Anti-Bribery Laws Spotlighted in 13 OECD Countries

Press Release
Paris, July 1, 2003

A comparative study of private-sector anti-bribery laws in 13 OECD countries has been published jointly by the International Chamber of Commerce and Germany's Max Planck Institute for Foreign and International Criminal Law.

Besides analyzing existing international instruments, the study covers the law in the Czech Republic, England and Wales, France, Germany, Italy, Japan, Korea, The Netherlands, Poland, Spain, Sweden, Switzerland, and the United States. It is ICC Publishing's ICC's Book of the Month for July 2003.

The book, Private Commercial Bribery, is jointly edited by Thomas O. Rose, an American lawyer who led ICC's work on suppression of private sector bribery; Professor Günter Heine, Director of the Institute for Criminal Law and Criminology at Berne University, Switzerland, and Dr Barbara Huber, Senior Research Fellow at the Max Planck Institute for Foreign and International Commercial Law.

In a preface, Professor Albin Eser of the Max Planck Institute says willingness to accept bribes was long regarded as no more than a form of disloyalty to an employer or a threat to fair competition without full recognition of the far-reaching injury to the economic system.

"This underestimation of corrupt behaviour in the private economic sphere has, however, thanks to the efforts over the past 25 years of the International Chamber of Commerce, at last come to an end."

ICC policy manager Caroline Newton said: "This study is in the context of the existing OECD Convention banning the bribery of foreign public officials. Decisions will have to be made soon about whether the convention should be expanded to include bribery entirely within the private sector and the study will be of great help to those who have to make the decisions."

ICC has been engaged in the fight against bribery and extortion in international business for more than 25 years. The first ICC Rules of Conduct on Extortion and Bribery in International Business Transactions were published in 1977. The rules were updated in 1996 and again in 1999. They have been adopted by companies worldwide.

The study is the result of an initiative by ICC in 1997 to persuade the OECD Working Group on Bribery in International Business Transactions - the consultative group within OECD which produced the Convention - to complete the Convention by criminalizing bribery in international business transactions, whatever its form and without distinction as to the parties involved.  The Working Group had decided in 1997 to limit its focus to transnational bribery of foreign public officials and to leave for a later date related matters such as private-sector bribery.  In 1998 it invited ICC to demonstrate whether ICC found that the business community felt a strong commitment to curbing private-sector bribery and would vigorously support action by OECD to condemn it. 

ICC has taken a consistent position since adopting its first Rules of Conduct in 1977 that no meaningful distinction exists between public and private bribery, that they both distort commercial dealings and that they deserve similar treatment in the law.  Its commitment to this principle has only grown in the succeeding years, which have been marked by the privatization of many formerly governmental functions, by increased complexity and interaction between the public and private sectors in international transactions and by an increase in the monetary value of these transactions. 

As a first step in advancing the issue of private-sector bribery, Professor Dr. Mark Pieth, the Rapporteur of the OECD Working Group, and ICC agreed that a systematic study of the state of the law of private-sector bribery would lay the foundation for further consideration by the Working Group.  ICC was proud to be asked to undertake this study and solicited the support of the Ford Foundation, an American non-profit organization, for a grant to finance the work.  The Max Planck Institute was referred to in the ICC application to Ford as the likely partner of ICC for production of the study.  Upon award of the grant, ICC initiated negotiations in 1999 with Professor Dr. Albin Eser, Director of the Max Planck Institute, Professor Dr. Gunter Heine and Dr. Barbara Huber, Senior research Fellow, to define the extent and terms of the studies required.  Two years later, the country reports, whose choice of rapporteur and supervision was assigned to the capable team of Dr. Huber and Professor Heine, were submitted in draft form and became the foundation for the presentation of the observations of ICC's Commission on Anti-Corruption to OECD on April 23rd 2002.  Further mention of the observations laid before the OECD is reserved for later discussion.

With 34 countries having adopted or adhered to the Convention and more possible, it is appropriate to have expected that the process of adoption and implementation of the Convention would take a decade or more to achieve.  Owing to the "genius" of the instrument, especially its concept of functional equivalency, however, delays due to "transposition" were greatly reduced.  Thus, the ratification process proceeded smoothly and was completed on February 15th, 1999.  "Functional equivalency" requires countries which adopt the Convention simply to adjust their laws so that they achieve the purpose and effect of the Convention; no specific forms are imposed, and unorthodox or novel techniques unknown to a country's legal system are not ordered.  So long as the intent and effect of the Convention is achieved, the country's legal order is given free rein to take conforming action. 

The other novelty of the Convention, peer review, ensures that the adoption and implementation of the Convention satisfies its requirements.  Once a country has adopted implementing legislation, OECD arranges for a team of specialists from two other signatory countries to visit the country and to examine the result to determine whether the implementation will be effective.  To date, there have been four such reviews, a rate of examination which has not kept pace with earlier expectations.

It would be needlessly repetitious of themes developed in Professor Heine's analytical survey for me to dwell on major aspects of the law of private-sector bribery.  It is enough to state that the criminalization of private-sector bribery, especially if international aspects are present, is a recent phenomenon, tracing its late development to such assumptions as:

- criminal sanctions should be reserved for bribery of public officials, i.e., where public funds or a public duty is involved;

-private-sector bribery, like its public-sector counterpart, is a national problem;

-private persons should deal with commercial bribery by civil remedies or self-regulation; implementation of a state's system of prosecution for this behaviour is unwarranted and wasteful (indicative of this attitude is the fact that in 2001 three of the thirteen OECD countries surveyed had no private commercial bribery statute).

Even where statutes exist, there is no unanimity about the policy goal(s) which private-sector bribery law should vindicate.  Is the purpose to curb unfair competition, penalize violations of loyalty due to employers and/or to an economic system, or ensure the protection and proper management of corporate assests?  Or a plurality of purposes?

Other explanations of official reticence toward private-sector bribery are the same as for public bribery.  In many OECD countries, jurisdictional concepts, based on situs of the criminal act within the country, have not kept pace with globalization and so transnational bribery cases remain beyond the reach and control of national authorities.  Likewise, the idea that bribery is a national problem dies hard and has limited the development of legal tools for investigating and/or procuring evidence of a crime in an international (i.e., involving two or more countries) setting, for compelling the appearance of witnesses or for the arrest and extradition of suspects in international cases.  Procedural and practical roadblocks to preparing cases remain a principal explanation of the rarity of cases actually prosecuted, even where the law provides for action.

The slow pace of development of the law of private-bribery may also be determined by reticence about the nastiness of "dirty laundry" which victims do not wish to wash in public.  ICC surveyed attitudes of its national committees as well as leading business enterprises and corporate counsel and found that business generally preferred to handle such matters in house by self-regulation, or at most, through civil suit.  In stark contrast, however, a majority of those polled favoured adoption of criminal legislation making clear that private-sector bribery in international transactions is outlawed.  The result of these paradoxical attitudes is that although the incidence and magnitude of private-sector bribery has not been confirmed by empirical studies, there appears to be consensus that a clear proscription agaisnt it is needed.

Criminalization of Private-sector Bribery

Whatever the reason for past reluctance about curbing private-sector bribery and despite difficulties with collecting meaningful statistics on the problem, ICC's Commission on Anti-Corruption asked the Max Planck Institute to survey the ciminal law of private-sector bribery according to a uniform checklist, to assess the effectiveness of civil law and civil law remedies to give redress for bribery and to evaluate self-regulation as a means of preventing commercial bribery.  The effect of these strategies in international business transactions was to be specifically addressed.  Without wishing to dilute Professor Heine's complete analysis, let me summarize certain points:

• There is no uniform, systematic definition of the crime of private-sector bribery today in the thirteen countries or in international legislation.
• Divergent criminal laws produce different burdens of proof and different defences.
• The existence of "international elements" in a criminal bribery case virtually assures the case will not be prosecuted.  This may result from procedural or evidentiary hurdles, from a requirement of "double criminality", from the need for a request to prosecute from the victim or authorities of his country, from victim's reticence or because prosecution of such crimes is not a high priority of the state.
• Jurisdictional concepts have been too narrow to support vigorous prosecution of private-sector bribery.  A "territorial" basis for jurisdiction - a reflection of the normal roots of bribery law - is not sufficiently  extensive to reach the new international dimensions of transactions today, with their complex and exotic patterns.

Effectiveness of Civil Remedies

Regarding the use of civil law and its remedies as a method of compensating for private-sector bribery, the reports reflect a spectrum of results extending from robust enforcement of liability in some countries to a total  absence of case law in others, suggesting that general principles of tort/fault law have not always been implemented or vindicated in this field.  In jurisdictions where cases have been brought, private bribery is actionable on such grounds as unfair competition, breach of trust or fiduciary duty, and tortious interference with employment obligations.  However, in many others, although the rapporteurs may refer to principles such as "no injury without remedy", case law demonstrating the liveliness of this principle in matters of private-sector bribery is lacking.  Moreover, strict separation between criminal and civil process for the same wrong can encumber and discourage resort to a claim for damages in some countries.  A number of other factors discouraging civil suits were disclosed in the reports:

• Rules in some countries substantially limit the plaintiff's possible claim.
• Damage claims must be brought in separate proceedings from criminal prosecutions.
• Damages do not adequately compensate for the costs of protracted litigation.
• The ability to investigate and compel the production of evidence and witnesses in international cases is severely hampered.
• Showing damages with certainty and proving causal links is another difficulty in international cases, as is obtaining jurisdiction.
• Reticence of victims again plays a role.

Administrative Measures and Self-regulation

The study also inquired about practices to stem private-sector bribery present in regulatory measures and/or developed internally by business enterprises.  Although here, too, a wide spectrum of initiatives has been taken in the countries surveyed, the survey results reflect varying commitments and approaches to the problem.  Thus, some countries' legislation disqualifies companies convicted of the crime of corruption (itself or by vicarious liability through actions of officers) from bidding on contracts of public procurement.  A small minority of others allow disqualification on grounds of suspicion of such behaviour.  Certain rapporteurs saw evidence of heightened willingness to combat the problem in the general duty of auditors of companies to report unusual financial transactions adversely affecting the company's business or assets to its shareholders.  Another emphasized legislation seeking to raise ethical standards of business practices or provide for channels for "whistle-blowers" to report corrupt practices to a manager responsible for corporate oversight.  Likewise, recent efforts to ensure that bribery payments are not tax-deductible under local law in the OECD countries has produced some encouraging results. 

Despite the harvest of initiatives, it must be said that governmental condemnations of bribery have been uneven in the countries surveyed.  No uniformity of approach exists and the recognition of private-sector bribery as a serious problem is not acknowledged.

Corporate codes of conduct and training programmes implementing them are the essential expression of corporate commitment to self-regulation; but they too are subject to regional and cultural variations in their frequency of adoption and implementation.  Thus, while ethical codes provide a framework in which managers, employees, unions, and business associations can articulate standards of behaviour and provide for compliance procedures, they must be recognized to operate in a specific ethical and legal context, which can be supportive in varying degrees.  Large multinational companies in Europe and the USA have adopted such codes and implement them to a substantial extent.  One Asian country, determined to reform practices which led to serious economic problems in the late 1990s, has joined this movement.

There is evidence that guidelines for vicarious liability of companies and for imposing sentence on crimes of bribery have taken or will take into account whether the company has an effective code of conduct or has otherwise taken all "reasonable organizational measures" to prevent acts of bribery.  These are encouraging signs, but they are not yet the general rule in the thirteen countries surveyed, some of which (ex-state-run economies) have not introduced self-regulatory measures.  Self-regulation, to be effective, should rest on a clear legislative condemnation of private-sector bribery to give impetus and substance to the adoption of corporate codes of conduct.

Conclusion

With the study as background, the ICC Commission on Anti-Corruption faced the task of reporting to OECD on its findings.  An informal consultation between OECD, ICC and other stakeholders, took place on April 23rd, 2003 for this purpose.  Backed by the country and international reports, which follow, the Commission, after much discussion, decided to formulate and offer to OECD the Commission's observations based on the study and to urge the Working Group to create a task force of its own members to draw appropriate conclusions.  ICC's Commission on Anti-Corruption has volunteered to assist OECD in its deliberations as a group of  experts on the subject. 

Any subject as broad as private-sector bribery in international transactions is sure to be difficult to systematize, especially where legal systems are different and derive from diverse traditions.  The problems of doing so leap out of the study conducted.

Similar problems beset the criminalization of bribery of public officials in international transactions, and yet the political will to achieve this condemnation was patiently forged by the leadership of teh OECD Working Group.  Although the political will to act on private-sector bribery may not be present today, owing to lack of knowledge of the extent of the problem or choice of other priorities by the Working Group, there is likely over time to be a growing recognition that private-sector bribery is the twin of bribery of public officials and that its condemnation is the natural next step of the OECD Working Gourp.

The ICC Task Force on Private Sector Bribery, which I have had the honour to chair, could not have produced its reports nor kept to its rigorous schedule without the helpful comments and drafting skills of members of the ICC Commission on Anti-Corruption.  I would like to single out for mention Francois Vincke (Chair fo the Commission on Anti-Corruption), Andrew Berkley, Michael Davies, Fritz Heimann, Thomas Pletscher, and Stephen Walzer.  Thanks also are due to Dr. Barbara Huber for managing and making this publication possible.  On behalf of the editors I wish to thank Karen A. Guida, Attorney at Law (USA), for her painstaking language revision as well as Petra Lehser and Christa Wimmer for their great diligence in preparing the book for publication.