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10.6. To what extent have international anti-corruption and integrity standards been implemented in national legislation and regulations? Do penal, administrative and civil law provisions provide an effective legislative and regulatory framework for fighting corruption, including bribe solicitation and extortion as well as promoting integrity, thereby reducing uncertainty and improving business conditions for all investors?
Rationale for the question
Corruption distorts competition and adds uncertainty to business operations, both of which can reduce levels of foreign and domestic investment and hence economic development. To address these concerns, governments should consider enacting provisions, mostly in criminal law, but also in the civil and administrative regulations, to prevent and sanction corruption of domestic public officials. Over the past decade, many governments have developed standards of conduct to address conflicts between public officials’ private interests and their public duties. The original focus was on traditional sources of influence, such as gifts or hospitality offered to public officials, as well as personal or family relationships. With increased co-operation between the public and private sectors, many countries have also established standards of conduct for tackling other potential conflicts of interest, such as business interests (e.g. in the form of partnerships, shareholdings), affiliations with other organisations and post-public employment.
Policy practices to scrutinise
The first question relates to the implementation of international standards. The second concerns the actual legislation and regulations at the national level to combat corruption, including those enacted or made to implement international standards. Given the close relationship between the two questions, the PFI user should assess both at the same time. Regarding the implementation of international standards, the PFI user needs to identify what national laws and regulations exist on anti-corruption and the extent to which these implement international anti-corruption and integrity standards. Does the law prohibit, for example, the bribery by corporations of public officials for the purpose of obtaining or retaining business or other improper advantages? The PFI user should consider carefully the domestic anti-corruption framework to determine whether it is effective in combating corruption and promoting integrity.
To assess the implementation of international standards (see Question 10.9), the PFI user should consider the following criteria and indicators:
Legislative provisions which prohibit public officials, whether directly or through intermediaries, from soliciting or receiving any undue pecuniary or other advantage or from engaging in extortion. These provisions might be established as an offence within the general penal law or as part of specific legislation on anti-corruption and integrity. They might relate to domestic or foreign bribery or both. Many anti-corruption conventions require parties to establish offences. The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions includes Agreed Common Elements of Criminal Legislation and Related Action.
Legislative provisions making it a criminal offence for legal persons (whether individuals or corporate entities) “intentionally to offer, promise or give any undue pecuniary or other advantage, whether directly or through intermediaries, to a foreign public official, for that official or for a third party, in order that the official act or refrain from acting in relation to the performance of official duties, in order to obtain or retain business or other improper advantage in the conduct of international business”. This is the definition of the foreign bribery offence, as set out in Article 1(1) of the OECD Convention on Combating Bribery. Where this offence can be established by building on pre-existing domestic bribery offences, this has the advantage of being able to refer to case law interpreting applicable terminology, such as: intent; the offer, promise or giving of a bribe; undue pecuniary or other advantage; or performance of official duties.
Definitions of “public official” and “foreign public official” can draw on international standards. The OECD Convention on Combating Bribery, for example, defines this term as “any person holding a legislative, administrative or judicial office of a foreign country, whether appointed or elected; any person exercising a public function for a foreign country, including for a public agency or public enterprise; and any official or agent of a public international organisation”.
The OECD Convention permits only two exceptions to the offence of bribing a foreign public official. The first (Commentary 8) applies where the advantage was permitted or required by written law or regulation (including case law) of the foreign public official’s country. The second (Commentary 9) applies for “small facilitation payments” in very specific circumstances, i.e. where they are not made to obtain or retain business or other improper advantage. Countries that choose to adopt either of these two exceptions should ensure that they do not exceed the strict limits of the exceptions, which would create a gap in their implementation of the Convention.
Establishing an effective framework to combat corruption also requires the creation of appropriate sanctions for bribery offences. Sanctions should involve effective, proportionate and dissuasive criminal penalties, which should be measured according to the particular facts of each case. For natural persons, this should include sufficiently long periods of imprisonment to permit mutual legal assistance and extradition. If criminal responsibility is not applicable to legal persons under the legal system of a country, proportionate and dissuasive non-criminal sanctions should be applicable, including monetary sanctions. This might include, for example, exclusion from entitlement to public benefits or aid; temporary or permanent disqualification from participation in public procurement or from the practice of other commercial activities; being placed under judicial supervision; and a judicial winding-up order. With all bribery offences, sanctions should include the seizure and confiscation of the bribe (and its proceeds) or the corresponding property value.
Fighting effectively against corruption requires thorough and consistent investigation, prosecution and sanctioning. Many governments have established separate investigation and prosecution units, with special training, facilities and expertise to equip them with effective anti-corruption capabilities. Such units should be capable of working with other law enforcement agencies, including through sharing information, and should be independent so as to avoid the possibility of political interference or influence.
Where a statute of limitations restricts the period within which criminal action can be brought, this should be as long as possible. The investigation of domestic and foreign bribery offences is often complex, with allegations sometimes not surfacing until after the retirement of a public official. Furthermore, the transnational nature of many bribery cases may require mutual legal assistance which can take many months (and sometimes years) to obtain. Since the length of statutes of limitation normally depends on the maximum penalty applicable to the particular offence, it is important to ensure that corruption offences attract high penalties. Given the seriousness of corruption offences, some countries such as Canada and the United Kingdom impose no statute of limitations for the offence of bribing a foreign public official.
Laws and regulations disallowing the tax deductibility of bribes are part of an effective framework for fighting corruption by making the proscription against bribery more visible. Tax authorities can play a key role in detecting and deterring corruption. Tax auditors and relevant officials need to be aware that bribes are not deductible, and consideration should be given to obliging them to report any bribes they identify to management, corporate monitoring bodies and law-enforcement authorities.
Where bank secrecy laws exist, the PFI user should serious consider lifting or creating an exception to bank secrecy in the context of the investigation of bribery offences. Similar exceptions exist in many countries as a result of party status to the International Convention for the Suppression of the Financing of Terrorism and anti-money-laundering obligations (such as those under the Financial Action Task Force).
Identifying situations where conflicts of interest might arise helps to promote integrity. Legislation and regulations should provide clear and realistic descriptions of what circumstances and relationships can lead to a conflict of interest. Such rules should target situations in which the private interests and affiliations of a public official might, or do, conflict with the proper performance of official duties. This might relate to public/private partnerships, self-regulation, exchanges of personnel, and sponsorships. Rules should be supplemented by organisational strategies and practices which are capable of identifying the variety of conflict of interest situations. Clear rules on what is expected of public officials in dealing with conflicts of interest must be established. The OECD Recommendation on Guidelines for Managing Conflict of Interest in the Public Service provides useful tools for the development and implementation of an effective conflict of interest policy, as well as a Toolkit to help public officials put it into practice.
OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions includes Agreed Common Elements of Criminal Legislation and Related Action. (Annex to the Revised Recommendations of the OECD Council, adopted 23 May 1997).
A table of applicable sanctions in the jurisdiction of the majority of States parties to the OECD Convention on Combating Bribery is available as an Annex to the Working Group on Bribery Mid-Term Study of Phase 2 Report.
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