67.

The Draft United Nations Convention against Transnational Organized Crime, in it’s article 4 ter68 also envisages the criminalization of corruption when an organized criminal group is involved. The Convention includes following acts: corrupt activities involving an international civil servant, a foreign public official, a judge or other official of an international court. The draft convention is aimed at corrupt activities towards international officials. Additional international measures were proposed for further combating corruption the 10th U.N. Congress69 included “develop, ratify and incorporate international instruments to encourage strengthen anti-corruption programs at the national level” and “Consider the development of a comprehensive United Nations convention against corruption”70.

^ 2. European Union

A number of measures have been taken by European Union as well. On May 21, 1997, the European Commission adopted a Communication to the Council and to the European Parliament on a Union Policy Against Corruption71. The Communication provides member states with a consistent and coherent policy on corruption in international trade and commerce well as in other pertinent area. But the Communication does not have legal effect of corruption.

The Convention criminalizes bribery of E.U. officials as well public officials of E.U. member states, but does not concern transnational bribery with foreign officials of countries that are not members of the European Union.72

The Convention on the Fight against Corruption involving Officials of the European Community or Officials of Member States of the European Union73, adopted on May 26 1997, criminalized active and passive corruption of officials even where financial damage to the Union was not at issue. The Joint Action of 22 December 1998 adopted by the Council on the Basis of article K.3 of the Treaty on European Union, on corruption in the private sector, constituted another important instrument.” 74

3. The World Bank

The World Bank started pay attention at the problem of corruption, since 1995 with the appointment of James Wolfensohn as the president. At the 1996 meeting, Wolfensohn made combating bribery a top priority. In 1997, with help of Transparency International, the bank adopted a comprehensive program, including strong controls to prevent bribery on World Bank-financed projects and assistance to governments to promote reforms.75

It was decided that bank will fight corruption by following means: (a) preventing fraud and corruption in World Bank-financed projects; (b) assisting countries fight corruption, if and when they request it; (c) seriously considering corruption in the World Bank's internal planning, in the design of its projects and in its analysis and policy dialogue with countries which lead to agreeing upon strategies; (d) supporting international efforts against corruption.76

As a practical matter the World Bank’s approach has been to support these efforts by: (1) helping coordinate both cross-border and in-country anti-corruption efforts; (2) focusing the Bank’s efforts on areas of its comparative advantage; (3) forming strategic collaborations with other organizations; (4) gaining and disseminating knowledge about corruption internationally, and (5) explaining and developing Bank policy. So far the Bank has participated in a number of international anti-corruption efforts. For over two years, the Bank has participated in the OECD’s Working Group on Bribery in International Business Transactions and contributed to the formulation of this Convention. It collaborates closely with the other Multi-lateral Development Banks in the MDB Working Group on Governance, Corruption and Capacity Building. It maintains observer status at Interpol conferences and on the Financial Action Task Force on Money Laundering (FATF), in order to educate itself on international crime and money laundering. At the regional level the Bank partners with organizations such as the Organization of American States (OAS) and the Global Coalition for Africa. The Bank has also recognized the important role played by international NGOs such as Transparency International. Most recently the Bank co-sponsored a number of Anti-Corruption Conferences and workshops.77 It has also developed Country Assistance Strategy, which deals with discussion of country’s governance conditions including public sector institutional reforms as well as an assessment of the corruption risks to Bank projects before beginning of its operations; created Economic and Sector Work (ESW) what is the vast range of evaluative Bank reports on economic and sectoral issues at the country level; shifted obligations to Operations Evaluations Department to carry out an evaluation of the Bank’s anti-corruption program in 2000. It was promoting training programs, research and analysis as well as the development of new diagnostic tools, Anti-Corruption Knowledge Management System, and the website78.

4. International Monetary Fond

The IMF, going beyond its traditional focus on monetary and fiscal policy, is emphasizing the need for transparency and other steps to curb corruption.79 On August 4, 1997, the IMF Executive Board released guidelines, which instructed IMF staff to consider corruption and accountability issues in its relations with borrowing countries. The IMF guidelines are worded in the language of economists, which makes them difficult to understand for laypersons. The Guidelines do, however, officially recognize the problem of corruption for the first time. More importantly, they call the attention of IMF staff to the threat that corruption poses to international lending for development. The IMF guidelines specifically seek to provoke greater attention to involvement in governance issues by advocating policies and development of institutions and administrative systems with aim to eliminate opportunity for corruption and fraud. It also expresses great concern that corruption issues be addressed only based on economic considerations within its mandate prohibiting IMF adopt the role of an investigative agency or guardian of financial integrity in member countries. 80

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