Ethics and compliance practitioners need to develop a precise and concrete understanding of the fundamental concepts which form the foundations of anti-corruption and antitrust. In this Chapter, you will find a glossary of the most important terms in these two fields. For each of them, a short definition is included as well as the relevant provisions of the ICC Rules on Combating Corruption (2011), developed by the ICC Commission on Corporate Responsibility and Anti-corruption. A full version of the ICC Rules on Combating Corruption is available in Annex I of this Training Handbook.

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Bribery is the offering, promising, authorizing or accepting of an undue advantage, a bribe, in order to obtain or retain an improper advantage, for instance in connection with public or private procurement contract awards, regulatory permits, taxation, customs, judicial and legislative proceedings. A bribe can consist of money or of any other advantage such as expensive gifts, a discount, a waived fee, an inflated fee for a consultancy contract, an inflated price for an item, a position for the bribed person or a person close to him or her, a medical treatment, or a vacation. Although bribery and corruption are often used indifferently, bribery has a narrower meaning than corruption, which is sometimes used to include practically any perversion of integrity.

Business partners is a term used to refer to any party associated with another party in the pursuit of business. Preventive anti-corruption measures are increasingly focusing on business partners since they are often used to perform high-risk activities on an enterprise’s behalf.

According to the ICC Rules on Combating Corruption (2011), enterprises should conduct appropriate due diligence on the reputation and capacity of their business partners, which include, for this purpose: third parties (as defined hereafter), joint venture and consortium partners, as well as contractors and suppliers. Enterprises should also have the possibility to suspend or terminate a relationship if they have a unilateral good faith concern that a business partner has engaged into corrupt practices.
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  • Third parties (when used in the context of anti-corruption) are parties subject to the control or determining influence of an enterprise; they include agents, business development consultants, sales representatives, customs agents, general consultants, resellers, subcontractors, franchisees, lawyers, accountants, or any kind of intermediaries; they act on an enterprise’s behalf, often in connection with marketing or sales, the negotiation of contracts, the obtaining of licenses, permits or other authorizations, or other activities which benefit the enterprise.

According to the ICC Rules on Combating Corruption (2011) enterprises have a responsibility to instruct third parties not to engage in corruption, not to use them as a channel for bribes, to hire them only to the extent appropriate for the regular conduct of the enterprise’s business and not to pay them more than an appropriate remuneration for legitimate services. Enterprises should also obtain a commitment from third parties that they will not engage in any corrupt practice and should have the possibility to audit the third parties’ books and accounting records. Payments to third parties should not be made in cash and should only be made in the country of their incorporation or residence, where their headquarters are located, or where the mission is executed. Enterprises should also ensure that their central management has adequate control over third parties and maintains a record of their names, terms of engagement and payments made to them.

The ICC Guidelines on Agents, Intermediaries and Other Third Parties (2010)2 and Chapter 14 of this Training Handbook provide further guidance on how to choose, monitor, and pay third parties.

  • Joint venture or consortium partners are partners of an enterprise for a specific project or activity. Joint venture or consortium arrangements can take the form of a partnership or a joint subsidiary company. They may, however, be used as a subterfuge for corruption, especially when they involve a local partner in a country with a high corruption risk.

The ICC Rules on Combating Corruption (2011) provide that enterprises should take measures within their powers to ensure that their anti-corruption policy is accepted by their joint venture or consortium partners with respect to the joint venture or consortium.

Chapter 15 of this Training Handbook provides further guidance on how to manage corruption risks arising from joint ventures.

  • Contractors and suppliers are parts of an enterprise’s supply chain, linking together a supplier of materials or components, a manufacturer, a distributor or retailer, and ending with the consumer. A supply chain typically aims at rationalizing the distribution of work. However, outsourcing by an enterprise of certain functions to, for instance, local partners can be used by this enterprise as a way to avoid a direct involvement in areas particularly exposed to corruption.

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The ICC Rules on Combating Corruption (2011) provide that enterprises should take measures within their power and, as far as legally possible, ensure that their contractors and suppliers comply with the ICC Rules on Combating Corruption (2011) in their dealings with the enterprise or on behalf of the enterprise. Enterprises should also avoid dealing with contractors and suppliers known or reasonably suspected to be paying bribes.

Charitable contributions are donations made to support an organization dedicated to philanthropic goals such as educational, religious, social, or other activities serving the common good. However, charitable contributions can also be used to disguise a bribe when they benefit only a very limited group of individuals. This would be the case, for instance, of a foundation for heart diseases headed by the wife of a high ranking public official, which uses its funds to cover the costs of a heart operation for a child of this official.

The ICC Rules on Combating Corruption (2011) provide that charitable contributions should be transparent and that enterprises should establish reasonable controls and procedures to ensure that no improper charitable contributions are made and that special care should be exercised in reviewing contributions to organizations in which prominent political figures, or their close relatives, friends, and business partners are involved.

Conflicts of interest arise when the private interests of an individual or of individuals close to him or her diverge from those of the organization to which the individual belongs. Conflicts of interest are a particular form of corruption where an individual grants himself or herself an improper advantage by exercising his or her decision-making power to his or her advantage (or to that of a person close to him or her). Typical conflicts of interest include hiring relatives or favouring relatives as suppliers of goods or services.

The ICC Rules on Combating Corruption (2011) provide that enterprises should closely monitor and regulate actual or potential conflicts of interest, or the appearance thereof, of their directors, officers, employees, and agents and should not take advantage of conflicts of interest of others.

A corporate compliance programme is a programme which contains adequate procedures and is adopted by an enterprise to reduce the risk of corruption (and of other misconduct as specified in a corporate Code of Conduct). Under the United Kingdom Bribery Act (2010), unless a corporation can demonstrate the existence of such adequate procedures, it will be liable for any bribe paid by any person associated with it in relation to the conduct of its business. Although such strict liability does not exist under the law of other countries, the implementation of a compliance programme will be considered when determining the corporation’s liability. Where no programme or only an insufficient programme exists, enforcement authorities may require the introduction or reinforcement of one and may impose a compliance ‘monitor’ during a certain period of time in order to ensure that it is properly implemented.

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The ICC Rules on Combating Corruption (2011) include a list of elements to be included in a corporate compliance programme. This list, which is reproduced in Chapter 8 of this Training Handbook, reflects best practices featured in leading legal and guidance instruments.

Criminal liability is the liability, defined in a criminal code, which attaches to offences committed by either a physical person or a corporation and which are sanctioned by penalties (such as imprisonment, fines, debarment, or suspension of political or civic rights). The most usual form of criminal liability is the criminal liability of a physical person. Corporate criminal liability was introduced in relatively recent conventions and legislations.

Corporate criminal liability is the liability of a corporation that attaches to offences, such as corruption, committed in the conduct of the corporation’s business. All countries having signed the OECD Convention (1997) had to introduce in their national law some form of corporate liability. The severest form of corporate criminal liability is that introduced by the United Kingdom Bribery Act (2010): it provides that corporations are criminally liable for corruptive acts unless they prove that they had adequate procedures in place to prevent corruption. Corporate criminal liability can extend to parent companies for acts of their subsidiaries if they knew or should have known that acts of corruption were taking place or if they did not have adequate preventive procedures in place.

Corruption is sometimes used restrictively as a synonym for bribery and sometimes extensively to connote any perversion of integrity. According to the ICC Rules on Combating Corruption (2011), corruption includes bribery, extortion or solicitation, and trading in influence, whether the intended recipient, extorter or solicitor of a bribe is a public official, a politician or a private individual. It also includes laundering the proceeds of corruption.

This definition is in line with the United Nations Convention (2003) and its provisions concerning the private sector; however, it goes further than the OECD Convention (1997), which deals with active bribery of foreign public officials (offering a bribe, for instance). The OECD Convention (1997) does not cover:

  • the corruption of national officials;
  • passive bribery, which includes accepting, extorting or soliciting a bribe;
  • the bribing of politicians, unless they hold a public mandate (in which case they qualify as public officials); and
  • private bribery (also called commercial bribery).

Furthermore, the OECD Convention (1997) only deals with bribery occurring in the conduct of international business.

In general, national laws implementing the OECD Convention (1997) cover both active and passive bribery of national and foreign public officials as well as bribery in the private sector. Some national laws also cover corruption of politicians, while only a few cover trading in influence.

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  • Direct corruption takes place when a bribe is passed on without intermediary from the briber (the giver of the bribe) to the recipient from whom an undue advantage is expected.
  • Indirect corruption takes place when an intermediary, such as an agent, subcontractor, consultant or other third party, is used to channel a bribe.
  • Grand corruption is the corruption that takes place in relation with the award of contracts for large orders or projects; it usually involves high-ranking officials, such as heads of government, ministers or their close relatives; the amount of bribes involved is large; they are often expressed as a percentage of the order or project and are typically transferred through intermediaries and letter box companies in tax havens.
  • Petty corruption is the ‘corruption of the poor’; it involves for instance a customs, harbour or immigration official, the police or an individual in charge of delivering permits, licenses, or other official documents; the amounts of the bribes are modest. The bribe can serve to accelerate an administrative procedure without breaching the law (in which case it will be considered a facilitation payment - see below for the definition of ‘Facilitation Payments’) or to obtain a preferential treatment in breach of the law.
  • Political corruption is the corruption of politicians and political parties. It can involve amounts close to those of grand corruption. Its purpose is to create goodwill with a party in anticipation of its accession to power. Political corruption can also be organized by politicians in power in order to secure the financing of their party in anticipation of future elections. Both Helmut Kohl, the former Chancellor of Germany, and Jacques Chirac, the former President of France, have been convicted of participating in the organization of illegal financing for their parties. The United Kingdom has experienced a scandal revolving around loans granted to a party in exchange for life peerages. Such abuses in the area of the financing of political activities have led countries to regulate this domain. Graft is a form of political corruption in which a public official helps himself or herself to an improper advantage by abusing his or her position, or his or her political influence, for instance by buying land earmarked for government development knowing that its value will increase. Clientelism or patronage is the rewarding of political support with, for instance, the appointment to an office or the award of business or subsidies.
  • Private sector or private corruption is any form of corruption where the purpose of the bribe is to entice a private person, such as a director, officer, or employee of a private sector enterprise to breach his or her duties towards that enterprise.
  • Public sector or public corruption is any form of corruption where the purpose of the bribe is to obtain an undue advantage from an act or omission of a public official in relation with his or her public duties.

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Extortion or solicitation is the demanding of a bribe, whether or not coupled with a threat if the demand is refused. In certain countries, police may for instance stop drivers to obtain a payment for a purported infringement. Extortion is generally not recognized as a justification against allegations of corruption. While the defenses of necessity and duress are available, they only apply in extreme situations, for instance when the health, security, or safety of individuals is involved.

The ICC Rules on Combating Corruption (2011) provide that enterprises will oppose any attempt of extortion or solicitation; enterprises are further encouraged to report such attempts through available formal or informal reporting mechanisms, unless such reporting is deemed to be counterproductive under the circumstances.

Chapter 13 of this Training Handbook and the RESIST scenarios3 provide practical guidance on how to prevent and respond to inappropriate demands.

Facilitation payments are unofficial, improper small payments made to a low-level official to secure or expedite the performance of a routine or necessary action to which the payer of the facilitation payment is legally entitled, such as for instance obtaining official documents; processing papers, like visas and work orders; providing police protection, mail pick-up and delivery; obtaining a telephone line or power and water supply; loading and unloading cargo; or protecting perishable foodstuffs; scheduling inspections associated with contract performance or transit of goods across country. Facilitation payments do not fall within the ambit of the OECD Convention (1997) because they are not considered to constitute payments to obtain or retain business or other advantage. In its 2009 Recommendation, however, the OECD changed its position and encouraged “companies to prohibit or discourage the use of small facilitation payments in internal company controls, ethics and compliance programmes”. Under the United States Foreign Corrupt Practices Act (1977), they are allowed but only if paid abroad. However, they are prohibited (but not always prosecuted) in several jurisdictions.

According to the ICC Rules on Combating Corruption (2011), enterprises should not make facilitation payments, but it is recognized that they may be confronted with exigent circumstances, in which the making of a facilitation payment can hardly be avoided, such as duress or when the health, security or safety of the enterprise’s employees are at risk. If a facilitation payment is made under such circumstances, it must be accurately accounted for in the enterprise’s books and accounting records.

Favouritism or nepotism consists of favouring friends (favouritism or cronyism) or family members (nepotism, from the Italian word for nephew: nipote) without objective justification, for instance when hiring people or adjudicating orders. Favouritism or nepotism are forms of corruption or of conflicts of interest, which consist of granting an improper advantage to a close individual and so benefiting indirectly from that improper advantage.

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Gifts and hospitality are ways of expressing feelings of friendship or of welcoming guests and form part of the nexus of social customs. However, they can be, and in fact sometimes are, used as a subterfuge for corruption.

  • Gifts are donations of an item or in some cases of money. Gifts are made at special occasions such as the New Year, a birth or a birthday, a wedding, a successful examination, a religious feast such as Christmas, or to express gratitude or friendship. In the business world, gifts are made to clients or business partners to reinforce a business relationship. Excessive gifts, beyond what is socially usual and acceptable, may be a subterfuge for corruption by creating a moral necessity to reciprocate with a favour; especially frequent and generous gifts may create a climate leading to a favourable treatment when the recipient will have to make a decision affecting the giver.
  • Hospitality consists of expenses made to entertain guests, for instance by inviting them to a restaurant or to a sports or cultural event or by covering a guest’s travel and accommodation expenses. Excessive hospitality may be a subterfuge for corruption.

Public officials in many countries are subject to precise rules with respect to gifts or hospitality which they may accept or not.

According to the ICC Rules on Combating Corruption (2011), enterprises should establish procedures on the offer or receipt of gifts and hospitality in order to ensure that (i) they comply with national law and international instruments, (ii) are limited to reasonable and good faith expenditures, (iii) do not improperly affect, or be perceived as improperly affecting the recipient’s independence of judgment towards the giver, (iv) are not contrary to the known provisions of the recipient’s Code of Conduct, and (v) are neither offered nor received too frequently nor at an inappropriate time.

Intermediaries − see the definition for ‘Third parties’ above.

Kickbacks are a form of bribery which consists of returning, or sending back, a portion of a contract payment or of a bribe to government or political party officials or to employees of a contracting party, their close relatives, friends, or business partners. Kickbacks are often paid through an intermediary and on an account in an offshore financial centre.

Laundering the proceeds of corruption is a form of corruption consisting of concealing or disguising the illicit origin, source, location, disposition, movement, or ownership of property, knowing that such property is the proceeds of corrupt practices.

Political contributions are an acceptable way to support the democratic process. However, they can also be used for the purpose of political corruption (see above under ‘Corruption – Political Corruption’).

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The ICC Rules on Combating Corruption (2011) provide that enterprises should only make contributions to political parties, party officials, and candidates in accordance with applicable law and public disclosure requirements and that the amount and timing of political contributions should be reviewed to ensure that they are not used as a subterfuge for corruption. Enterprises should also establish reasonable controls and procedures to ensure that improper political contributions are not made.

Procurement is the process by which governments or enterprises manage their purchases of goods and services. Procurement is an area particularly exposed to corruption and procurement procedures are therefore key in the prevention of corrupt practices. They should aim at establishing a transparent process and at eliminating discretionary decisions in procurement processes in excess of defined figures.

The ICC Rules on Combating Corruption (2011) provide that enterprises should conduct their own procurement in accordance with accepted business standards and in a transparent manner to the extent possible.

A Public official is any person holding a legislative, administrative, or judicial office at any level of government, national, or local. International civil servants are also public officials. Employees of public enterprises (enterprises over which a government exercises a dominant influence) are public officials unless the enterprise operates on a commercial basis on its market like a private enterprise. Employees of a private enterprise performing an activity in the public interest such as customs inspections or tasks delegated in connection with public procurement are also considered as public officials in that respect.

Restrictive practices are practices restricting competition in violation of competition law. Competition law was one of the initial focuses of the European integration process, since restrictive practices tend to prevent the integration of national markets. Now the focus of European Union competition law is more and more on the protection of customers. In the United States, antitrust law focused initially, as its name indicates, on the prevention of the formation of trusts or monopolies in a number of industries, such as railways, steel, oil, sugar, or aluminium.

Restrictive practices fall into the following categories:

  • Abuse of a dominant position: there is a dominant position when an enterprise occupies most or all of a market, be it that it has absorbed or eliminated all or most of its competitors or that the market is too small to accommodate enough competitors for a workable competition; competition law does not prohibit the creation of a dominant position as such but does repress its abuses; these include refusing to deal, discriminatory pricing, dumping, imposing leonine conditions, or tying the purchase of products not naturally related. Competition law also attempts to keep the creation of dominant positions in check by imposing control procedures for mergers and acquisitions potentially leading to an uncompetitive market.
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  • Horizontal agreements: horizontal agreements take place between enterprises at the same level of the supply chain, for instance between suppliers, manufacturers or distributors of the same or similar products, and include among others price-fixing or the carving up of the market by allocating territories. A cartel is a horizontal agreement which includes all or most enterprises in an industry.
  • Vertical agreements: vertical agreements take place between enterprises at different levels of the supply chain, for instance between a supplier or manufacturer and a distributor or retailer; they include among others exclusive dealing, territorial protection or resale price maintenance.
  • Exchange of information between competitors: this is a sensitive practice in competition law, because the mere exchange of information between competitors can precede a restrictive practice; this will be the case of exchange of price (or other sensitive) information which can lead to concerted pricing behaviour in a market with a limited number of actors.

Revolving doors refer to the practice of offering an activity or employment to a public official after he or she leaves public office. A cooling-off period is the period recommended by good practices or imposed by law before a former public official can be offered an activity or employment relating directly to the functions held or supervised during his or her tenure.

The ICC Rules on Combating Corruption (2011) provide that former public officials shall not be hired or engaged in any capacity before a reasonable period has elapsed after their leaving office, if their contemplated activity or employment relates directly to the functions held or supervised during their tenure. In any case, restrictions imposed by national legislation shall be observed.

In OECD countries, the length of the cooling off period for public official varies from six months to five years. Most countries have, however, opted for a cooling off period in the order of one to two years.

Sponsorships are a special kind of donation whereby the sponsor supports typically a sports or arts event or a specific cause in return for exposure of its name and brand. Sponsorships are necessary to finance certain activities. However, they can also be used as a subterfuge for corruption.

The ICC Rules on Combating Corruption (2011) provide that sponsorships should be transparent and in accordance with applicable law.

Trading in influence is a form of corruption consisting in the offering or soliciting of an undue advantage to a public official or any other person in order for the latter to exert an improper advantage, real, or supposed influence with a view to obtaining from a public official an undue advantage for the payer of the bribe or for any other person.

Whistleblowing refers to the reporting of misconduct, including any form of corruption, especially by individuals employed by the organization where this misconduct is taking place.

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The ICC Rules on Combating Corruption (2011) provide that no employee shall suffer retaliation or discriminatory or disciplinary action for reporting in good faith violations or soundly suspected violations of the enterprise’s anti-corruption policy or for refusing to engage in corruption, even if such refusal may result in the enterprise losing business. Enterprises are further expected to offer channels to raise, in full confidentiality, concerns, seek advice or report violations.

The ICC Guidelines on Whistleblowing (2008)4 and Chapter 11 of this Training Handbook provide further guidance on how to establish internal whistleblowing systems.

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About the author

Jean-Pierre Méan was General Counsel and Chief Compliance Officer for SGS, the world’s leading verification, inspection, and certification company, from 1996 to 2008. In 2002 and 2003, he was Chief Compliance Officer for the European Bank for Development and Reconstruction in London before returning to his position at SGS. He is now Of Counsel at MCE Legal, a law firm based in Lausanne, Switzerland. Jean-Pierre Méan holds a doctor of laws degree from the University of Basle and an LL.M. from Harvard Law School, and is admitted to the bar in Switzerland and Canada. He is President of the Swiss Chapter of Transparency International and a member of the ICC Commission on Corporate Responsibility and Anti-corruption. He chaired the Task Force which drafted the ICC Rules on Combating Corruption (2011).

2
http://www.iccwbo.org/advocacy-codes-and-rules/document-centre/2010/icc-guidelines-on-agents,-intermediaries-and-other-third-parties/

3
The RESIST toolkit was developed by ICC and three other international organizations involved in the fight against corruption. It is available at: http://www.iccwbo.org/products-and-services/fighting-commercial-crime/resist/