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|Iv. how to do business in highly corrupted countries|
The Problem of Eradicating Corruption from the Judiciary: Attacking Corruption in the Judiciary: A Critical Process In Judicial
Economic Causes of Corruption, at
Financial Institutions Face the Corruption Eruption
Dennis m. arroyo
The Role of The World Bank in Controlling Corruption
19 Donald j. johnston
Foreign corrupt practices antibribery provisions
25 Ronald berenbiem
Id. 2. 31 Bialos, supra
See Commentaries on the Convention on Combating Bribery of Officials in International Business Transactions at
Implementation in France of the OECD Convention on Combating Bribery of Foreign Public Officials
OECD Actions to Fight Bribery in International Bsusiness Transaction, at
See Id. , Article VIII 45 Id.
The International Chamber of Commerce in Paris plays an important role in encouraging the international business community to become active in fighting corruption. The Chamber's focus is on improving corporate self-regulation programs. The biggest Chamber’s achievement is the "Rules of Conduct to Combat Extortion and Bribery".81 For the first time the ICC issued its Rules of Conduct to Combat Extortion and Bribery in International Business Transactions in 1977 establishing a set of guidelines to promote high standards of corporate conduct. On 26 March 1996, the ICC's Executive Board updated the Rules82 and expanded them to cover a broader range of corrupt practices. If the 1977 Rules only prohibited extortion and bribery in connection with obtaining or retaining business; the new Rules prohibit extortion and bribery for any purpose. Thus, extortion and bribery in judicial proceedings, in tax matters, in environmental and other regulatory cases or in legislative proceedings are now covered by the Rules. In 1999 the Rules were revised again.
The Rules deal with such issues as payments to sales agents and other intermediaries, business entertainment and gifts, and political contributions. They cover not only bribery of public officials but bribery within the private sector as well. The basic approach of the Rules is the need for action by international organizations, governments and by enterprises, nationally and internationally, to meet the challenging goal of greater transparency in international trade. The 1996 version consisted of two parts. Part I “Recommendations to Governments and International Organizations” contains such provisions as need for WTO’s active role, because bribery and extortion are clearly important factors distorting international trade; additional efforts should be taken to deal more effectively with extortion by foreign public officials. To that end, national governments must strengthen their enforcement of laws prohibiting the solicitation and receipt of bribes, as well as the payment of bribes; to regulate political contributions by enterprises and to ensure that they are publicly recorded; to stimulate cooperation between governments and world business. Part II “Rules of Conduct to Combat Extortion and Bribery” sets forth the Rules of Conduct recommended by ICC for voluntary application by enterprises. New emphasis is placed on implementing mechanisms within companies to enforce corporate codes of conduct.
Revised 1999 version of the Rules83 was amended by Part III ”ICC Follow-up and Promotion of the Rules”. The Standing Committee on Extortion and Bribery is established with the aim to promote and monitor the widest possible acceptance and application of the Rules of Conduct. Its principal purpose will be to stimulate action by enterprises and business organizations in support of self-regulation, as an important factor in effectively combating extortion and bribery.
Now the Chamber is preparing a manual to assist companies in complying with the Rules and with the OECD convention84. ICC is currently working to produce further rules to tackle 'private-to-private' extortion and bribery, as opposed to corrupt practices between private and governmental entities85.
6. World Trade Organization
WTO has also recently mobilized its efforts against corruption. So far the only one legal action was taken by the WTO: the 1996 WTO Ministerial Declaration86 which included a provision establishing the Transparency in Government Procurement working Group to study transparency in government procurement practices. In 1999 the Group has issued its first report87. Within the WTO the most feasible possibility is to revise the Agreement on Government Procurement88, focusing on anticorruption aspects. This agreement entered in force on January 1, 1996, but only a few courtiers, mostly in industrial world, have adopted its provisions. The U.S. and multinational organizations demand more actions from the WTO.
7. Transparency International
Transparency International is a non-governmental organization established in 1993 in Berlin. It has former governmental officials and business people as its members. The main aim of this organization is to increase governments’ accountability and curbing both international and national corruption.89 The most important actions by the Transparency International are information gathering and raising public awareness. For example, it publishes a Corruption Perceptions Index90 that scores countries on ten-point scale, a score of ten indicating a highly clean country and zero indicating a highly corrupt country.91 TI also publishes a Bribery Index of Leading Exporting Nations92 to uncover the sources of bribery by scoring countries on a ten-point scale with a score of ten indicating negligible bribery and zero indicating very high levels of bribery.93
From previous text, the prospective of doing business in developing countries looks scary. On the other hand, recent legislative and other measures taken at the international level to reduce corruption in international business transactions gives some hope for better. I have to admit that a lot of big corporations which are doing business in highly corrupted countries started to do it long time ago in more difficult conditions and succeeded. The secret of this success was adoption of good risk management policy. One of the examples of such a policy could be so called “Sullivan Principles” which were proposed and developed by Leon Sullivan who was a member of the board of directors of General Motors, back in 1977. The original idea was to help to promote racial equality in South Africa through the influence of large corporations.94 The original set of six principles95 was a voluntary code designed to guide the practices of U.S. corporations doing business in South Africa.
Based on Global Sullivan principles, so-called C2 (Combating Corruption) principles were developed for international corporations. Under such principles corporations would: (a) establish a clear policy against employees paying bribes and kickbacks; (b) train and discipline employees, (c) accurately record and report transactions that are independently audited; (d) require agents and suppliers to affirm that they have not engaged in improper payments; (e) establish a monitoring system; (f) report solicitation of payments to a group such as Transparency International, and (g) protect employees who similarly make such reports.96 Such principles could be broader or narrower but to have an impact on the practice of corruption, any set of principles must (1) emphasize transparency; (2) provide guidance concerning specific practices associated with paying bribes; (3) be relevant to organizational environment; (4) identify itself with and be supported by an independent entity such as not-governmental organization or an academic center, and (5) be capable of monitoring and assessment by external, independent entities, such as social and financial auditors.97 It is established that approximately 65 to 85 % of all U.S. companies have established ethical codes or compliance programs designed to prevent violations of the FCPA.98
Aside ethic codes, there are some other measures could be taken to mitigate risks of corruption it could be: use of know your partner strategy, include provisions concerning FCPA for joint venture or employment contract; compliance program which require the joint venture to establish an internal control program. The key provisions of the Compliance program are: senior management commitment; procedures; record keeping and control.99
Some practical advices how to organized business in country with high level of corruption do exist as well. One of them is how to do business in Russia, based on the Principles and analysis of the situation in the country, which to my mind could be used in any developing country in the world. The very first advice will be: never give bribes. One time is enough to get such a reputation and then requests for payments will rise like a snowball what does not make life easier. Next suggestion is to not to be alone. It’s very important to cooperate with other U.S. or West European corporations by sharing experience in dealing with extortion of bribes and similar activity. It is also important to hire private security firms for protection of premises and/or executives and never limit itself to one security company.100 Next step is to formulate and publicly promulgate and follow a set of guiding principles for operating in Russia. Signatories can go on record that they oppose working with corrupt elements. The contents of the code need not be elaborate and, in fact, may be relatively simple but should contain main provisions, discussed above. By avoiding bribery and giving publicity to anti-corruption measures taken against corruption a company will inform Russians that U.S. companies do not consider corruption part of the way of doing business. On the other hand publicity will lend support to attempts by government reformers who wish to legislate and enforce legislation against corruption. Companies that wish to engage in business with honest Russian entrepreneurs will become known101 as well as honest Russian entrepreneurs. This could be very helpful in future.
From this paper we can conclude first, that corruption is not just domestic issue of developing countries but a global one too. In conditions of the economic globalization the corruption affects everybody in different aspects. Second, international community has recognized global character and threat of corruption by and number of measures were taken both at international and domestic levels. International political and economic organizations have developed and are developing rules and recommendations about reducing corruption in international business transaction. The United States plays leading role within those organizations in this field. Third, level of corruption in developing countries is really high but it does not mean that it’s impossible to do business in those countries. Knowledge of international and domestic legal instruments and local custom, use of code of ethics and wise risk management policies could make it possible and successful to do business in any developing country and with avoiding conflicts with FCPA. And forth, provided legal instruments and measures are only rudimentary steps towards reducing corruption in international business transactions. There is a lot of to be done 102 and the fight is going on.
The recent measures taken at the international level to combat corruption are: Global Organization of Parliamentarians Against Corruption was created with very strong support of Canada. It has a chapter in Africa and others are in the works in Europe, India, South-East Asia has already received support from Latin American and Caribbean parliamentarians to join it. It would promote issues such as open and transparent government, press freedom, independent prosecutors and judiciaries, limits on discretionary powers of bureaucrats and open appeals processes.103 In France Investors and lenders demand high standards of corporate governance free of corruption.104 On January 16, 2001, the U.S. Department of Treasury, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Department of State announced the issuance of new guidance to help U.S. financial institutions avoid transactions that may involve the proceeds of foreign official corruption.105
1 Maria Dakolias and Kim Thachuk, ^ , 18 Wis. Int'l L.J. 353, 355 (2000). [Hereinafter Dakolias & Thachuk]
2 Id. at 356
3 Kim Lane Scheppele, The Inevitable Corruption Of Transition, 14 Conn. J. Int'l L. 509, 510-514 (1999).
4 UNITED NATIONS DEVELOPMENT PROGRAM, (3, July 1997), MDGD Discussion Paper 3, ^ http://magnet.undp.org/docs/efa/corruption3/o_UN-07b_Chp1.pdf
5 Dakolias & Thachuk , supra note 1 at 355-356.
6 Robert Klitgaard, International Cooperation Against Corruption, International Monetary Fund Finance & Development (March, 1998), No. 1, Vol. 35, Pg. 3, LEXIS, Nexis Library, IAC-ACC-NO: 20519366.
8 James P. Wesberry Jr., International ^ , 18 J. INTL. L. BUS, 498, 509 (1998). [Hereinafter Wesberry ]
9 See John T. Noonan, Bribe (1987) for discussion of bribery.
10Enery Quinones, What is Corruption, OECD Observer, (April 1, 2000), Pg. 23; LEXIS, Nexis Library IAC-ACC-NO: 64333488. [Hereinafter Quinones ]
13 See Nancy Bord, International Corruption: So What? World and I, (April 1, 1999), No. 4, Vol. 14, Pg. 86, LEXIS, Nexis Library IAC-ACC-NO: 54703786, for discussions of causes and consequences of corruption. See also State Dept's Wayne on Anti-Bribery Report to Congress, (1670), (29 June 2000) at http://www.fas.org/irp/news/2000/06/000629-bribery.htm, for discussions See also^ MONDAY MORE TRADE MAY LEAD TO LESS CORRUPTION , Philippine Daily Inquirer (April 16, 2001), Pg. 3, LEXIS, Nexis Library, WDPI file;
14 Wesberry, supra note 8, at 498. See also QUINONES, supra note 9.
15 Paolo Mauro, Why Worry About Corruption? 4-6 (1997). [Hereinafter Mauro]
16 See Henry R. Luce, ^ 29 Law & Pol'y Int'l Bus. 93, 95-97 (1997) for 6 situations where bribery plays role of the distributor of costs and benefits.
17 See Vito Tanzi, Roads to Nowhere:Hhow Corruption in Public Investment Hunts Growth (1998).
18 Mauro, supra note 15, at 6-7.
^ Honesty is the Best Policy, OECD Observer (April 1, 2000), Pg. 3 LEXIS, Nexis Library, IAC-ACC-NO: 64333481.
20 Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat.1494. 15 U.S.C.A. § 78 (1998)
21 See Barbara Crutchfield George & Kathleen A. Lacey, A Coalition of Industrialized Nations, Dveloping Nations, Multilateral Development Banks , and Non-Governmental Organizations:A Pivotal Complement to Current Anti-Corruption Initiatives, 33 Cornell Int’l L.J. 547 (2000) for discussion of the amendments. See also Stuart H. Deming, Foreign Corrupt Practices, 33 Int'l Law. 507 ( Summer, 1999).
22 U.S. Department of Commerce. ^ USIA Electronic Journal, Vol. 3, No. 5, November 1998 http://usinfo.state.gov/journals/ites/1198/ijee/factfcpa.htm
23Bill Shaw, The Foreign Corrupt Practices Act and Progeny: Morally Unassailable, 33 Cornell Int’l L.J. 689, 702-706 (2000). See also Id. at 701 for analysis of court practices in FCPA
24 Steven R. Salbu, A Delicate Balance: Legislation, Institutional change, and Transnational Bribery, 33 Cornell Int’l L.J. 657, 681 (2000)
^ Tolerance, Compliance And Whistle Blowing, (September 15, 2000) No. 23, Vol. 66, Pg. 726, LEXIS, Nexis Library IAC-ACC-NO: 66122954
26 Jeffery P. Bialos, The Foreign Corrupt Practices Act: coping with corruption in transitional economies, (1997), at 140. [Hereinafter Bialos]
27 See Duane Winsdor and Kathleen A. Getz. Multilateral Cooperation to Combat Corruption: Normative Regimes Despite Mixed Motives and Diverse Values. 33 Cornell Int’l L.J. 731 (2000) for discussion.
28 See Id. at 760-762.
29 Stuart E. Eizenstat, Promoting The Rule Of Law And Anti-Corruption In A Globalized Economy, USIA Electronic Journal, (November 1998) Vol. 3, No. 5, at http://usinfo.state.gov/journals/ites/1198/ijee/eizen.htm
30 ^ . 2.
31 Bialos, supra note 26, at 138
32 Id. at 116.
33 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, OECD/DAFFE/IME/BR(97)16/FINAL (Dec. 18, 1997), reprinted in 37 I.L.M. 1 (1998), also available at http://www.oecd.org/daf/nocorruption/20nov1e.htm
34 Argentina, Brazil, Bulgaria, Chile and the Slovak Republic.
35Steps Taken and Planned Future Actions by each Participating Country to Ratify and Implement the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions at http://www.oecd.org/daf/nocorruption/annex2.htm. (Last visited April 24, 2001).
36 Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Slovak Republic, Spain, Sweden, Switzerland, United Kingdom, United States.
37 ^ Commentaries on the Convention on Combating Bribery of Officials in International Business Transactions at http://www.oecd.org/daf/nocorruption/20nov2e.htm (Visited April 24, 2001).
38 Frédéric Wehrlé, Co-ordinator of Anti-Corruption Outreach Activities, Making Sure That International Anti-Corruption Standards Are Enforced: The OECD Convention Monitoring Mechanism, OECD Global Forum on Fighting Corruption: Safeguarding Integrity Among Justice and Security Officials, Bucharest, Romania, March 30-31 2000 at http:// usinfo.state.gov/topical/econ/integrity/buchor/homepage.htm (Visited April 20, 2001).
39 Stephane Bonifassi, ^ International Enforcement Law Reporter (January, 2001), Vol. 17, No. 1, LEXIS, Nexis, Library, IELR file
40 OECD Members Agree to Prevent Bribery in Export-Credit Transactions, International Enforcement Law Reporter, January, 2001, Vol. 17, No. 1, LEXIS, Nexis, Library, IELR file
41 Id., see also John R. Schmertz, Jr., and Mike Meier, Esq., OECD adopts revised guidelines for "responsible business conduct" by Multinational Enterprises which recommend standards as to labor, environment, human rights and corruption issues, International Law Update (July, 2000), Vol. 6, No. 7, LEXIS, Nexis Library, ILAWUP file.
42 Carolyn Ervin, ^ http://magnet.undp.org/Docs/efa/corruption/Chapter10.pdf, (Visited 20 April 2001)
43 Inter-American Convention Against Corruption, OEA/Ser.K/XXXIV.1, CICOR/doc. 14/96 rev.2 (Mar. 26, 1996), reprinted in 35 I.L.M. 724 (1996), also available at http://www.oas.org/
44 ^ , Article VIII
45 Id. Article XIII and XIV
46 U.S. Department of State, Fact sheet, OAS Inter-American Convention Against Corruption (May 27, 1997) at http://usinfo.state.gov/journals/ites/1198/ijee/factoas.htm (Visited April 20, 2001).
47 John R. Schmertz, Jr., and Mike Meier, Esq., U.S. Senate approves OAS
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