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Fighting foreign bribery: prosecutions making it harder for companies

“The growing momentum behind anti-bribery enforcement is making it harder to get away with the use of graft to win business.”

– Huguette Labelle, chair of Transparency International

Companies who use foreign bribes seek an unfair advantage to win better contracts or dodge local regulations. Investigating and punishing them is essential in the fight against global corruption.

Under the 1997 Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention, 39 countries have committed to making foreign bribery a crime. The Convention is a key instrument for curbing the export of corruption globally. The 39 countries are responsible for two-thirds of world exports and three-quarters of foreign investment.

The OECD Anti-Bribery Convention is designed to deter companies from engaging in foreign bribery, but how well are countries actually enforcing it?

Tracking how countries fight foreign bribery

“Exporting Corruption? Country Enforcement of the OECD Anti-Bribery Convention, Progress Report 2012” tracks countries’ efforts to investigate and punish corrupt companies who are using foreign bribes to get ahead.

1 IN 4
business executives (27 per cent) believe bribery by a competitor resulted in direct costs to their business in the last 12 months, according to a Transparency International survey to be published this week.

The report assesses the progress of 37 of the 39 countries signed up to the Convention, placing them in four enforcement categories: Active, Moderate, Little and No enforcement.

These classifications are based mainly on how many “cases” have been brought which try to identify and punish instances of foreign bribery. “Cases” include criminal prosecutions, civil actions and judicial investigations.

The results

Prosecutions against companies that use foreign bribes are on the rise

BIGGEST COMPANY FINE
JGC Corporation
US$219 million (sixth highest fine ever)

With 144 new cases in 2011, the total number of cases prosecuted by 37 major exporters rose from 564 at the end of 2010 to 708 at the end of 2011, with a further 286 investigations ongoing.

Over 250 individuals and almost 100 companies were sanctioned as a result of foreign bribery-related cases in OECD Convention countries to the end of 2011, according to the OECD. Sixty-six people have gone to jail in those countries for the crime of bribing overseas officials in business deals.

The table below shows the levels of enforcement for 37 OECD Convention countries analysed in the new report. National breakdowns are available for select countries, by clicking the links in the table. More details on all 37 countries are available in the report.

Enforcement level Countries (in order of share of world exports) Scale
Active enforcement United States, Germany, United Kingdom, Italy, Switzerland, Norway, Denmark 28 per cent of world exports (7 countries)
Moderate enforcement Japan, France, Netherlands, Korea (South), Canada, Spain, Belgium, Australia, Sweden, Austria, Argentina, Finland 25 per cent of world exports (12 countries)
Little enforcement Mexico, Brazil, Turkey, Hungary, Chile, Luxembourg, Portugal, Slovak Republic, Slovenia, Bulgaria 6 per cent of world exports (10 countries)
No enforcement Ireland, Poland, Czech Republic, South Africa, Israel, Greece, New Zealand, Estonia 4 per cent of world exports (8 countries)

BIGGEST FINE FOR AN INDIVIDUAL
Jeffrey Tessler, agent for Kellogg, Brown and Root US$149 million

There is now Active Enforcement of the OECD Anti-Bribery Convention in seven countries responsible for 28 per cent of world exports. Twelve countries with 25 per cent of the world exports are classed as Moderate Enforcers.

The United States shows the highest enforcement with 275 cases completed by the end of 2011. Germany is the only other country to have completed more than 100 cases.

With 34 ongoing investigations, Canada joins Australia and Austria as the most improved enforcers, all three conducting their first major case in 2011.

The overall level of enforcement is still inadequate

Eighteen countries have little or no enforcement at all, having not yet brought any criminal charges for major cross-border corruption by companies. Together these countries represent 10 per cent of world exports. Only seven out of 37 countries are actively enforcing bribery law.

Japan is the biggest economy to have brought less than 10 major cases. In another big exporter, France, there are concerns about the slow progress of cases initiated and the lack of deterrent sanctions.

Slow justice in France

The rate at which cases brought by prosecutors proceed in the French judicial system is extremely slow, and it is uncertain whether penalties will be “proportionate and dissuasive”, as called for by the Convention. The introduction of plea bargaining may help expedite the resolution of cases. However, it is important that appropriate penalties are imposed.

Recommendations

Governments must remain vigilant

Government leaders must reject arguments that winning foreign orders during the recession justifies condoning foreign bribery.

Engaging in bribery sets a dangerous precedent for companies and governments. It is difficult to undo the culture of extortion – getting business through back-handers is not sustainable.

Proper enforcement of anti-bribery laws requires money and manpower.

Despite the pressure to cut costs, governments must retain experienced people with adequate resources to help lead cases against corruption.


Increased membership in the Convention

Russia became the 39th party to the Convention last year. G20 members India, China, and Indonesia took similar legislative steps in the last two years. It is vital that foreign bribery is not tolerated in these large emerging economies.

Resources

Countries

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