Incoterms_® and Commercial Contracts

Over the last decades, a number of international anti-corruption instruments have been adopted, but two international conventions are usually regarded as the milestones in the fight against corruption: the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions adopted by the OECD in 1997 (referred in this Handbook as the OECD Convention) and the Convention Against Corruption adopted by the United Nations in 2003 (referred in this Handbook as the United Nations Convention). Ethics and compliance officers should be familiar with the provisions of these conventions and understand the dynamics of their implementation. This Chapter describes the relevance of both conventions for business and stresses the complementarities and differences between their respective provisions.

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INTERNATIONAL CONVENTIONS, AN ESSENTIAL TOOL

International conventions are essential to combating corruption because corruption in a global economy operates on a global scale and cannot be dealt with effectively by national governments or corporations acting on their own.

The legal structure for combating corruption consists of three interdependent levels:

1. International conventions that impose requirements and standards for action by national governments;
2. Laws and regulations enacted by national governments to implement convention requirements; and
3. Corporate compliance programmes meeting national laws and regulations.

International conventions are collective commitments undertaken by their states parties. Follow-up monitoring is crucial for their success. An effective monitoring process is necessary to ensure that governments implement the provisions of conventions, and that corporations adopt and carry out compliance programmes in accordance with national laws. Because consistent action is necessary to achieve a level playing field,
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the monitoring process must be conducted by the international body sponsoring the international convention. Companies, business and professional organizations, as well as governments, have to play an active role to make this monitoring process work.

This Chapter deals with the OECD Convention and the United Nations Convention. These two Conventions are very different. The OECD Convention is a narrow instrument of great strategic importance to multinational enterprises. It requires its states parties to prohibit foreign bribery. Because its states parties, currently numbering 40, include most of the world’s leading exporters, the OECD Convention represents a major step toward creating a level playing field in global trade.

The United Nations Convention has worldwide membership, now numbering 167 countries. It has a very broad scope covering a wide range of preventive measures, criminal law enforcement, international cooperation, and asset recovery provisions. It has great potential, but it will require considerable time to attain its full potential. Conditions for doing business without being hampered by corruption will improve as its provisions are increasingly implemented around the world.

Other (regional) conventions against corruption are listed in Annex III of this Training Handbook.

I. THE OECD CONVENTION

The OECD Convention was signed in 1997 and became effective in 1999. It has been ratified by all 34 OECD members, as well as by six other states. The parties comprise over 75% of world exports and an even larger share of world investment. Accession discussions with other importing trading countries including China, India, and Indonesia are under way.

IMPORTANCE OF THE OECD CONVENTION

The OECD Convention is of great strategic importance in the fight against international corruption because the OECD member states are the home states of most major international corporations. This makes the OECD the ideal forum for curbing the supply side of international corruption.

The Convention was a major breakthrough because it overcame a previously insurmountable obstacle. After the United States passed its Foreign Corrupt Practices Act in 1977, the first law making foreign bribery a crime, there was a two-decade stalemate. Other countries were unwilling to prohibit foreign bribery without assurance that their major competitors would do so at the same time. Agreement at the OECD cut the Gordian knot.

The Convention provides a solid framework and an effective system to prohibit bribery of foreign officials:

• “Bribery” is broadly defined to include both direct and indirect bribery, which means bribery conducted by agents and intermediaries. “Foreign official” is broadly defined to include both government officials and officials from state-owned corporations.
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• Penalties must be “effective, proportionate and dissuasive”. They must be comparable to those for the bribery of domestic officials, including provisions for prison terms.
• Bribes and the proceeds of the bribery are subject to seizure and confiscation. Proceeds are defined as “the profits or other benefits derived by the briber”.
• Accounting and auditing standards are required to prohibit the establishment of off-the-books accounts and other techniques for hiding bribery.
• Mutual legal assistance must be provided to other governments in connection with criminal investigations and other proceedings. Bank secrecy may not be asserted, and extradition is provided for.

THE OECD MONITORING PROGRAMME

The Convention requires the parties to cooperate in carrying out “a programme of systematic follow-up to monitor and promote the full implementation of th[e] Convention”. This is of critical importance to assure that all parties are held to high standards in carrying out the Convention’s requirements.

The monitoring programme is conducted by the OECD Working Group on Bribery, which consists of delegates from all the parties and meets four times a year. The Working Group conducts about half a dozen country reviews each year. These include country visits by ‘lead reviewers’ from two member states accompanied by experts from the OECD Secretariat.

The monitoring programme is conducted in three phases. Phase 1 evaluates the adequacy of national laws implementing the requirements of the Convention. Phase 2 reviews the structures in place to enforce the national laws. Phase 3 focuses on progress made in enforcement and progress made in correcting deficiencies identified in prior reviews.

Country visits include meetings with government officials, as well as with representatives of the private sector and civil society. The review team prepares a detailed report, often more than 50 pages long, which is first submitted in draft form to the government under review and then presented for discussion and approval at a meeting of the full Working Group on Bribery. Governments are expected to report back to the Working Group on the actions taken to correct deficiencies, orally after one year and in writing after two years. When the Working Group on Bribery is dissatisfied with the adequacy of corrective action, it can order a second country visit. This has been done several times, including for the United Kingdom and Japan.

The OECD monitoring programme has received excellent marks. Its reports are particularly thorough and of high professional quality. They are published and are available on the OECD website. The Working Group on Bribery consults regularly, not only with ICC, but also with the OECD’s business and trade union advisory groups and with Transparency International.

The progress of foreign bribery enforcement by parties to the OECD Convention is uneven, but is continuing to improve. According to an
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annual progress report published by Transparency International in September 2012, there was active enforcement in seven countries with 28% of world exports; moderate enforcement in twelve countries with 25% of world exports, and little or no enforcement in 18 countries with 10% of world exports. There has been substantial increase in the number of cases brought in countries with active enforcement. The United States leads with 275 cases, an increase of 48 since the last year; Germany has 176 cases, an increase of 41 since last year; Switzerland has 52 cases, an increase of 17 since last year; Italy has 32, an increase of 14 since last year; and the United Kingdom has 23 cases, an increase of six since last year.

THE FUTURE SCOPE OF THE OECD WORKING GROUP ON BRIBERY

• Continuation of rigorous monitoring by the Working Group on Bribery, including country visits, is essential because the goal of the Convention – to establish a corruption-free, level playing field for international trade and investment – has not yet been achieved. The continued OECD monitoring programme in its Phase 3 has two key objectives:
• To assure that governments which have taken little or no enforcement action against foreign bribery undertake significant enforcement without further delays; and
• To assure that governments correct deficiencies identified in prior reviews.
• Because self-regulation by companies is essential for the success of the Convention, the Working Group should promote corporate integrity programmes at the international, national, and industry sector level. Governments should encourage the adoption of effective integrity programmes by taking them into account in sentencing guidelines and in decisions on bringing lawsuits as well as in settlements.
• While the prime focus of the Convention is on the supply side of corruption, international business continues to be exposed to widespread solicitation and extortion by foreign officials. The Working Group on Bribery should address this issue by promoting cooperative action by member governments to assist their companies in overcoming extortion threats, including joint intervention with governments where such threats are common. The High-Level Reporting Mechanism sponsored by OECD, which is further discussed in Chapter 13 of this Training Handbook (‘Resisting Solicitation’), is an initiative to overcome solicitation and extortion. The government of Colombia has launched a pilot programme.
• Two long-recognized inadequacies in the coverage of the OECD Convention need to be addressed:
• bribe payments to foreign political parties, party officials, and candidates for office; and
• bribe payments by foreign subsidiaries of companies based in OECD countries.
• On bribery in the private sector, ICC proposed that OECD introduce provisions in its anti-corruption instruments prohibiting private-to-private corruption.
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• Facilitation payments, which are defined in Chapter 4 (‘Glossary’), were not covered when the Convention was adopted. The thinking of the business community about facilitation payments has changed substantially in recent years, reflecting greater recognition of the damage such payments cause. Multinational companies, confronted with divergent practices in different countries, increasingly opt for zero tolerance policies. The OECD has now introduced a recommendation restricting the use of facilitation payments.
• Whistleblower protection: corporations recognize that readily accessible complaint procedures can contribute substantially to uncovering corruption and other economic fraud and make it possible to solve problems at an early stage. Effective protection of whistleblowers against retaliation is essential. ICC published Guidelines on Whistleblowing (2008) and the OECD recommends that member governments provide whistleblower protection.
• There should be more cooperation between the OECD and the monitoring programmes of other anti-corruption conventions including the United Nations Convention, the monitoring programme of the Council of Europe, the Inter-American Convention Against Corruption (1996) and the African Union Convention on Preventing and Combating Corruption (2003). Such enhanced cooperation is important to avoid duplicative monitoring and to build on the experience of these different programmes.
• In recent years South Africa, Israel and Russia have joined the OECD Convention and are being monitored by the Working Group on Bribery. Accession to the Convention by other major trading countries, including China, India, Indonesia, and Saudi Arabia, as recommended by the G20, is important for the achievement of a corruption-free level playing field.
• The OECD has surmounted the political difficulty of amending the Convention − which would require securing approval by the legislatures of all the parties − by adopting ‘recommendations’ specifying changes and providing that implementation of these recommendations will be reviewed by the follow-up monitoring process. This provides an innovative technique to update and strengthen the Convention.
• The Recommendation of the Council for Further Combating Bribery of Foreign Public Officials adopted on 26 November 2009 changes the provision on facilitation payments and also makes corporations liable for failure to implement adequate internal controls, ethics, and compliance programmes or measures.
• The 2009 Recommendation includes an Annex II entitled Good Practice Guidance on Internal Controls, Ethics, and Compliance. This document spells out in considerable detail the elements of effective corporate compliance programmes.

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II. THE UNITED NATIONS CONVENTION

The United Nations Convention is of compelling interest for international business because it provides a global framework for combating corruption. This Convention has been ratified by 167 parties, including key players in international trade such as China, India, and Indonesia in addition to almost all OECD countries. With a much broader scope than the OECD Convention, the United Nations Convention is capable of tackling many issues that cannot be effectively dealt with by the OECD or regional anti-corruption conventions.

OVERVIEW OF THE UNITED NATIONS CONVENTION AGAINST CORRUPTION

The United Nations Convention was adopted in 2003 and became effective in December 2005. The Convention’s parties include industrialized, emerging, developing, and least-developed economies. By comparison, the OECD Convention includes only 40 industrialized nations, while the regional conventions only cover countries in their regions.

The scope of the United Nations Convention is particularly ambitious. There are 28 articles covering criminalization and law enforcement, including foreign and domestic corruption, extortion as well as bribery, corruption in the public and private sector, embezzlement, illicit enrichment of public officials, abuse of functions, and trading in influence.

In addition, the United Nations Convention contains important preventive measures designed to strengthen the capability of states to fight corruption, provisions on international cooperation, including mutual legal assistance, extradition and joint investigations, ground-breaking provisions on asset recovery, as well as provisions on technical assistance and information exchanges.

Several examples can be used to illustrate the provisions of the United Nations Convention which are of particular relevance to multinational enterprises:

• The provisions for international cooperation should substantially improve cooperation among national enforcement officials. There are detailed articles dealing with mutual legal assistance and extradition. These should expedite prosecutors’ ability to obtain evidence and witnesses located in other countries, thereby overcoming one of the biggest obstacles obstructing foreign bribery cases.
• The criminalization provisions break important new ground. Particularly noteworthy is the article on “Compensation for damages” which provides for private rights of action to enable those damaged by acts of corruption to obtain compensation from those responsible for the damage. Also of interest is the article requiring governments to “address consequences of corruption”, including annulling contracts and withdrawing concessions.
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• The United Nations Convention includes innovative provisions on asset recovery designed to enable governments, most commonly in the South, to recover funds deposited abroad by corrupt officials, often in the North, but increasingly elsewhere. In the past, asset recovery has been very difficult to pursue. The World Bank and the United Nations Office on Drugs and Crime have launched a Stolen Assets Recovery initiative to increase and accelerate this process. Companies dealing with corrupt officials must exercise high levels of diligence to ensure that any assets that they may obtain as a result of dealings with corrupt officials, or other politically exposed persons, cannot be frozen and confiscated in asset recovery proceedings.

The United Nations Convention’s broad scope and worldwide participation provide unique potential for global progress against corruption. However, these same factors present difficulties and complexities in their implementation that will take time to overcome. The parties are at different levels of political, legal and economic development. The provisions of the Convention are not self-executing and require governments to pass new legislation, to build and strengthen organizations and provide them with adequate funding and staffing. Some of the United Nations Convention’s provisions are mandatory (“Governments shall adopt laws”), others are discretionary (“Governments shall consider adopting laws”). Some are spelled out in great detail: the article on mutual legal assistance includes 30 sections; others are expressed only in broad generalities.

The rate at which the implementation of the United Nations Convention will progress will be uneven. That almost all the parties which have signed the Convention have also ratified it is a positive sign and means that governments recognize the need for comprehensive international action in the fight against corruption.

There is widespread recognition of two fundamental points: (a) globalization of economic life will continue to expand, and (b) corruption operates on a global scale and is continuing to grow. Therefore, there is a compelling need for the United Nations Convention to evolve into effective action programmes.

PROVISIONS DIRECTLY AFFECTING INTERNATIONAL BUSINESS

The provisions of most direct impact on international business are primarily in the Convention’s Chapter on Criminalization and Law Enforcement.

The provision on “Bribery of national public officials” is mandatory and requires that governments criminalize domestic bribery (active corruption) and solicitation (passive corruption). The OECD Convention only deals with bribery of foreign public officials. Bribery of national officials is prohibited by the criminal laws of most countries.

The provision on “Bribery of foreign public officials and officials of public international organizations” is also mandatory and requires that governments criminalize foreign bribery. However, the criminalization of solicitation by foreign public officials is left discretionary. The prohibition of solicitation applies whether the company solicited is domestic or foreign. The OECD Convention covers bribery of foreign public officials, but does not deal with solicitation.

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United Nations Convention, article 16

“1. Each State Party shall adopt such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the promise, offering or giving to a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties, in order to obtain or retain business or other undue advantage in relation to the conduct of international business.

2. Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, the solicitation or acceptance by a foreign public official or an official of a public international organization, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties”.

The provisions on “Trading in influence”, “Abuse of functions”, and “Illicit Enrichment” are discretionary and have considerable potential for broadening the reach of criminal law beyond the traditional prohibitions of bribery and extortion. The provision on “Illicit Enrichment” is particularly important because it shifts the burden of proof on to public officials who get rich in office. All these provisions go beyond the OECD Convention. Companies need to consider whether to cover “Trading in influence” under their anti-bribery policies; this can raise the difficult issue of distinguishing between legitimate lobbying activities and improper trading in influence.

United Nations Convention, articles 20 and 21

“Subject to its constitution and the fundamental principles of its legal system, each State Party shall consider adopting such legislative and other measures as may be necessary to establish as a criminal offence, when committed intentionally, illicit enrichment, that is, a significant increase in the assets of a public official that he or she cannot reasonably explain in relation to his or her lawful income”.

“Each State Party shall consider adopting such legislative and other measures as may be necessary to establish as criminal offences, when committed intentionally in the course of economic, financial or commercial activities: (a) The promise, offering or giving, directly or indirectly, of an undue advantage to any person who directs or works, in any capacity, for a private sector entity, for the person himself or herself or for another person, in order that he or she, in breach of his or her duties, act or refrain from acting; (b) The solicitation or acceptance, directly or indirectly, of an undue advantage by any person who directs or works, in any capacity, for a private sector entity, for the person himself or for another person in order that he or she, in breach of his or her duties, act or refrain from acting”.

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The provisions on “Bribery in the private sector” and on “Embezzlement of property in the private sector” are both discretionary. Their implementation is important because the line of division between the private sector and the public sector has become blurred with the private sector taking on traditional public functions. These provisions go beyond the OECD Convention.

The provision on “Laundering of proceeds of crime” is mandatory. It provides that the corruption offences covered by the United Nations Convention shall be predicate offences triggering the anti-money laundering prohibitions. This provision goes beyond the OECD Convention, which makes foreign bribery a predicate offence only in countries where bribery of domestic officials is a predicate offence.

The article on “Liability of legal persons” is mandatory and calls for corporate liability for the offences covered by the United Nations Convention. This is an important step because it should accelerate the abandonment of the antiquated concept that only individuals and not corporations shall be criminally liable for offences. This article provides that the liability of corporations may be criminal, civil or administrative; thus, it does not require that corporations shall be criminally liable. Governments must provide that corporations are “subject to effective, proportionate and dissuasive criminal or non-criminal sanctions, including monetary sanctions”. The treatment of corporate liability under the United Nations Convention is similar to that of the OECD Convention.

United Nations Convention, article 26

“1. Each State Party shall adopt such measures as may be necessary, consistent with its legal principles, to establish the liability of legal persons for participation in the offences established in accordance with [the] Convention.

2. Subject to the legal principles of the State Party, the liability of legal persons may be criminal, civil or administrative.

3. Such liability shall be without prejudice to the criminal liability of the natural persons who have committed the offences.

4. Each State Party shall, in particular, ensure that legal persons held liable in accordance with this article are subject to effective, proportionate, and dissuasive criminal or non-criminal sanctions, including monetary sanctions”.

The provision on “Statute of limitations” is mandatory and calls for long statutes of limitations for corruption offences. It also provides for a longer limitations period or a suspension of the statute where there is evasion by the offender. This provision is stronger than the OECD Convention.

The article on “Freezing, seizure and confiscation” is mandatory and calls for the confiscation of the proceeds of corruption and of property used in or destined for use in corruption. Bank and other financial records shall be made available and bank secrecy may not be asserted. The OECD Convention also provides that bribes and the proceeds of bribery are subject to seizure and confiscation.

The provision on “Protection of reporting persons” is a discretionary one and aims at ensuring the protection of persons who report offences
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under the Convention to the competent authorities (whistleblowers). This subject matter is not covered in the OECD Convention.

As already mentioned above, the United Nations Convention contains a provision on the “Consequences of acts of corruption”. This provides for annulling or rescinding contracts or withdrawing concessions in case of corruption. This matter is not covered in the OECD Convention.

Another important innovation is Article 35 on “Compensation for damages”, which contains a mandatory provision calling for measures to enable persons damaged by acts of corruption to obtain compensation from those responsible for such damages. This provision for private rights of action has far-reaching implications. It enables companies to take action to obtain compensation even when public prosecutors fail to do so. The OECD Convention does not provide for private rights of action.

This provision is broadly worded. Its scope and effect will depend on implementing legislation and court decisions. Presumably lawsuits could be brought by unsuccessful competitors and by various other damaged parties. It will be interesting to see how broadly courts will construe the category of potential plaintiffs: “entities and persons who have suffered damage as a result of an act of corruption.” Similar questions are raised regarding the category of potential defendants: “those responsible for that damage.” Presumably lawsuits could be brought against corrupt companies and against corrupt officials. It is possible that lawsuits could also be brought against governments that maintain corrupt procurement systems.

The article on “Cooperation with law enforcement authorities” provides that governments may mitigate punishment or grant immunity to persons cooperating in investigations and prosecutions of corruption. This is not covered by the OECD Convention. Several OECD countries, including the United Kingdom and the United States, take account of self-reporting or other actions by companies.

The Convention’s Chapter IV on “International Cooperation” includes provisions on mutual legal assistance, law enforcement cooperation, joint investigations and special investigative techniques. These are important to international business because they should speed up the traditionally cumbersome and time-consuming procedures for dealing with international corruption.

As already mentioned above, Chapter V on ‘”Asset Recovery” is of principal benefit to countries whose corrupt officials have deposited stolen assets in foreign countries. Companies making foreign acquisitions need to assess, as part of their due diligence reviews, whether properties to be acquired could be subject to seizure and confiscation because of corruption by prior owners.

The successful implementation of the asset recovery chapter of the United Nations Convention will be of far-reaching importance, because the attractiveness of corruption will be sharply reduced if corrupt leaders can no longer count on safely depositing the proceeds of corruption in foreign banks. In addition, recovery of stolen assets would contribute greatly to international development because a large share of the estimated billions of dollars of such assets originated from the poorest countries in the world.

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STRENGTHENING NATIONAL INTEGRITY SYSTEMS

The Convention’s provisions on “Preventive Measures” are important to companies because they will strengthen integrity and accountability, thereby curtailing corruption and improving conditions for doing business more broadly. The OECD Convention does not include preventive measures.

The article on “Preventive anti-corruption policies and practices” requires governments to develop anti-corruption policies that reflect the rule of law, integrity, transparency, and accountability. Periodic evaluations are called for to determine the adequacy of anti-corruption measures. This article should provide a useful advocacy tool for private sector and civil society groups.

The provision on “Preventive anti-corruption bodies” requires governments to establish organizations to implement the policies referred to in the preceding paragraph. Such bodies shall be granted the necessary independence to enable them to carry out their functions, as well as the necessary material resources and specialized staff.

The article on “Codes of conduct for public officials” requires governments to promote integrity, honesty, and responsibility among its public officials by means of codes of conduct. Such codes should encourage reporting of violations. Also called for are declarations by public officials of outside activities, investments, assets, and substantial gifts from which conflict of interest may result.

The provision on “Public procurement and management of public finances” addresses two areas of government activity long subject to widespread corruption. Governments are required to establish public procurement systems based on transparency, competition and objective criteria in decision-making, including effective systems of appeal. They shall also promote transparency and accountability in the management of public finances, encompassing procedures for the adoption of the national budget, timely reporting on revenue and expenditure, accounting and auditing standards and risk management and internal control. Improvements in these areas would be of great benefit to business.

An article on “Public reporting” provides for public access to decision-making authorities and periodic reports on the risks of corruption in public administration.

United Nations Convention, articles 9 (excerpted) and 10

“Each State Party shall, in accordance with the fundamental principles of its legal system, take the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making that are effective, inter alia, in preventing corruption […]”

“Taking into account the need to combat corruption, each State Party shall, in accordance with the fundamental principles of its
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domestic law, take such measures as may be necessary to enhance transparency in its public administration, including with regard to its organization, functioning and decision-making processes, where appropriate. Such measures may include, inter alia:

1. Adopting procedures or regulations allowing members of the general public to obtain, where appropriate, information on the organization, functioning and decision-making processes of its public administration and, with due regard for the protection of privacy and personal data, on decisions and legal acts that concern members of the public;
2. Simplifying administrative procedures, where appropriate, in order to facilitate public access to the competent decision-making authorities; and
3. Publishing information, which may include periodic reports on the risks of corruption in its public administration”

A provision on the “Private sector” calls for governments to take measures to prevent corruption in the private sector, including enhanced accounting and auditing standards, codes of conduct, prevention of conflicts of interest, restrictions on employment of former public officials, internal controls, prohibitions of off-the-books transactions and disallowance of tax deductibility of bribes.

United Nations Convention, article 12 (excerpted)

“Each State Party shall take measures, in accordance with the fundamental principles of its domestic law, to prevent corruption involving the private sector, enhance accounting and auditing standards in the private sector and, where appropriate, provide effective, proportionate and dissuasive civil, administrative or criminal penalties for failure to comply with such measures. […]

In order to prevent corruption, each State Party shall take such measures as may be necessary, in accordance with its domestic laws and regulations regarding the maintenance of books and records, financial statement disclosures and accounting and auditing standards, to prohibit the following acts carried out for the purpose of committing any of the offences established in accordance with [the] Convention:

1. The establishment of off-the-books accounts;
2. The making of off-the-books or inadequately identified transactions;
3. The recording of non-existent expenditure;
4. The entry of liabilities with incorrect identification of their objects;
5. The use of false documents; and
6. The intentional destruction of bookkeeping documents earlier than foreseen by the law.

Each State Party shall disallow the tax deductibility of expenses that constitute bribes, and where appropriate, of other expenses incurred in furtherance of corrupt conduct.

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The provision on “Participation of society” requires governments to promote active participation of individuals and groups outside the public sector in the fight against corruption. This includes business as well as non-governmental organizations. Another article calls for ensuring that the public has effective access to information and protects the freedom to publish and disseminate information concerning corruption. Anti-corruption bodies are required to provide access for reporting, including anonymously, of corruption offences.

The provision on “Measures to prevent money laundering” calls for a comprehensive regulatory and supervisory regime for banks and other financial institutions to deter and detect all forms of money laundering.

The foregoing preventive measures provide an invaluable foundation for strengthening government capability to combat corruption, strengthening private participation, and enhancing corporate integrity programmes.

THE IMPLEMENTATION REVIEW MECHANISM

Experience has shown that follow-up monitoring is essential to make anti-corruption conventions work. It is particularly important for a convention as complex and with as many parties as the United Nations Convention.

The need for monitoring was debated during the 2002-03 Vienna negotiations that led to the adoption of the Convention. When it proved impossible to reach agreement on monitoring, the Convention was adopted with a decision on monitoring deferred for future action. It took six years, until the Third Conference of States Parties in 2009 in Doha, Qatar, before an agreement on an ‘Implementation Review Mechanism’ could be reached. ICC, as well as the World Economic Forum, the United Nations Global Compact and Transparency International, played an active role in advocating for an effective monitoring mechanism.

The Review Mechanism started in July 2010. The initial five-year cycle of country reviews covers the Convention’s chapters on criminalization and international cooperation. The second five-year cycle will cover preventive measures and asset recovery. Each year about 40 countries will be reviewed, an extremely ambitious undertaking.

Policy direction for the Implementation Review Mechanism is provided by the Conference of States Parties which meets every two years. An Implementation Review Group has been established which meets (at least) annually and provides oversight between the Conference of States Parties meetings. Country reviews are conducted by two peer review states, one from the same region and one from a different region than the country being reviewed. The United Nations Office on Drugs and Crime acts as the Secretariat for the United Nations Convention and helps to manage the review process.

The experience of the first three years indicates that completing country reviews on schedule is difficult. Most governments have agreed to have country visits by the review teams, an important element for effective reviews. Most country reviews have permitted participation by private
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sector and civil society organizations, another important element. An executive summary, prepared by the United Nations Office on Drugs and Crime, is published after each country review. Some but not all governments have permitted the publication of the full text of the country review.

Keeping a review process involving 167 countries on schedule is a formidable challenge. However, the quality of the reviews must not be compromised. The private sector can play an important role in the conduct of individual country reviews and in pressing for adequate funding for the review process.

A rigorous review process is crucial for the success of the United Nations Convention. Implementation must be consistent between countries and for the different Convention provisions. Unless there is consistent global implementation, the United Nations Convention cannot achieve its objectives. For example, asset recovery can be circumvented as long as some banking centres fail to implement the Convention’s asset recovery provisions. Stolen funds will flow to countries with little or no implementation, particularly those that retain banking secrecy laws.

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About the author

Fritz Heimann is an American corporate lawyer and is one of the founders of Transparency International. He was formerly Associate General Counsel of the General Electric Company. He is a member of the ICC Commission on Corporate Responsibility and Anti-corruption and leads its work on international anti-corruption conventions. He is the co-editor of ‘Fighting Corruption: International Corporate Integrity Handbook’ published by ICC in 2009.

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