The Un Convention Against Corruption

THE UN CONVENTION AGAINST CORRUPTION

A summary of discussion at the International Law Programme Discussion Group at Chatham House on 27th September 2005; participants included lawyers, diplomats, academics and representatives of NGOs.

This summary is issued on the understanding that if any extract is used, Chatham House should be credited, preferably with the date of the meeting.

The Convention

The first speaker complimented Chatham House on its foresight in arranging a discussion group on the UN Convention Against Corruption (UNCAC). The timing was perfect in that, recently, Ecuador had become the thirtieth state to ratify the Convention thus triggering the procedure for its entry into force. The Convention currently has 133 signatories, 32 of which have ratified; it will enter into force on 14 December 2005.

The Convention is the first truly global instrument designed to combat corruption and, as such, gives a powerful signal that there is now a global consensus that corruption must be stopped. It is the culmination and natural extension of numerous regional instruments, most notably the OECD Anti-Bribery Convention, similar conventions within the Organisation of American States (OAS) and the African Union, and other initiatives within the Council of Europe (GRECO), the EU, the 10th Principle of the UN Global Compact, and the Extractive Industries Transparency Initiative (EITI) Code of Conduct etc. There is inevitably much overlap between the Convention and these other initiatives as all are intended to create greater transparency and increase international cooperation in combating corruption.

However, the Convention contains some additional features, most notably on the tracing and return of stolen assets to the country of origin.The speed with which the Convention was negotiated reflects states’ increased political will to deal with corruption issues and the growing realisation of the damage caused to development by corruption. It disrupts democracy, facilitates organised crime and provides a toxic environment for legitimate business. Above all, it hits the poorest members of society the hardest. The World Bank has estimated that corruption costs 0.5 % of global gdp per annum.

Another speaker commented that the Convention was, without doubt, an extraordinary achievement which demonstrated states’ overall commitment to the problem. Its scope was enormous. The speaker paid tribute in particular to the contribution made by the Department for International Development to the first part of the Convention which deals with prevention. It was an instrument full of hope and aspiration but, inevitably compromises had had to be made. Some of the provisions of the Convention appear to leave much to the discretion of States Parties with words such as “should”(discretionary) rather than “shall”(mandatory) and phrases such as “shall where appropriate”, “may consider”, “endeavour to” or “to the extent that such a requirement is consistent with the fundamental principles of their domestic law” etc. Such wording suggests that the Convention could be the subject of varying levels of compliance and its effectiveness will depend, in practice, on the detailed rules for implementation and monitoring established at the first Conference of States Parties. In this context, another speaker added that the Convention provisions on jurisdiction (Article 42) and extradition (Article 44) appear rather weak when compared with similar provisions in instruments dealing with terrorist offences. States are not even required to take jurisdiction over their own nationals. On extradition, States Parties may, on ratification, choose whether or not they wish to take the Convention as the legal basis for cooperation on extradition with other parties; there is no requirement to treat the Convention as an extradition agreement in itself.

UK Ratification

One speaker said it was hoped that the UK would ratify by the end of 2005. Many different government departments and agencies had been involved in the necessary preparations and such ratification will be dependent on the successful passage of some secondary legislation, although the necessary primary legislation is already in place. The Anti-Terrorism Crime and Security Act (2001) extended UK jurisdiction to corruption offences committed abroad by UK nationals and companies whilst the Proceeds of Crime Act(2002) strengthened the law on money-laundering and set up an Asset Recovery Agency to trace and recover assets obtained as a result of unlawful activity.

Any delay in ratification would jeopardise UK participation in the forthcoming Conference of States Parties. This Conference has been established to review implementation and facilitate activities required by the Convention. It will play a vital role in establishing the ground rules for implementation and monitoring of the Convention and it is important that the UK plays a full role.

France and Hungary are the only EU states to ratify so far and Mexico the only OECD state. By contrast numerous developing countries, some of which have very poor records on corruption, have ratified. In one case ratification took place on the day of signature. One speaker said that early ratification probably did represent a genuine commitment on the part of such countries but that such a commitment was sometimes not accompanied by a full understanding of the detailed implementation required. For this reason it was essential that a good balance of developed and developing countries attended the Conference of States Parties. One speaker asked why certain developed countries, including the UK, were taking so long to ratify. In response, there was some speculation that uncertainty as to the content of recent EU anti money laundering legislation had, in some cases, delayed preparations.

Implementation

There was a general recognition amongst speakers that agreement on the Convention was only the first step; the real test would be whether or not parties were prepared to follow up the provisions of the Convention in their own domestic legal systems so as to provide for its effective implementation. In this connection, one speaker criticised the UK record on implementation of the OECD Anti-Bribery Convention. This Convention is much narrower in its scope than UNCAC but the UK had seemed to lack an overall strategy for its implementation. There had been a number of good initiatives but procedures for enforcement were fragmented and, ultimately, unsuccessful. The Convention came into force on 15 February 1999 but, so far, there had been no prosecutions in the UK. Evidence had proved difficult to obtain and the high standards of evidence required had deterred prosecutors. All FCO posts abroad are now obliged to report any information they receive concerning involvement of UK nationals in corruption abroad. Information of this kind is passed to the Serious Fraud Office (SFO) but, if the case in question does not fit within its criteria for further investigation, it is simply passed on to the police who often do not have the resources available to deal with it. One speaker referred to the Lesotho Highlands Water Project case where a Canadian engineering consultancy firm was convicted of bribery by the High Court of Lesotho. There were other companies involved, from other OECD countries, including Britain, but there had been no prosecutions in those countries. Other speakers suggested that , in practice, prosecution in the country where the offence is committed is often the best solution and the one most likely to lead to a successful conviction. Unfortunately, the Lesotho case was very much a one off and the challenge will be to persuade and assist developing countries to put in place the necessary systems and procedures to enable such prosecutions to take place.

Another speaker stressed that UK legislation and practice is in conformity with the Convention and noted that the OECD had commended the UK for its participation in the peer review process; an important tool for encouraging effective implementation. The UK had followed up many of the OECD’s points of criticism and was confident that OECD observers would be satisfied with its response. The UK remained active in its attempts to improve implementation and increase transparency and, to this end, had made anti –corruption issues a central part of its recent G8 Presidency platform. In its forthcoming response to the Africa All Party Parliamentary Group’s request for evidence, it would set out a general strategy on corruption. Another speaker looked forward to reading this response and expressed the hope that it would herald the beginning of a new unified strategy for implementation of UNCAC and related instruments. The same speaker pointed out three more practical issues on which there would need to be specific improvement:

Crown Dependencies and Overseas Territories

The UK Government will need to consult the above to see whether their governments wish UNCAC to be extended to them. However, it is notable that many of the territories concerned have not opted for the OECD Anti-bribery Convention to apply to them and have not passed relevant legislation. This is of particular concern as some are so- called haven jurisdictions. Their participation in UNCAC will be important and the UK will need to do more to encourage that participation;

Tax Deductibility

Many countries and some UK overseas territories still allow bribes to be tax deductible legal expenses. This is not acceptable and should be discontinued;

Mutual Legal Assistance

States must look at ways of simplifying the procedures applicable for exchanging information, evidence and tracing assets. All too often, the term mutual legal assistance seems to describe a series of obstacles to efficient cooperation rather than a mechanism for delivering such cooperation.

Asset Recovery

There was some discussion of the asset recovery provisions of the Convention. The provisions were described by one speaker as “bold” and “cutting edge”. It was recognised, however, that the ultimate proof of the Convention’s worth would be whether it did in fact lead to the successful return of stolen assets. Some of the provisions of the Convention on this matter were a little obscure and the role of the Conference of States Parties in establishing more detailed procedures and guidelines will be crucial in this regard. One of the controversial issues during negotiation had been whether or not some sort of conditionality should be attached to the return of assets eg that they be used for approved developmental purposes. The idea of some sort of UN trust fund had been floated. The UK had favoured the inclusion of some form of conditionality but many developing countries were strongly opposed to such conditionality and it had proved impossible to include any express provision to this effect. One speaker criticised the UK record on asset recovery in corruption cases, referring to the Abacha case. In this respect, the UK appeared to be more obstructive than Switzerland . Another speaker pointed out that new secondary legislation will permit the UK authorities to take action to freeze assets pursuant to foreign confiscation orders but confirmed that actual seizure and recovery will continue to operate on an administrative basis. At that stage it was to be hoped that there might be a possibility of reaching agreements with the countries concerned on the use of the money to be returned. One speaker praised the UK’s plan to establish accelerated response teams tasked with negotiating and arranging the return of stolen assets. This was an excellent, practical idea.

Private Sector Attitude

One speaker said that criminalisation was only part of the necessary response to corruption. Another vital response was making an awareness of and hostility to corruption part of private sector culture. In this context, transparency was a key factor. It was important that everyone knew what the costs of doing business in a particular country were; how much was being paid and received. The EITI initiative was important in this regard. There was some discussion of firms’ use of foreign agents to facilitate their business abroad. Such use is traditional and widespread In practice, any bribes etc are often paid by agents rather than directly by officials of the foreign company concerned and described as necessary expenses. There was general agreement that the wording of the Convention was certainly broad enough to cover use of an agent in this way and that the acceptance of the Convention by so many developing and developed countries had weakened any defensive argument that corrupt payments and practices were just a traditional way of doing business in the countries concerned. One speaker commented that UK business had been generally supportive of the Convention, recognising that it could reduce the burdens on business but continued support would, again, depend on effective implementation.

Monitoring

It was recognised that good monitoring procedures would be important in securing effective implementation. States are often responsive to criticism and efficient procedures will encourage prosecutions and help to ensure compliance. It was suggested that OECD monitoring procedures could provide a good model in this regard and the UK and other OECD countries should take the lead at the forthcoming Conference of States Parties in securing similar procedures. Another speaker sounded a note of warning, reminding the Group that the OECD was a club of like- minded states. UNCAC was more universal and ambitious in its aims and there could be more difficulty in reaching agreement on appropriate monitoring mechanisms. Some NGOs had already begun to develop some ideas in this regard.

It was remarked in conclusion that it was important that the Government take early steps to prepare proposals for monitoring to be discussed at the first meeting of States Parties ; lobbying of other countries would also be needed. This is an area in which it is highly desirable that the Government work closely with organisations such as Transparency International.