Progress Report OECD Anti-Bribery Convention 2008 Enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions Progress Report 2008 Enforcement of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions Fritz Heimann and Gillian Dell 24 June 2008 P R O G R E S S R E P O R T 2 0 0 8 ABOUT TRANSPARENCY INTERNATIONAL Transparency International (TI) is the civil society organisation leading the global fight against corruption. Through more than 90 chapters worldwide and an international secretariat in Berlin, Germany, TI raises awareness of the damaging effects of corruption, and works with partners in government, business and civil society to develop and implement effective measures to tackle it. To read more about Transparency International go to www.transparency.org All material contained in this report was believed to be accurate as of 2007. Every effort has been made to verify the information contained herein, including allegations. Nevertheless, Transparency International does not accept responsibility for the consequences of the use of this information for other purposes or in other contexts. © 2008 Transparency International ISSN 1999-8570 Transparency International Secretariat Alt Moabit 96 10559 Berlin – Germany www.transparency.org 4 TRANSPARENCY INTERNATIONAL P R O G R E S S R E P O R T 2 0 0 8 Table of contents Introduction ............................................................................................................................................... 007 Table of Foreign Bribery Cases and Investigations ............................................................. 08 I Conclusions and Recommendations: OECD Enforcement must be Re-energised..................................................................... 09 Causes for the Current Stalemate ........................................................................................... 09 Recommended Actions ................................................................................................................ 10 II Overview of Enforcement and Enforcement Systems ............................................ 011 Status of Cases and Investigations ........................................................................................ 011 Status of Legislation .................................................................................................................... 11 Status of Enforcement Systems .............................................................................................. 12 III Access to Information Issues ............................................................................................... 013 IV Reports on Enforcement Systems ...................................................................................... 015 V Cases and Investigations ........................................................................................................ 040 Acknowledgements ....................................................................................................................... 048 VI Appendix A and B A | List of Experts from TI National Chapters .................................................................... 048 B | Questionnaire for TI National Chapters in OECD Signatory States .................... 051 TRANSPARENCY INTERNATIONAL 5 P R O G R E S S R E P O R T 2 0 0 8 Introduction In 1997 the Organisation for Economic Cooperation and Development (OECD) adopted a treaty to address the supply side of cross-border bribery, the OECD Convention on Com- bating Bribery of Foreign Public Officials in International Business Transactions (OECD Convention). This is the fourth progress report on enforcement of the OECD Convention prepared by Transparency International (TI), the global coalition against corruption. TI’s progress reports are intended to provide an annual assessment of enforcement by OECD Convention signatory states. It examines the enforcement performance in 34 of the 37 parties to the Convention (including all G7 countries). The first report issued in March 2005, covered 24 countries; the second in June 2006, covered 31 countries; and the third in July 2007 covered 34 countries. The report is based on information provided by TI national experts in each country who are highly qualified professionals selected by TI national chapters. (Appendix A lists TI experts and their qualifications). They responded to a questionnaire (Appendix B), taking into ac- count the views of government officials and other knowledgeable persons in their coun- tries. They were aided in their work by the valuable Phase I and Phase II reports prepared by the OECD Working Group on Bribery in the course of its reviews of government compliance with the Convention. The following table lists foreign bribery cases and investigations for the 34 countries cov- ered by the TI report. Section I summarises the conclusions and recommendations of the report. Section II provides an overview of the data on enforcement. Section III covers ac- cess to information issues. Section IV summarises the country reports on enforcement systems highlighting deficiencies and notable recent developments. Section V provides examples of important cases or investigations involving multinational companies, namely Alstom, AWB, BAE Systems, Halliburton, IMPSA & EME, and Siemens. TRANSPARENCY INTERNATIONAL 7 P R O G R E S S R E P O R T 2 0 0 8 Foreign Bribery Cases And Investigations Enforcement Share of World Exports Country Cases Investigations % for 2007 (UNCTAD, 2007) 2008 2007 2008 2007 1. Argentina 1 0 0 0 0,36 2. Australia 1 (1) u s (s) 4 (1) 1,06 3. Austria 0 0 2 0 1,25 4. Belgium 4 4 s s 2,90 5. Brazil u 0 s(s) 1 1,06 6. Bulgaria 3 3 0 0 0,14 7. Canada 1 1 s s 3,14 8. Chile 0 0 0 0 0,45 9. Czech Rep. 0 0 1 0 0,73 10. Denmark 17(17) 1 0 21 (21) 0,97 11. Estonia 0 0 0 0 0,09 12. Finland 1 0 3 1 0,64 13. France 19 9 16 u 4,11 14. Germany >83 43+ +4 >88 (63) 8,80 15. Greece 0 u 1 or 0 u 0,38 16. Hungary 23 18 1 27 0,58 17. Ireland 0 u 3 (3) 3 (3 ) 1,23 18. Italy 2 2 3 1 3,44 19. Japan 1 1 u u 5,15 20. Korea (South) 5 5 1 2 2,20 21. Mexico 0 0 0 0 1,80 22. Netherlands 7 (7) 0 3 8 (7) 3,69 23. New Zealand 0 0 s (s) 2 (2) 0,20 24. Norway 4 2 u u 1,04 25. Poland 0 0 0 0 0,88 26. Portugal u 0 u 2 0,41 27. Slovak Rep. 0 0 0 0 0,32 28. Slovenia 0 0 0 0 0,17 29. Spain 2 2 0 1 2,11 30. Sweden 1 1 15 (12) 14 (12) 1,34 ( ) = Oil for Food 31. Switzerland 16 (14) 1 36 23 (17) 1,31 cases; some not 32. Turkey 0 0 1 0 0,72 for bribery 33. United Kingdom 0 0 20 15 4,56 u = unknown s = some 34. United States 103 67 69 60 9,84 Note: Cases include prosecutions, judicial investigations and civil actions and are recorded on cumulative basis through end 2007 even if discontinued. Investiga- tions (excluding judicial investigations) are on current basis for 2007. Numbers do not include cases and investigations carried out by OECD countries regarding foreign bribes paid to their own officials. Numbers in brackets refer to cases arising out of the UN’s Oil-for-Food Programme in Iraq (1995-2003), some of them not for bribery. 8 TRANSPARENCY INTERNATIONAL P R O G R E S S R E P O R T 2 0 0 8 I Conclusions and Recommendations: OECD Enforcement must be Re-energised The adoption of the OECD Convention in 1997 was a landmark event in the fight against international corruption: a collective commitment by the governments of the leading industrialised states to ban foreign bribery. Because most major multinational companies are based in OECD countries, the Convention was hailed as the key to overcoming the damaging effects of foreign bribery on democratic institutions, development programmes and business competition. TI’s 2008 Report shows that there is significant enforcement1 in sixteen countries, two more than in our 2007 Report, with little or no enforcement in the others. While our 2007 Report showed progress over 2006, the lack of enforcement in over half the countries is very disturbing. The political foundation of the Convention is a col- lective commitment by all the parties to stop foreign bribery. Thus, unless the laggards start enforcement without further delay, there is danger of backsliding by those that are now enforcing. The present stalemate is unsustain- able, support for the Convention must be re-energised, or it will falter. Focusing on the G-7 countries, enforcement has increased substantially in France, Germany, and the US. That is a very positive development. However, there is still little or no enforcement in Japan, the UK and Canada. While there was some enforcement in Italy in prior years, the current situation is uncertain. Causes for the Current Stalemate • The UK’s termination of the investigation of Al Yamamah-related bribery allegations against BAE Systems (BAE) in December 2006 was a damaging setback for the Convention. The assertion that national security concerns overrode the obligation to enforce the Convention, created a dangerous precedent that other governments could readily follow. The termination of the BAE investigation compounded prior concerns about lack of UK commitment, including the failure to correct deficiencies in UK corruption legislation called for in OECD reviews, and the failure to bring any prosecutions, notwithstanding numerous UK inves- tigations of foreign bribery. • The international business community has received mixed messages, most graphically illustrated by strong enforcement action against Siemens in Germany,