Since the mid-1990s, anti-corruption has made impressive progress. It has been transformed from a subject that was kept in the closet to a high place on the agenda of multinational companies, international organizations, national governments and non-governmental organizations. However, the goal of greatest importance to the international business community – a corruption-free, level playing field for trade and investment – has not yet been achieved. This chapter will review the cur- rent status of the principal anti-corruption programs and consider the obstacles that must be overcome to move the anti-corruption agenda to the next level. Our key message is that greater cooperation among the key players is needed so that the ongoing programs can reinforce each other to achieve the common objective.

Combating corruption is like mountain climbing; making progress becomes more difficult the further you go. With international conventions, getting foreign ministers to sign is the easiest step. Obtaining ratification from legislatures is some- what harder. Achieving implementation and enforcement by national bureaucracies is difficult. Follow-up monitoring to ensure that lagging governments meet their commitments is the most controversial step.

Corporate integrity programs face a similar progression. Publishing statements of ethical principles is easy. Formulating detailed integrity programs is harder. Implementing these programs so they become part of the corporate culture is much more difficult. Accepting the need for external verification remains very controversial.

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There are several reasons why making progress combating corruption becomes harder. Announcing anti-corruption policies is popular. However, moving from words to deeds requires allocation of money, experienced people and real commitment from top executives. It will also arouse opposition from those who benefit from corruption. Such opposition is strongly entrenched and intensifies when anti- corruption programs move from political gestures to real enforcement.

Another difficulty is that making discernible progress in reducing corruption will take time. It has taken ten years from the adoption of the OECD Convention to reach the point where there is substantial enforcement by half the parties. The UN Convention is much more complex, and considerable time will be needed to produce tangible results. Strong long-term commitment to anti-corruption programs is essential. Maintaining this commitment presents a difficult challenge, because pub- lic and political priorities change over time. Sustained advocacy by many parties will be required.

To overcome the obstacles confronting the anti-corruption agenda will require, not only persistence in pursuing the ongoing programs, but also marshalling much greater cooperation by key stakeholders. Such cooperation can build on the strong inter-relationships among different anti-corruption initiatives. For example, enforcement of anti-bribery laws and adoption of corporate integrity programs play an inter- dependent and mutually reinforcing role. Widespread adoption of corporate compliance programmes usually does not occur until there is active enforcement of anti- bribery laws.

However, law enforcement alone has difficulty changing business behaviour. Adoption of integrity programs by leading companies helps establish the moral framework that facilitates law enforcement. In addition, corporate programs also have a considerable multiplier effect on law enforcement: for every government prosecutor investigating foreign bribery, there will be scores of corporate lawyers and auditors enforcing corporate integrity standards. Similar inter-relationships among anti-corruption initiatives will be discussed below.

Closer cooperation among all the stakeholders will make it easier to overcome resistance to anti-corruption programs and to demonstrate discernible results. This will raise public and political support to the level at which continuing progress will become irreversible.

OECD Convention

The adoption of the OECD Convention in 1997 and the enactment of laws prohibit- ing bribery of foreign public officials by all 37 signatories of the Convention have been widely regarded as breakthroughs in the fight against international corruption. Because most major international companies are covered by these laws, they hold the promise of sharply curtailing the supply side of international bribery.

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To make sure that the promise of the Convention is achieved, the OECD’s Working Group on Bribery has been conducting a rigorous follow-up monitoring program since 1999. The first phase reviewed the laws enacted by the parties. The second phase assessed government enforcement programs and has included coun- try visits to almost all of the parties. The monitoring program is described in more detail in Chapter One. It deserves high marks for professional thoroughness and for its courage in criticising even the most powerful governments.

In an independent civil society effort to assess government actions, TransparencyInternational publishes an annual progress report on government enforcement. The 2008 report indicates there has been significant enforcement in 16 countries. This compares with 14 countries in 2007, 12 in 2006 and 8 in 2005. There have been substantial increases in the number of prosecutions in important exporting countries, including France, Germany and the US. In TI’s assessment, the trend is positive, but there is still little or no enforcement by over half of the parties to the Convention. These include the UK, Japan and Canada, three of the largest exporters.

Because the Convention depends on a collective commitment to stop foreign bribery, its success will not be assured until all the major exporters meet their engagements. The present “half way there” situation is unstable. There is a danger of backsliding by governments now enforcing the Convention. These governments will come under increasing pressure from national companies to let them do what their competitors are doing, and these arguments will be difficult to resist during a period of declining export markets.

The progress of the Convention is also threatened by the UK government’s termination in December 2006 of the investigation of bribery allegations involving a huge BAE order in Saudi Arabia. The UK asserted that national security interests overrode the obligation to prohibit foreign bribery. Even though the OECD strongly criticized the UK action, the House of Lords, in July 2008, upheld the termination, overturning a prior court ruling invalidating it. The threat posed by the BAE case is that other governments could also assert the right to override the Convention because of national security concerns. Unlimited, unilateral assertions of national security exceptions could undermine the Convention.

The Convention does not provide for a national security exception. However, there is room for debate concerning whether governments have an implicit right to assert such an exception. Many other treaties have resolved this issue by providing explicit national security exceptions, but establishing conditions limiting the use of them. Unless OECD adopts reasonable limitations on the use of national security exceptions, other governments may well be tempted to follow the UK’s example and unilaterally assert them.

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OECD’s follow-up monitoring program has carefully documented the present deficiencies in enforcement. However, notwithstanding the efforts of the Working Group and the Secretary General, OECD is struggling to persuade reluctant governments to meet their commitments. This is difficult to do in OECD’s consensus-based culture. The best hope for generating enough pressure to move forward is to secure the active cooperation of other interested stakeholders on the following steps:

  • The business community faces intolerable problems if the Convention is unable to create a corruption-free level playing field for international trade and investment. Business leaders must use their influence to ensure that the Convention succeeds by persuading their governments to exercise sufficient peer pressure to ensure that:
    -Lagging governments enforce the prohibition against foreign bribery;
    -Reasonable limitations on the use of national security exceptions are adopted.
  • Governments enforcing the Convention should exercise the required peer pressure through bilateral contacts and through fora such as the OECD Ministerial meetings and G8 meetings.
  • Business organizations and NGOs should work actively with OECD and with governments to ensure that the current review of OECD instruments will result in:
    - Continuation of a rigorous monitoring program on a permanent basis;
    - New programs to (a) strengthen coverage of foreign subsidiaries and bribery of political parties, (b) eliminate the exclusion of facilitation payments and (c) determine how best to address private sector bribery.

UN Convention

After two years of negotiations in Vienna, the UN Convention Against Corruption (UNCAC) was adopted in 2003. It was signed by 140 governments and has been ratified by more than 120. UNCAC has a more comprehensive scope than any other anti-corruption convention. It includes a broad range of preventive measures designed to: strengthen governments’ capacity to fight corruption; add extensive criminalization and law enforcement provisions covering domestic as well as foreign bribery, extortion and embezzlement by government officials; fight corruption in the private sector; provide arrangements for international cooperation, including mutual legal assistance facilitating investigation and prosecution across borders; introduce innovative provisions for asset recovery; and provide technical assistance and information exchange. UNCAC’s worldwide membership and its broad scope provide a truly global framework for combating corruption

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Based on surveys conducted by the UN Office on Drugs and Crime (UNODC), which serves as the Secretariat for UNCAC, government implementation of UNCAC’s ambitious array of articles is quite uneven, both with respect to the countries that have taken action and the articles that have been implemented. This highlights the importance of follow-up monitoring. UNCAC’s broad scope and large number of parties make monitoring even more essential than for other conventions, but also more difficult to agree upon. The conference in Vienna in 2002-2003, which adopted the Convention, was unable to reach agreement on monitoring and deferred the issue to the Conference of States Parties (CoSP) to be held after UNCAC went into effect.

Two such conferences have taken place. While there is agreement in principle on the need for a monitoring mechanism (or, in UN terminology, an “implementation review mechanism”), there is still no agreement on how this mechanism should be organized and its terms of reference. The principal obstacle is resistance by many developing countries belonging to the G77 group. These countries are concerned that monitoring would unfairly criticize countries that have difficulty implementing UNCAC. While there is greater support from industrialized countries, some have raised concerns about the cost of monitoring and about duplication of UNCAC monitoring and monitoring with other anti-corruption conventions. Overcoming the obstacles to agreement on a monitoring process remains a difficult challenge. Another Conference of States Parties will be held in Qatar at the end of 2009.

An effective monitoring mechanism is the key to enabling UNCAC to function as the global framework or combating corruption. Active cooperation by other stake- holders will be needed to enable the Convention to move to the next level.

  • Business leaders must make clear to their governments that UNCAC deserves strong support and that the stalemate over monitoring must be overcome. The interests of the international business community are clear, because in a global economy UNCAC’s global framework for combating corruption must be made to work. Moreover, most multinationals recognize that their future growth depends on their ability to expand in developing countries without compromising the integrity standards demanded in their home countries.
  • International donors - including the World Bank, UNDP, OECD-DAC, the regional development banks and bilateral donors – must provide increased capacity-building assistance to developing countries to enable them to implement UNCAC. This is the single most important step needed to overcome G77 concerns about agreeing to a monitoring mechanism.
  • The organizations monitoring other anti-corruption organizations- including OECD, GRECO, OAS and the African Union – must work with UNODC to agree upon cooperative arrangements to alleviate concerns about duplicative monitoring. Because all monitoring organizations have serious resource constraints, cooperation is in everyone’s interest.

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  • Civil society and other private sector organizations – including ICC, TI the World Economic Forum and the Global Compact – can play an important role in promoting the foregoing initiatives.

International business initiatives

During the past several decades, there have been extensive efforts to curb corruption by business. The ICC Rules of Conduct have been made more rigorous. Transparency International has published its own Business Principles for Countering Bribery. The World Economic Forum has launched its Partnering Against Corruption Initiative (PACI). All three documents go beyond the provisions of the OECD and UN Conventions to clarify grey areas, such as gifts and entertainment and payments to agents and other intermediaries. The standards spelled out in all three documents are very similar. (They are also converging in their treatment of facilitation payments, where there had been differences between organizations.) The UN’s Global Compact has been extended to include a commitment not to bribe and has recommended all three documents to its member companies as models for their use.

Many more companies have adopted anti-corruption policies. A decade ago, such policies were used primarily by US companies, but the OECD Convention has resulted in their adoption by companies from other OECD countries as well. There is also increasing recognition that adopting corporate policies is not enough and that rigorous implementation programs are necessary to ensure that all parts of an enterprise comply.

Anti-corruption programs tailored to the issues of particular industry sectors have been organized in several important industries - including aerospace and defence, private banking, construction, mining and other extractive industries. TI’s Integrity Pacts, project-specific arrangements in which the project’s sponsor and all bidders agree on procedures to prevent corruption, have been increasingly used.

The foregoing steps have been extremely valuable in developing the techniques needed to curb corruption. However, their impact on reducing it is still difficult to assess. The techniques have been utilized more extensively by large multinationals than by small- and medium-sized companies, and the extent to which they are employed differs substantially between countries, with higher use in countries where there is substantial enforcement of the OECD Convention. (For example, German businesses received a clear message to end foreign bribery from the prosecution and huge fines imposed on Siemens; the termination of the BAE case sends a different message to UK companies.)

The wider adoption of corporate anti-corruption programs may also be deterred by the increasing role in international trade of China, India, Russia and other countries not bound by the OECD Convention. While these countries are parties to the UN Convention, that Convention may not significantly impact the practices of their businesses until it becomes clear that governments will actively enforce its prohibi- tions against bribery.

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To raise business initiatives to a level where there will be discernible reductions in bribery will require increased efforts, as well as greater cooperation, among corporations and with other stakeholders:

  • Leaders of companies with high integrity standards have a strong incentive to promote improved compliance by their competitors.
  • Industry sector anti-corruption initiatives provide an ideal forum for industry leaders to encourage adoption of improved standards for all competitors. Participation by independent organizations in the development of these standards would be helpful.
  • Collection of data concerning how many companies have implemented anti-corruption programs would provide an important measure of progress. Differences in their use between companies in different industries and in different countries would indicate where additional work is needed.
  • International organizations and governments engaged in major procurement projects should require all bidders to have rigorous anti-corruption programs in place as a condition for bidding.
  • Business leaders should work with their governments to encourage cooperative action by the leading exporting countries to overcome extortion by public officials in countries where extortion is widespread.
  • Corporate governance reforms will receive renewed attention as a result of the financial crisis. Business leaders should support stronger transparency and accountability requirements, including greater disclosure of anti-corruption programs and their implementation in annual reports, external verification of compliance with these programs and stronger whistleblower protection.
  • Increased attention is needed to prevent bribery of public officials by intermediaries, such as sales agents, consultants, bankers, lawyers and Customs agents. Codes of conduct specifically applicable to different groups of intermediaries should be developed. In many countries, low pay of Customs officials is a cause of extortion. Cooperative projects should be conducted with participation by exporters, Customs agents and government officials to raise pay levels for Customs personnel, including provisions for increased fees in return for the elimination of illicit payments.

Cooperation by other stakeholders

International development agencies

International development agencies – including the World Bank, UNDP, regional MDBs and bilateral donors – have played an increasing role in preventing corruption in their own programs and in the countries in which they work. These efforts should be strengthened, and the leading development agencies, as well as OECD-DAC, should actively work in cooperation with other stakeholders along the lines indicated above.

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Civil society and private sector organizations

ICC, Transparency International and other organizations have actively promoted anti-corruption initiatives, including the OECD Convention and UNCAC. Their continued involvement is essential, since they have substantial credibility with the public and the media; they can maintain a steady focus on anti-corruption when government interests flag; they can do independent research and analysis and pioneer innovative approaches; and they can take critical positions that are too controversial for governments and international organizations to advance.

The media

Public concern about widespread corruption has been the single most powerful driver for reform. The media have been a key here, by publicizing evidence of corruption in their investigative reporting.

Conclusion

Clearly, greater cooperation among all stakeholders is essential to move the anti-corruption agenda to the next level. To promote this cooperation, intensive dialogue across organizational lines is necessary. As soon as this dialogue has sufficiently advanced, a leadership meeting of the leading stakeholders should be held, with a focus on developing a consensus on attainable objectives over the next five years.

Even though serious obstacles must be overcome – both to achieve effective implementation of anti-corruption conventions and to have a broader adoption of corporate integrity programs – there must be no turning back. The damage inflicted by corruption on the global economy, on democratic institutions and on internation- al development is well understood. Moving anti-corruption efforts to a higher level will make it possible to reduce and, in time, hopefully eliminate this scourge of inter- national commerce.

Fritz Heimann is the author of Chapters 1 and 3 in this handbook.

Mark Pieth is a Professor of Criminal Law at Basel University in Switzerland and Chairman of the OECD Working Group on Bribery in International Business Transactions.