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Did You Know?

Building the rule of law & fighting corruption could help ward off worldwide recession:

William Hague, UK Foreign Secretary, affirms that: “Bribery is a modern day scourge on international trade. At a time when so many people are struggling through an economic downturn, bribery is a very real disease threatening our prosperity. It poses a serious challenge to the development of economies and contributes to market failure."

OECD Convention

The OECD Convention on Combating Bribery of Foreign Public Officials

In 1997 and 2003, international conventions sponsored by the Organization for Economic Cooperation and Development (OECD) and the UN, respectively, came into force, requiring signatories to amend their domestic laws along lines similar to America's Foreign Corrupt Practices Act of 1977.The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions went into effect in 1999. It has its roots in a corruption scandal involving the United States and Japan in the 1970s, and is primarily aimed at eliminating “facilitation payments” in pursuit of business.

The Convention is important because its signatories account for most of the world’s exports and foreign investment.Parties to the Convention are obliged to adopt legislation making it a crime to bribe foreign public officials, whether directly or through intermediaries, and establish corporate liability for foreign bribery.

The U.S. was, until recently, the only nation that had a significant track record of anti-foreign bribery enforcement; but now other nations are demonstrating a new interest in foreign anti-corruption enforcement. Indeed, Transparency International has praised fifteen countries, in addition to the U.S., for having made “significant enforcement” efforts.In many developing countries it is ordinarily not possible for foreign companies to operate effectively without paying bribes to justice/law enforcement system officials.

UK Extra-Territorial Anti-Bribery Legislation

Part 12 of the Anti-Terrorism, Crime and Security Act 2001, which came into effect on the 14th February 2002, made two main changes to the law:Section 108 put beyond doubt that the existing offences of bribery and corruption apply to the bribery of foreign public office holders, including foreign MPs, judges, ministers and 'agents' (as defined by the Prevention of Corruption Act 1906). This change mainly clarified existing law and no changes in procedure resulted from it.

Section 109 was the significant change: it gave British courts jurisdiction over certain offences of bribery and corruption when they are committed overseas by UK nationals or by bodies incorporated under UK law. The relevant offences are (a) the common law offence of bribery; (b) the offences under section 1 of the Public Bodies Corrupt Practices Act 1889; and (c) the first two offences under section 1 of the Prevention of Corruption Act 1906.

However, the scandal of the British Government's abrupt termination of an investigation by the Serious Fraud Office into allegations that defence and aerospace giant, BAE Systems, had paid hundreds of millions of pounds to the Saudis to secure the £43 billion Al Yamamah arms deal, focused minds on the inadequacy of this legislation. Subsequently, the Bribery Act was passed in 2010.

Since, under this Act - which was due to come into force in April, 2011, but the UK government has yet again backtracked - the corporate failure to prevent bribery becomes a strict liability offence, British businesses operating in developing countries will be obliged to pro-actively tackle bribery. Under the Act, no corrupt intent is necessary and, thus, if companies that have business operations of some kind in the United Kingdom are to avoid prosecution, they must demonstrate they have adequate processes in place to prevent corruption offences by their employees, agents and intermediaries working on behalf of the business anywhere in the world.

More specifically the Act:

Introduces a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery
The measures cover bribery of a foreign public official.Increases the maximum penalty for bribery from seven to 10 years imprisonment, with an unlimited fine.

The British Government aimed to publish a guide on what constitutes 'adequate procedures' early in 2011. However, not only did it fail to do so, but totally disingenuously, it used its failure as an excuse for delaying the implementation of the Act..

For more information on the OECD's work in fighting bribery and corruption click here

The Role of the OECD and EU Conventions in Combating Bribery of Foreign Public Officials