Few governments enforce foreign bribery prohibition

Internal Auditor, August, 2008 by S. Scharf

ACCORDING TO A TRANSPARENCY INTERNATIONAL (TI) report less than half of the governments that adopted the Organisation for Economic Co-operation and Development (OECD) Anti-bribery Convention nine years ago enforce the foreign bribery prohibition. The 2008 Progress Report on Enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions shows that although there is significant enforcement by 16 OECD governments, there is little or no enforcement by the remaining 18 governments.

The report lists two large exporters Japan and the United Kingdom, among those countries lagging in enforcement. At the same time, TI commends the increased enforcement by three of the largest exporting countries: France, Germany, and the United States. "Unless all OECD countries enforce their legal obligations on foreign bribery now, there will be a decreasing incentive for those countries currently complying to continue doing so," says Huguette Labelle, chair of TI. "This is an unacceptable risk."

The Anti-bribery Convention was considered a landmark event in 1999 because it criminalized foreign bribery, which had even been tax deductible in some countries. TI's yearly report provides a country-by-country analysis of systems for enforcing the prohibition on foreign bribery and includes investigation case studies.

"The business community is getting mixed messages," says Christian Poortman, director of global programs at TI. Poortman notes that Germany's strong enforcement actions in a case involving Siemens were a warning to businesses in that country that foreign bribery will not be tolerated. On the other hand, the United Kingdom's decision to terminate an investigation into BAE Systems' deals in Saudi Arabia raised doubts about the government's commitment to enforce bribery laws.

Calling the next year crucial for the success of the OECD Convention, the TI report outlines priority areas for action:

* The UK Parliament should address inadequacies in its laws based on a Law Commission report scheduled to be released in October.

* Lagging governments must send a strong signal that they are pursuing prosecutions seriously.

* The UK House of Lords should affirm the decision of the High Court invalidating the termination of the BAE Systems case, thereby closing the national-security loophole precedent it set.

* The OECD should continue its rigorous monitoring program geared at enforcing the Anti-bribery Convention and should encourage the accession of other major exporting nations such as China, India, and Russia.

To read the 2008 Progress Report in its entirety, visit TI's Web site, www.transparency.org.