Overseas, A Slow Pace To Follow FCPA Path

The United States blazed the trail against bribery of overseas officials when it enacted the Foreign Corrupt Practices Act 30 years ago. Other nations, however, are taking some very different routes to achieve the same goal.

The FCPA is the world’s oldest statute aimed at combating bribery of public officials in another nation. Since the late 1990s, dozens of other nations have climbed aboard by ratifying the Organization of Economic Cooperation and Development’s Anti-Bribery Convention. But while the OECD convention took “significant inspiration” from the FCPA, says Patrick Moulette, head of the OECD’s anti-corruption division, the laws being adopted elsewhere in the world differ greatly from the U.S. version.

Wolff

“The statutes are quite different [from] what we’ve got here,” says Jacqueline Wolff, of counsel at the law firm Covington & Burling. “The major difference is that in this country, we’re very comfortable historically prosecuting corporations.”

But in regions such as Europe, Wolff says, the idea of prosecuting corporations “is very new.” And while voluntary disclosures under the FCPA have exploded in the United States, that isn’t the case elsewhere. Voluntary disclosure here is driven by the Justice Department policy known as the Thompson Memo, which says a company that confesses wrongdoing might be spared prosecutors’ full wrath—but that concept is an exception globally. In fact, Wolff says, she unaware of any other country that has a voluntary disclosure program for foreign bribery.

Currently, 36 nations are implementing legislation and rules against bribery under the OECD Convention, and all 36 have completed Phase 1 of the convention, which involved review of each country’s laws to combat bribery to determine whether they met the standards set in the convention. Many countries, Moulette says, needed to change their statutes to translate the articles of the convention into their domestic laws.

Moulette

The second phase of monitoring began in 2001. Like Phase 1, Moulette says Phase 2 involves peer review, overseen by the OECD Working Group on Bribery in International Business Transactions. But the Phase 2 peer reviews also include on-site reviews by anti-corruption specialists from two examining countries. Such experts might include a judge, a prosecutor, or experts in law enforcement, tax, or accounting, Moulette explains.

As of this month, Phase 2 reports had been completed for 29 countries, Moulette says. The remaining seven are expected to be complete by March 2008. In addition, two years after the completion of its Phase 2 report, each country must explain the steps it has taken to implement the Phase 2 recommendations—which are published in yet another report posted on the OECD’s Web site. (For a link to the OECD Web site and other related resources, see the box, above right.)

Once Phase 2 is complete next year, Moulette says, “it’s likely there will be a Phase 3,” but the form and scope of any future monitoring hasn’t yet been decided.

There is general agreement that peer reviews should continue at the end of Phase 2 exams, “but the procedures and objectives of the future exams still need to be discussed and agreed on by the Working Group members,” he tells Compliance Week. “The Working Group will look at that issue in the next few months, so there’s no gap between round two and round three.”

Paper vs. Reality

Alexandra Wrage, president of TRACE International, an anti-bribery activist group, concedes that on paper, laws outside the United States appear more stringent than American statutes. In reality, she says, “they’re not being applied that way.”

In her role as the head of the nonprofit, which provides anti-bribery compliance solutions to multinational companies and their commercial intermediaries, Wrage travels the world conducting anti-bribery compliance training. Based on her own experience, Wrage says she’d characterize progress on anti-bribery and anti-corruption outside of the Unites States as “mulish reluctance.”

“They’re not wildly embracing the concept of prosecuting their own companies,” she says. As one example, Wrage cites the United Kingdom, which she notes has “yet to prosecute a single anti-bribery case under the conventions.”

Last December, the United Kingdom’s Serious Fraud Office made headlines for its decision to close its investigation into the affairs of aerospace and defense company BAE Systems as related to a defense contract with Saudi Arabia. While the SFO cited the “wider public interest” in announcing its decision, published reports suggest the inquiry into the alleged bribery of Saudi officials to secure a major arms deal was reportedly dropped because it jeopardized another valuable defense contract.

“This was Britain’s big case, and when it got uncomfortable, they closed the file,” says Wrage, who says it is “breathtaking that a sovereign state would allow themselves to be so completely bullied.”

Meanwhile, the OECD Working Group on Bribery has said it has “serious concerns” as to whether the U.K. decision was consistent with the convention and plans to discuss the issue further and consider appropriate action later this spring.

Wrage says the push for tough anti-bribery laws and enforcement “is perceived, at least by Europeans, as an American initiative. It’s viewed as another example of the US policing the world … While U.S. companies are being fined and are terrified of this law, foreign companies just aren’t. If you talk someone at a multinational company, it’s the U.S. law they’re afraid of.”

Wrage says progress on anti-corruption initiatives tracks closely with democratic tradition. “Democracies tend to be doing a better job, less democratic countries are not,” she says. “In countries where bribe-takers go all the way to the top, there’s no infrastructure to support a serious robust anti-bribery initiative.”

Alan Larson, chairman of the U.S. Chapter of Transparency International, a nongovernmental global coalition against corruption, agrees that progress has been slow. In a June 2006 progress report on the enforcement of the OECD Convention, Transparency International noted “little or no enforcement in five countries that play a major role in international trade.” The report noted that there were no prosecutions in Japan, the Netherlands, and the United Kingdom, and only one prosecution each in Italy and Canada.

While he says “the pace of enforcement activity has been accelerating,” Larson says only 12 of the signatories to the OECD Convention have “taken significant action in enforcement.” Among them: Belgium, France, Germany, Sweden, Korea, Spain, and the United States. While that’s an increase over what the number would’ve been five years ago, Larson says, “We’re pushing for more enforcement.”

“It is really important to have some prosecutions in order to drive home within business that there is statute, that will be enforced, that has bearing on their behavior so they introduce compliance programs,” he says.

Meanwhile, parties to the United Nations Convention Against Corruption, which is considered to be the first global convention against corruption, gathered for their first international meeting last December in Jordan. The UNCAC, which entered into force in December 2005, has been signed by 140 countries and ratified by 80.