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Expansion may weaken OECD anti-bribery convention-experts

Source: Thomson Reuters Foundation - Thu, 5 Dec 2013 17:41 GMT
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Angel Gurria, secretary-general of the Organisation for Economic Co-operation and Development (OECD) (2nd L) gestures during a joint news conference with Italian Prime Minister Enrico Letta at Chigi Palace in Rome. Photo May 2, 2013. REUTERS/Tony Gentile
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WASHINGTON (Thomson Reuters Foundation) – The OECD’s Anti-Bribery Convention needs to consider adding emerging powers to its ranks if it is to remain a major global force in combating business corruption, but expansion risks weakening its powerful oversight role, experts in foreign bribery said.

When the Anti-Bribery Convention was launched in 1997, its signatories represented 80 percent of world trade and investment flows.  Today it represents about 60 percent.  China is not a member, nor is India, and other emerging economies with growing export sectors such as Indonesia, Malaysia, the Philippines and Thailand are absent.

“If you are going to succeed, the club that was must recognize it is no longer the dominant force in world trade and investment.  How do you bring in those who matter in world trade and still have something manageable?” said Lucinda Low, a leading anti-bribery lawyer at the Washington law firm Steptoe & Johnson LLP.

Mark Pieth, outgoing chairman of the OECD’s Working Group on Bribery, said the organisation confronts two major issues – how to expand its membership while ensuring it maintains an effective monitoring system that can pressure countries to enforce their anti-bribery laws.

“We will have a real challenge to maintain the standards.  We are having trouble in getting standards in the existing countries,” Pieth said at a George Washington University Law School conference on Wednesday on the International Fight Against Corruption.  

Under the OECD’s Anti-Bribery Convention, signatory countries must criminalise bribing a foreign public official in business transactions. The 34 members of the Organisation for Economic Cooperation and Development, which represent major developed countries involved in international trade, plus six others - Russia, South Africa, Brazil, Argentina, Colombia and Bulgaria – are signatories.

The Working Group on Bribery holds quarterly meetings to monitor each country’s progress in implementing the anti-bribery laws and record on enforcement.  The greatest strength of the OECD’s anti-bribery mechanism is the frank feedback each country receives from its peers in closed-door meetings and in periodic public reports on the progress a country is making, officials who have attended the OECD sessions said.

This naming and shaming mechanism has succeeded in cajoling countries into toughening their legislation and their investigations and prosecution efforts, Pieth and others said. They cited the U.K’s passage of the 2010 Anti-Bribery Act after the BAE Systems bribery scandal as a prime example.

“Suddenly it gets very real when you can write into a diplomatic text you should do extra due diligence,” said Pieth.  By flagging to the business community that there is a high risk in doing business with a country, it creates immense political pressure for reform, he said.   

Charles Duross, deputy chief of the business fraud section at the U.S. Department of Justice, said he had been highly skeptical of peer review -- until he attended a gloves-off session at the OECD. 

“I was shocked by the fact countries deeply cared about what other countries had to say about them. It has had a dramatic impact,” Duross said.

Peer review has prompted the United Kingdom, Canada, the Netherlands and others to strengthen their anti-bribery frameworks. In the United States, criticism over how it decides on prosecutions under the Foreign Corrupt Practices Act – the landmark 1977 legislation which was the first to criminalise bribing foreign officials to win business contracts – prompted the Justice Department last November to issue its FCPA guidance document, he said.     

“It really has fundamentally changed the corporate bribery landscape. Peer review is tough, and it embarrasses the people who want to do well and receive accolades from their peers,” Duross said.

Expanding the Working Group’s membership beyond 40 countries will make it unwieldy to have the type of frank exchanges that have characterized its work to date, but to lose this peer pressure risks watering down the group’s effectiveness, experts said.

Fritz Heimann, chairman of Transparency International-USA and counsellor to General Electric, said the OECD’s Working Group is at “a tipping point.”  Enforcement of anti-bribery legislation is already sorely lacking, and expansion risks pushing the enforcement side further into the background, he said.

According to a Transparency International report, half the countries that are signatories to the convention have have had few or no prosecutions of foreign bribery cases.

“Why? The answer is that there is no high-level government support,” Heimann said.

Drago Kos, who takes over the chairmanship of the Working Group on Bribery in 2014, said the report shows the importance of remaining vigilant on enforcement.

“The fact that there are no cases in 20 countries tells us they are not doing enough work in this area.  We just have to keep on pressing and pushing.  There is no other way,” he said. 

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