Bribery in international business

Recommendation on Anti-Corruption Proposals for Aid-Funded Procurement: Follow-up report


The following report on the follow-up by OECD Members to the Recommendation on Anti-Corruption Proposals for Aid-Funded Procurement was prepared by the Development Assistance Committee in May 1997.

  • Executive Summary
  • I. Introduction and Background
  • II. Members' actions to implement the 1996 Recommendation
  • III. Wider anti-corruption initiatives in the OECD and elsewhere
  • Annex 1: Anti-corruption proposals for bilateral aid procurement
  • Annex 2: Members' follow-up actions

In May 1996, the DAC High Level Meeting approved a Recommendation on anti-corruption proposals for aid-funded procurement. Noting that Recommendation, the 1996 OECD Ministerial Council Meeting requested the DAC to follow-up on the Recommendation and report back on progress within one year.

This report summarises the impressive steps to date by DAC Members to give effect to this Recommendation, and the contribution of the work to broader efforts in the OECD and elsewhere to tackle corruption.

The DAC, at its 5-6 May 1997 High Level Meeting, endorsed this report and agreed to its transmission to the 1997 Ministerial Council.

The DAC High Level Meeting (HLM) in May 1996 approved a Recommendation on anti-corruption proposals for aid-funded procurement (see below), to be pursued in co-ordination with the other work being undertaken with related objectives in OECD and elsewhere.

In adopting the Recommendation, the DAC agreed to follow-up on the effect given to it by Members within one year. Linked to other OECD work, the 1996 Ministerial Council meeting encouraged the DAC to follow-up on the Recommendation and asked it to report back on progress.

This note reports to the 1997 Meeting of the Council at Ministerial Level achievements over the past year in giving effect to the Recommendation.

Section II reviews the impressive steps made by Members to date. Almost all DAC Members have introduced or are about to introduce explicit anti-corruption clauses or have strengthened existing similar provisions. The remaining Members are presently continuing their internal consultation processes with a view to deciding on the most appropriate actions beyond existing provisions.

Annex 2 details for each Member the texts of the anti-corruption clauses or other actions now being implemented or considered.

Section III puts the DAC's anti-corruption initiatives into the wider context of other efforts in the OECD and elsewhere.

The Recommendation called on Members, in co-operation with recipient countries and the international development institutions, to introduce or require anti-corruption provisions governing aid-funded procurement.

Members' actions to follow-up the Recommendation can be grouped as follows (see Annex 2 for full details):

  • Introduction /strengthening of anti-corruption provisions: The following 20 Members have introduced or are about to introduce explicit anti-corruption clauses or strengthen existing similar provisions: Australia, Belgium, Canada, CEC, Denmark, Finland, France, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States. In many cases the clauses are new and are based on the "model clause" previously considered by the DAC.
  • Currently reviewing positions : The remaining two Members (Austria and Germany) are currently reviewing their positions in their efforts to tackle corruption effectively and to give effect to the Recommendation. The positions expressed by these Members are also covered in Annex 2.
Given the wide range of rules of operation related to aid-funded procurement which exist in Member countries, the anti-corruption clauses and other provisions adopted naturally differ among Members. However, they all share the purpose of giving a clear signal that corruption will not be tolerated. In many cases, Members have indicated that the clauses will be inserted systematically in a range of documentation (contracts, agreements, memoranda of understanding), and will be mandatory.

The DAC's anti-corruption action is an important component of the wider efforts to tackle corruption.

Within the OECD, the Committee on International Investment and Multinational Enterprises (CIME), through its Working Group on Bribery in International Business Transactions, will follow up on its Recommendation on Bribery in International Business Transactions, adopted in May 1994. This will involve presenting to the 1997 Ministerial Council Meeting proposals on modalities and international instruments to facilitate the criminalisation of bribery of foreign public officials and to stop the tax-deductibility of bribes. That report to the Ministerial Council will take account of the activities of all members of the informal task force set up to oversee the OECD's anti-corruption and bribery activities.

Elsewhere, important progress is also being achieved:

  • The World Bank has already introduced more effective loan documentation and guidelines (including revisions to the Bank's Fraud and Corruption (Bribery clause). These provisions are mandatory for Bank operations and are now also being introduced in the regional development banks.
  • The United Nations' General Assembly adopted two resolutions in December 1996 on action against corruption. Other UN agencies e.g. the Crime Prevention and Criminal Justice Division and the International Drug Control Programme have prepared a draft model law against corruption.
  • The Organisation of American States adopted the Inter-American Convention against Corruption in March 1996; and
  • Work continues in the Council of Europe and the European Union to combat international bribery.

Actions being undertaken in the multilateral development institutions (MDIs) are relevant to that part of the Recommendation which calls for work to be undertaken to ensure the proper implementation of the anti-corruption provisions envisaged in those organisations' rules of operation. This work also reflects the shared concern of the membership of the MDIs (which include both developed and developing countries) to encourage system-wide anti-corruption action.

Recommendation endorsed by the Development Assistance Committee at its High-Level meeting, 6-7 May 1996
  1. DAC Members share a concern with corruption:
    - It undermines good governance.
    - It wastes scarce resources for development, whether from aid or from other public or private sources, with far-reaching effects throughout the economy.
    - It undermines the credibility of, and public support for, development co-operation and devalues the reputation and efforts of all who work to support sustainable development.
    - It compromises open and transparent competition on the basis of price and quality.
  2. The DAC, therefore, firmly endorses the need to combat corruption through effective prohibition, co-ordinated in a multilateral framework to ensure harmonised implementation. Other meaningful and concrete measures are also required to ensure transparency, accountability and probity in the use of public resources in DAC Members' own systems and those of partner countries, who themselves are increasingly concerned with this problem.
  3. In its efforts to curb corruption, the DAC recognises that opportunities may exist for corrupt practices in aid-funded procurement. Together with other efforts to deal with corruption, the DAC hereby expresses its firm intention to work to eliminate corruption in aid procurement.
  4. The DAC therefore recommends that Members introduce or require anti-corruption provisions governing bilateral aid-funded procurement. This work should be carried out in co-ordination with other work being undertaken in the OECD and elsewhere to eliminate corruption, and in collaboration with recipient countries. The DAC also recommends that its Members work to ensure the proper implementation of their anti-corruption provisions and that they draw to the attention of the international development institutions to which they belong, the importance of proper implementation of the anti-corruption provisions envisaged in their rules of operation.
  5. The DAC will follow up on the effect given to this Recommendation within one year.
  6. DAC Members will work closely with development partners to combat corruption in all development co-operation efforts.


The following anti-corruption clause is to be introduced in AusAID contracts for aid delivery:

The contractor will not make or cause to be made any offer, gift or payment, consideration or benefit of any kind, which would or could be construed as an illegal or corrupt practice, either directly or indirectly to any party, as an inducement or reward in relation to the execution of this contract. Any such practice will be grounds for termination of this contract.


Austria considers corruption in developing countries as one of the main obstacles to development. It undermines good governance and is also wastes scare resources, as an open and transparent competition based on price and quality can not take place.

One of the salient features of the Austrian development co-operation is therefore the promotion of democratisation and the support of measures to ensure good governance.

Austria considers anti-corruption seminars as an appropriate measure to fight corruption in partner countries. Currently Austria is examining such projects.

Anti-corruption clauses are not provided for in Austria's procurement contracts yet, but in the light of the outcome of the High Level Meeting in May 1997, Austria has the intention to examine the possibilities of inclusion of the substance of the OECD model clause into co-operation contracts.


Internal consultation processes are continuing in order to define the response to the Recommendation, with the intention of introducing, in the near future, anti-corruption clauses.


Canada will introduce a new anti-corruption clause in all new contracts entered into by the Canadian International Development Agency (CIDA) as follows:

No offer, gift or payment, consideration or benefit of any kind, which constitutes an illegal or corrupt practice, has or will be made to anyone, either directly or indirectly, as an inducement or reward for the award or execution of this contract. Any such practice will be grounds for terminating this contract or taking any other corrective action as appropriate.

In addition, Canada is considering the scope for introducing anti-corruption language into memoranda of understanding with partner developing countries and into contribution agreements with other partners.


The Commission of the European Communities is examining existing anti-bribery clauses in contracts which the Commission administers through its multilateral aid programmes. In some cases (e.g. the European Development Fund) this would entail only slight redrafting, in order to bring the contracts into line with the DAC Recommendation; while in other areas it would mean introducing the issue for the first time in existing contracts. These clauses will be mandatory both in procedures leading to the award of contract and in contracts governing the execution of projects.

More widely, the Commission services have constituted a working group with the aim of establishing a coherent anti-corruption strategy against corruption in the European Union. It is envisaged that this policy will be put forward by end-May 1997.

The Commission works with other multilateral donors to co-ordinate the wording of anti-corruption clauses in contracts managed by multilateral donors. The contractual clauses recently introduced by the World Bank are considered as a basis for future work. The procurement chiefs of multilateral donors will meet next in April 1997 to consider opportunities for the harmonisation of anti-corruption initiatives.


Denmark will introduce the following clause -- adapted from the World Bank's anti-corruption clause -- in its 'Standard Government Agreements for Bilateral Development Projects':

The Danish Ministry of Foreign Affairs:

  • may cancel a Standard Government Agreement for Bilateral Development Projects if it determines, with respect to any contract to be financed by Danish aid funds, that corrupt or fraudulent practices were engaged in by representatives of the recipient or of a beneficiary of the aid funds during procurement or during the execution of the contract without the recipient having taken timely and appropriate action satisfactory to the Ministry of Foreign Affairs to remedy the situation;
  • will have the right to inspect accounts and records of suppliers and contractors relating to the performance of the contract, and to perform a complete audit by auditors appointed by the Ministry of Foreign Affairs; and
  • may bar firms from contracts financed by Danish aid funds, either indefinitely or for a specified period of time if the Ministry of Foreign Affairs determines that the firm is engaged in corrupt or fraudulent practices in competing for, or in executing, a contract financed by Danish aid funds.

The introduction of this clause in 'Standard Government Agreements' will be followed by additional anti-corruption provisions. Currently an anti-corruption clause to be introduced in all of Danida's procurement contracts is being drafted. The actual wording to be inserted into the said contracts will subsequently be forwarded to the DAC.

Furthermore, following a recommendation endorsed by the OECD's Committee on Fiscal Affairs, the Danish Ministry of Taxation will submit a proposal to the Danish Parliament in the autumn, whereby tax deductibility of bribes to foreign officials is disallowed.


Finland plans to introduce a general paragraph on good governance in their inter-governmental frame agreements with co-operating countries. Standard inter-governmental project agreements will also be modified to include clauses to prevent corrupt practices.

In regard to the aid-funded procurement agreements, Finland has had since 1989 an anti-corruption clause for engineering contracts in accordance with FIDIC conditions of contract. Finland aims to include an anti-corruption clause systematically in all types of agreements covering aid procurements.

The specific contents of the relevant clauses, and especially the sanctions concerned, are expected to be agreed in the near future.


France is determined to combat corruption, and in particular corruption in aid-funded projects.

With this objective in mind, France proposed to the OECD Ministers in May 1996 that the experts study the modalities and appropriate legal instruments for an efficient and co-ordinated criminalisation of corruption of foreign public officials in the context of international transactions.

France supports the principle of an international convention in this area, in preference to just a recommendation. The former is a more legally binding instrument permitting the accession of other countries to the OECD initiative, which would in addition facilitate international legal co-operation related to corruption.

France actively hopes that other OECD Members will speedily engage in the process of finalising a convention, which could be submitted for ratification in 1998.

France also proposed in May 1996 the adoption by the DAC of a Recommendation combatting corruption in official development assistance.

In giving effect to this Recommendation, the decision was taken in 1996 to reinforce measures in order that French ODA would not be used to finance commissions.

To put this decision into effect, anti-corruption clauses have been introduced in the financing agreements signed between France and beneficiary countries. Written undertakings not to pay commissions are henceforth required from contracting enterprises and respect of this undertaking is subject to a posteriori control by the public authorities. Finally, controls by financing institutions to ensure the absence of commissions in the contracts submitted to them for payment have been reinforced.


The German government sees corruption as a considerable obstacle to development in many of its partner countries. It has, therefore, decided to make the fight against corruption a major theme of its development policy dialogue. The fight against corruption in the public sector is taken as an important indicator for assessing a government's orientation towards development. Highly corrupt administrations should not expect to receive German financial assistance.

The German government is examining, in the light of the DAC's Recommendation and other donors' experiences with measures undertaken to combat corruption, the contractual regulations which apply to German financial co-operation with developing countries. The German government is particularly concerned with finding even better ways of combating corrupt practices by project executing agencies in the developing countries in connection with the awarding of contracts by making further improvements in its appraisal and monitoring processes. In cases of provable corruption, the existing contractual regulations offer sufficient possibilities for demanding immediate repayment of the financial assistance already provided and stopping any further payments.


Ireland will introduce the following anti-corruption clause in all new aid procurement and consultancy contracts:

No offer, payment, consideration, or benefit of any kind, which constitutes or could be construed as an illegal or corrupt practice, shall be made, either directly or indirectly, as an inducement or reward for the award or execution of this contract. Any such practice will be grounds for terminating this contract or taking any other corrective action as appropriate (including civil or criminal action).

Italy plans to introduce the following clause in its documentation concerning its grant and credit development co-operation contracts.

No offer, gift or payment, consideration of benefit of any kind, which would or could be construed as an illegal or corrupt practice, has or will be made, either directly or indirectly, as an inducement or reward for the award of execution of this contract. Any such practice will be grounds for misprocurement.


Japan has always placed importance upon the proper use of its aid funds. In this regard, efforts have been made to prevent corruptive actions related to aid, including reference in the ODA Charter and relevant clauses in Exchange of Notes (E/N) and OECF Loan Agreements (L/A).

Japan fully agrees that DAC Members send jointly at this time an even clearer message of the intention to tackle corruption. In order to express its common intention along with other DAC Members, Japan has taken the following additional measures:

With regard to grant finance, Japan will introduce a measure in which the governments of Japan and the recipient make explicit reaffirmation in their Record of Discussions (R/D) that relevant clauses in the Exchange of Notes (E/N), an intergovernmental agreed document, include their intention to eradicate corruptive actions in order to ensure aid effectiveness. Similar considerations are also currently being given to yen loan programmes.

The actual wording to be inserted into the said documents will be subsequently transmitted to the DAC.


Luxembourg is presently examining the rules and procedures for procurement finance by official development assistance (ODA) in order to integrate into them the DAC Recommendation.

It is foreseen that an anti-corruption clause will be systematically inserted into all new framework agreements with Luxembourg's partner countries, as well as in bilateral agreements. The Ministry of Foreign Affairs is also examining the options for inserting such a clause in existing framework agreements.

The specific text of the anti-corruption clause is not yet formulated but will certainly be based on the "model clause" In a desire to be coherent in the fight against corruption, Luxembourg prefers to await the results of the Working Group constituted by the European Commission before formulating full details of its anti-corruption policy.


The Netherlands will introduce the following anti-corruption clause in its aid contracts.

The contracting party shall neither offer or give to a third party nor seek, accept or get promised directly or indirectly for himself of for another party any gift or payment, consideration or benefit of any kind which would or could be construed as an illegal or corrupt practice. Any such practice will be ground for annulment of the contract or part thereof.


The revision of New Zealand's Guidelines for NZODA Consultants and associated standard, will include the substance of the following "model" anti-corruption clause previously considered by the DAC.

No offer, gift or payment, consideration or benefit of any kind, which would or could be construed as an illegal or corrupt practice, has or will be made, either directly or indirectly, as an inducement or reward for the award or execution of this contract. Any such practice will be grounds for misprocurement.


Norway has confirmed that it has a standard clause in its bilateral co-operation agreements which can be used in cases where irregularities are found. This clause (below) enables Norway to withhold disbursements or claim repayment in the event of corruption.

Norway reserves the right to claim repayment in full or in part of funds from the Grant if the funds or part of the funds are found to be misused or not satisfactorily accounted for.

Norway feels that this standard clause provides a sufficient anti-corruption tool when required, and would hesitate to include any additional clauses on corruption in its standard agreement.


Portugal will introduce the following anti-corruption clause in its aid-funded procurement contracts.

  1. It's strictly forbidden to the contractors, by themselves or by a third part involved, with his agreement, to offer, ask or accept, for himself or for a third one, patrimonial or non patrimonial advantage or even, direct or indirect promise, as offsets for the conclusion and/or execution of the present contract, if susceptible of being qualified as criminal unlawful act in accordance with national laws of any party involved.
  2. Any contract that is based in the practice, or its attempt, of situations stipulated under n°1 of the present clause, will be considered null and void, without prejudice to eventual disciplinary, civil and criminal responsibilities against those involved in these practices.
  3. The previous rules also apply to any change or addendum to the contract.

Spain has instructed the Spanish Official Credit Institute, the relevant financial institution, that the clause shown below must be included in all credit agreements in which the transactions funded involve Spanish development assistance funds.

No offer, gift or payment, consideration or benefit of any kind, which could be construed as an illegal or corrupt practice, or as an inducement or reward for the award of this contract, has or will be made. Any such practice shall be grounds for misprocurement.


In January 1996, SIDA introduced a handbook of regulations to promote good administration and counteract corruption in Swedish development co-operation.

SIDA has, at present, no anti-corruption clauses in the agreements with recipients or in consultancy contracts. However, they are in the process of reviewing model agreements and consultancy contracts and anti-corruption clauses will be included.

In addition, the Guidelines for Procurement of Goods, Services and Contract work are appended to SIDA agreements and contracts. These Guidelines are now being revised and the following anti-corruption clause has been proposed:

Improper inducement:

  • Buying agencies shall in their procurement work respect and conform to the relevant agreements and observe the letter and spirit of the Guidelines.
  • All parties concerned shall take measures to ensure that contracts and purchase orders relating to procurement under the Guidelines are not used as devices to channel gifts, payments or other benefits to public officials and/or procurement management/staff members with decision-making responsibility or influence.

From 1 July 1996 the following anti-corruption clause was introduced in all contracts, notably covering consultancy, management and construction projects:

The contracting party shall neither offer a third person nor seek, accept or get promised directly or indirectly for himself or for another party any gift or benefit which would, or could, be construed as an illegal or corrupt practice.

In inserting this clause systematically in all inter-governmental agreements whether they involve development aid or economic support and technical assistance for Central and Eastern European countries, the Swiss Government will highlight the fact that fighting corruption is a common concern of both of the contracting parties.

In addition, Switzerland has prepared two other clauses:

  • One to be included in a statement that will have to be signed by businesses called upon to supply goods or services in connection with associated financing, balance-of-payments assistance or grants (in the case of economic support for countries in transition). The statement format is dictated by the fact that OFAEE is not a party to contracts entered into by these businesses.
  • The other to be incorporated into consultancy as well as management contracts.

In as much as the wording of these clauses is still under discussion with the private sector, Switzerland is not yet able to report them to the DAC but shall be doing so shortly.


In cases where UK Overseas Development Administration (ODA) is not a signatory of the contract they reserve the right to approve the terms to the contract which is proposed and has for some years has encouraged the use of the FIDIC type of contract, which contain an optional clause prohibiting corrupt practices. As a result of the Recommendation, it is proposed that this clause will become one of the mandatory clauses which ODA requires to be inserted in all such contracts. The text of the clause is:


If the contractor or any of his Sub-contractors, agents or servants offers to give, or agrees to offer or give to any person, any bribe, gift, gratuity or commission as an inducement or reward for doing or forbearing to do any action in relation to the Contract or any other Contract with the Employer or for showing or forbearing to show favour or disfavour to any person in relation to the Contract or any other contract with the Employer, then the Employer may enter upon the Site and the Works and terminate the employment of the Contractor and the provisions of Clause 63 hereof shall apply as if such entry and termination has been made pursuant to that Clause.

Where ODA, or its approved Procurement Agent, is a signatory for contracts for goods, they must abide by the following anti-corruption clause, contained in the Memoranda of Understanding (MOU) which govern their activities:

Corrupt Gifts or Payments:

The agent shall not offer or give, or agree to give, to any member, employee or representative of the Client any gift or consideration of any kind as an inducement or reward for doing or refraining from doing any act in relation to the obtaining or execution of the MOU or any Contract or for showing favour or disfavour to any person in relation to the MOU or any Contract. The attention of the agent is drawn to the criminal offences created by the Prevention of Corruption Acts 1889 to 1916.

All persons involved with the provision of the Services shall be required to undertake duties in accordance with the Ethical Code of the Chartered Institute of Purchasing and Supply.

In cases where ODA is the signatory to contracts to engage individuals or firms to provide services, the following clause is included:

Corrupt Gifts and Payments of Commission:

The Consultants warrant and represent to ODA that the Consultants have not:

a) offered to give or agreed to give to any person any gift or consideration of any kind as an inducement or reward for doing or forbearing to do or for having done or forborne to do any act in relation to the obtaining or execution of the contract or for showing or forbearing to show favour or disfavour to any person in relation to the Contract.

b) entered into the Contract in connection with which commission has been paid or agreed to be paid by the consultants or on their behalf, or to their knowledge, unless before the Contract was made, particulars of any such commission and of the terms and conditions of any agreement for the payment thereof were disclosed in writing to the Contract officer.

The contract also stipulates that breach by the consultants (including anyone employed by them or acting on their behalf, whether with or without their knowledge of the clause, or any offence by them subject to the Prevention of Corruption Acts 1889 to 1916), shall entitle the ODA to terminate the contract and recover the amount of any loss resulting from such termination and/or the amount or value of any such gift, consideration or commission.

The ODA has taken steps to co-ordinate the implementation of the Recommendation with other moves to combat corruption through the MDIs, particularly the World Bank. Dialogue with and feedback from other countries implementing anti-corruption provisions and other ways to help combat corruption is also an important element in ODA's strategy.


The United States introduced from 1 October 1996 the following anti-corruption provision in USAID-funded host country contracts for professional and technical services and equipment and materials:

No offer, payment, consideration, or benefit of any kind, which constitutes an illegal or corrupt practice, shall be made, either directly or indirectly, as an inducement or reward for the award of this contract. Any such practice will be grounds for cancelling the award of this contract and for such other additional actions, civil and/or criminal, as may be applicable.




Countries list

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