Corruption and, in particular, bribery of foreign public officials was, until recently, considered merely an issue pertinent to each country’s domestic laws and commercial practices. Another reason for industrialised States not extending extra-territorial jurisdiction against nationals or domestically registered corporations known to have bribed public officials of third nations was because the prospects of investments abroad were obviously perceived as boosting national economies, regardless of their unethical acquisition. On a short term scale, this may be true for a local economy, but IMF studies have revealed that corruption is negatively linked to the level of investment and economic growth.157Moreover, bribery may also constitute an act of unfair competition158and also have a serious impact on the enjoyment of fundamental human rights.159
The US was the first country to enact extra-territorial legislation prohibiting bribery of foreign public officials by US nationals or corporations of any type, which are either controlled by US nationals, or have their principal place of business in the US, or are organised under US laws.160‘Bribery’, under the Foreign Corrupt PracticesAct (FCPA) 1977, is the offer of payment of money or anything in value to an official of a foreign government or a political party with corrupt intent for business purposes. This definition excludes so called ‘facilitating payments’ intended to expedite otherwise lawful government action, as well as any payments permitted in accordance with the laws of the foreign State.161This legislation, although a bright light in the darkness of
157 V Tanzi and H Davaodi, ‘Corruption, Public Investment and Growth’, IMF Working Paper 97/139, 1997.
158 International Chamber of Commerce,Revisions to the International Chamber of Commerce Rules of Conduct on Extortion and Bribery in International Business Transactions,35 ILM (1996), 1306, p 1307.
159 Report of the Working Group on Contemporary Forms of Slavery,UN Doc E/CN4/Sub2/1999/17 (20 July 1999), para 53, wnich describes corruption as an inescapable element in the struggle against contemporary forms of slavery.
160 1977 FCPA, 15 USC, §§ 78a, 78dd-1, 78dd-2 (Supp 1997).
161 See LH Brown, The Extra-Territorial Reach of the US Government’s Campaign Against International Bribery’, 22Hastings Intl & Comp L Rev(1999), 407, pp 410–16; MK Hurst, ‘Eliminating Bribery in International Business Transactions’, 6JILP(1997), 111.
international business corruption, was rightly seen by US corporations and their foreign subsidiaries as placing them at an onerous disadvantage against their international competitors who were not susceptible to such laws.
US-led efforts to achieve global normative consensus on the international criminalisation of foreign bribery prompted various organisations to confront this issue for the first time. In 1975, the General Assembly of the UN passed Resolution 3514, condemning bribery by transnational and multinational corporations and the United Nations Economic and Security Council directed ECOSOC to formulate a code of conduct regarding payments in international trade. Although an ad hoc Working Group on Corrupt Practices was established and produced a draft Agreement on Corrupt Practices, lack of support from developed nations eventually shelved this project. At the same time, the OECD established a Committee on International Investment and Multinational Enterprises (CIME) with the purpose of drafting a relevant code of conduct. On 21 June 1975, the OECD Ministerial Conference adopted a Declaration on International Investment that prohibited the solicitation and payment of bribes to foreign officials, as well as other unlawful political contributions.162However, it was not until 1994, and the adoption by the OECD Council of a Recommendation on Bribery in International Business Transactions,163that mounting pressure had paved the way for establishing concrete normative guidelines on international corruption. This Recommendation called upon OECD Member States to deter bribery through their national legislation and practice, especially by amendment of any tax laws that permit or favour bribery and further urged them to facilitate international co-operation. CIME was designated as a monitoring body, ordered to review the status of the Recommendation after three years. On the instigation of the US, the OECD Council adopted, on 11 April 1996, a Recommendation calling upon States to re-examine their laws on tax deductibility concerning bribes paid to foreign public officials, which were often listed as commissions or fees, preferably by treating such bribes as illegal.164In accordance with its mandate, on 23 May 1997, CIME submitted a Revised Recommendation on Combating Bribery in International Business Transactions, which the OECD Council subsequently adopted.165This instrument recommended the adoption of specific legislative proposals in every field of national laws—criminalisation of bribery, non- recognition of tax deductibility, enforcement of adequate accounting, independent external audit, internal company controls, transparency in public procurement and international co-operation—and eventually formed the basis for the OECD’s 1997
162 Likewise, the International Chamber of Commerce issued a report in 1977 containing Rules of Conduct to Combat Extortion and Bribes, in connection with retaining or obtaining business, requiring the adoption of codes of conduct and rigorous accounting controls by participating States. These Rules were revised in 1996, reprinted in 35 ILM (1996), 1306.
163 OECD Doc C(94)75/FINAL (27 May 1994), 33 ILM (1994), 1389.
164 1996 Recommendation on the Tax Deductibility of Bribes to Foreign Public Officials, OECD Doc C(96)27/FINAL (17April 1996), 35 ILM (1996), 1311; following publication in May 1997 of the OECD’s Committee on Fiscal Affairs (CFA)Report on the Recommendation on Tax Deductibility,which noted that in 12 Member States bribes to foreign officials were ‘in principle’ deductible offences; the majority of these States re-examined their tax legislation. Seeop cit,Brown, note 161, p 494.
165 OECD Doc C(97) 123/FINAL (29 May 1997), 36 ILM (1997), 1016.
Convention on Combating Bribery of Foreign Officials in International Business Transactions (OECD Convention).166
Article 1(1) of this Convention makes it a criminal offence for any person:
Intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that public official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business.
It is also an offence under the Convention to be involved in instances of bribery through acts of complicity, incitement, aiding or abetting, attempts or conspiracy.167 This definition of bribery of foreign public officials is entirely consistent with similar international instruments, such as the 1996 Organisation of American States (OAS) Inter-American Convention Against Corruption,168the 1997 EU Convention on the Fight Against Corruption Involving Officials of the EC or Officials of Member States of the EU,169the 1999 Council of Europe Criminal Law Convention on Corruption,170 and the 2000 CATOC.171Although illicit enrichment is an offence in two of the above instruments,172 advantages collected by foreign public officials are generally recognised as not constituting bribery if they are permitted by statute or case law of the official’s country, or are in fact ‘facilitation payments’.173 The 1997 OECD Convention renders legal persons responsible for acts of bribery and subject to financial and administrative sanctions,174and the 1997 EU Convention makes explicit reference to the criminal liability of the heads of businesses—defined as the people having power to exercise control or take decisions—where an act of bribery was performed by a person under their authority acting on behalf of the business.175The offence contemplated is an extraditable one,176subject to the usual qualification of bilateral extradition treaties between the parties concerned.
Besides the stress on interstate co-operation, treaties and non-binding instruments alike either urge or oblige parties to adopt sound economic regulatory and disclosure procedures, auditing, surveillance of public officials and be prepared to initiate
166 37 ILM (1998), 1; the most significant changes to the FCPA 1977 made by the InternationalAnti-Bribery and Fair Competition Act 1998, which is intended to implement into US law the OECD Convention, are that it adds officials of public international organisations to the definition of ‘foreign officials’ and expands US jurisdiction both to acts committed by US nationals wholly abroad, without a nexus requirement to US interstate commerce, and also to acts committed by non-US nationals while in the USA: Pub L No 105–366, 112 Stat 3302 (1998). See SD Murphy, ‘Contemporary Practice of the US Relating to International Law’, 93AJIL(1999), 161.
167 1997 OECD Convention, Art 1(2).
168 Art 4(1).
169 Arts 2 and 3, distinguishing between ‘passive’ and ‘active’ corruption. 1997 OJ C195/1, 37 ILM (1998), 12.
170 ETS 173.
171 Art 8, UN Doc A/55/383 (2 November 2000).
172 1996 OAS Convention, Art 11; GA Res 51/191 (16 December 1996), containing the UN Declaration against Corruption and Bribery in International Commercial Transactions.
173 ‘Commentaries on the 1997 OECD Convention’, 37 ILM (1998), 8, p 9.
174 1997 OECD Convention, Arts 2 and 3(2).
175 1997 EU Convention, Art 6.
176 1997 OECD Convention, Art 10; 1997 EU Convention, Art 8.
prosecutions in cases of corruption.177The 1997 OECD Convention established a monitoring mechanism under the supervision of the Working Group on Bribery in International Business Transactions, incorporating both a reporting system and an examination procedure for each Member State.178In 1996, the World Bank’s Board of Executive Directors revised the organisation’s Guidelines for Loans and Credits by requiring that all parties to a transaction that is financed by the bank observe the highest standards of ethics, and that, in case of corrupt practice, the bank is to reject financing proposals.179The World Bank has taken concrete action regarding bribes allegedly paid to win contracts for the Lesotho Highlands Water Project, a dam construction venture partly funded by the bank. It has provided financial assistance to the Lesotho Government’s investigation into the corruption allegations, stating further that, if a company were discovered to have paid bribes, it could be excluded from participating in any World Bank projects elsewhere.180It is worth noting the existence of a non-profit non-governmental organisation established in 1993 dedicated to the curbing of corruption, Transparency International.181 This organisation has actively participated in building international support for the 1997 OECD Convention and works closely with governments on developing national anti-corruption programmes and adequate domestic legislation. Among its enormous research resources and database, most impressive are its annualCorruption Perception and Bribe Payers Indexes.
It is obvious that bribery of foreign public officials has been finally recognised as a contemporary scourge, an international offence being a threat to commerce, stability and the enjoyment of human rights. Whatever may be the domestic practice with regard to other international offences, the application of the ‘Act of State’ and similar doctrines is incompatible with the purposes of the above anti-corruption treaties, as these instruments are, by their nature, intended to regulate acts of public officials. It would, thus, be absurd to hold that solicitation and receipt of bribes constitutes a public act of a foreign State committed on its territory, and, hence, not susceptible to the criminal jurisdiction of other States, as this defeats the object and purpose of the relevant conventions. What is more worrying is that although the performance element of certain contracts has been premised on corruption of foreign officials, subsequent arbitral awards dealing with other contractual matters were enforced in third countries, with the courts of the enforcement State refusing to examine the relevance of the corruption.182
177 International Chamber of Commerce,Revisions to the Rules of Conduct on Extortion and Bribery in International Business Transactions,35 ILM (1996), 1306; 1997 OECD Convention, Art 8; GA Res 51/191 (16 December 1996).
178 1997 OECD Convention, Art 12.
179 The World Bank,Guidelines for Procurement under IBRD Loans and IDA Credits,1996, p 7.
180 ‘Dam Builders Charged in Bribery Scandal’, BBC News, 19 November 1999.
181 See J Pope and F Vogl, ‘Making Anti-CorruptionAgencies more Effective’, 37Finance and Development (2000), 1.
182 See I Bantekas, ‘Some Aspects of Enforcement of Foreign Arbitral Awards in the United Kingdom:
Financial Fora, Public Policy andJus Cogens’, in I Greshnikov (ed),International Commercial Arbitration, 2002, Arbitration Centre IUN.