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Public Sector Governance On this page
* * * Transparency International Sees UN Anti-Corruption Conference as ‘Major Setback’TI says Bali Conference failed to develop any monitoring system for implementing the UN Convention against Corruption
Ahead of the meeting of convention signatories, the so-called Conference of States Parties (CoSP), Transparency International released a position paper, which can be downloaded here, with specific technical recommendations for a long-range, phased review of country progress. Posted 2/4/08* * * Success of OECD Anti-Bribery Convention “Is Not Yet Assured,” Says Transparency International TI’s Annual Report Asserts the Convention is at Crossroads Eight years after the OECD Convention entered into force only 14 of the 34 countries to have ratified the Convention are pursuing what TI calls “significant enforcement,” while there is little or no enforcement in 20 countries. This includes 12 countries where there are no prosecutions.
A critical setback to the Convention, according to TI’s new report relates to the decision by the UK Government to terminate investigations into alleged bribery by BAE Systems. The TI report states: “The termination by the United Kingdom of the investigation of bribery allegations against BAE Systems on the Al Yamamah arms project in Saudi Arabia presents a serious threat to the convention. The UK government's assertion that national security concerns overrode the commitment to prosecute foreign bribery opens a dangerous loophole that other parties could assert when investigations may offend powerful officials in important countries.” This year’s TI report on the OECD Convention is based on the research of TI experts across the world. The report is detailed and provides country-by-country comments on the state of corruption investigations and prosecutions and the factors, including political considerations, that are influencing governments to enforce/ or not enforce the Convention. TI Recommendations
Posted 7/18/07 * * * Building Support for the UN Convention Against Corruption The Socio-Economic Rights & Accountability Project (SERAP) Launches Campaign The application of the United Nations Convention Against Corruption in Nigeria can “Strengthen the national anti-corruption legal framework in order to increase transparency and accountability in the management of Nigeria’s wealth and resources, facilitate mutual legal assistance, and promote repatriation of stolen funds sent abroad by corrupt officials.”
-SERAP’s Executive Director, Adetokunbo Mumuni
SERAP, supported by the National Endowment for Democracy (NED), US, has launched a campaign in Nigeria in early July to build support and understanding for the new UN Convention. At the same time, SERAP is campaigning to secure National Assembly support for the prompt ratification of the African Union Convention on Preventing and Combating Corruption (AU Anti-Corruption Convention). Nigeria ratified the UN Convention against Corruption in December 2004, but domestic implementation and enforcement of the Convention is hindered by the clause in section 12 of the Nigerian Constitution, which stipulates that the National Assembly must enact all international treaties into law before they can have the force of law. Following the deposit of the 15th instrument of ratification by Algeria on 6th July 2006, the AU Anti-Corruption Convention entered into force on 5th August 2006. Article 23 of the AU Anti-Corruption Convention provides that the Convention shall enter into force 30 days after the deposit of the 15th instrument of ratification. Although Nigeria signed the Convention on 16th of December 2003, it has failed and/or refused to ratify the pan African anti-corruption treaty. SERAP said the rationale behind its campaign is that: “The criminal code provisions relating to corruption are mostly outdated and very limited. While Nigeria has enacted a new Anti-Corruption Act, this Act does not sufficiently articulate provisions relating to recovery of Nigerian stolen money, and there are no adequate guarantees in the Act to ensure the full independence of the Commission established under the Act. Making the UN Convention against Corruption part of national laws is especially important at a time when the independence and effectiveness of national anti-corruption institutions are being questioned.” Adetokunbo Mumuni noted that, “Much of the fight against corruption in Nigeria has almost always focused on criminal prosecution and punishment, not recovery of stolen funds stashed abroad. Yet, over $400 billion of Nigeria’s wealth has been stolen and sent abroad by corrupt officials since independence in 1960, contributing to ruining the economy and impoverishing the majority of the citizens.” SERAP explained: “The UN Convention against Corruption is the most comprehensive global anti-corruption treaty and includes provisions on recovery of stolen funds stashed abroad. This is particularly important given that efforts to recapture stolen money are often stalled because of many legal and procedural obstacles faced in the states which provide a haven for stolen money.” The organization also argued that asset-recovery is fundamental in the fight against corruption, “especially in Nigeria where high-level corruption has plundered the national wealth, and where resources are badly needed for reconstruction and the rehabilitation of the society.” It said, “The domestication of the UN Convention against Corruption can help support the efforts of Nigeria to redress the worst effects of corruption, while at the same time, sending a message to corrupt officials that there will be no place to hide their illicit assets,” the organization stated. African Union Convention SERAP said it is calling on the Nigerian National Assembly to:
The organization said this Convention brings striking novelties to international efforts against corruption by specifically linking corruption and human rights and represents a significant step in the efforts to develop international standards to counteract the systemic corruption across Africa. It imposes obligations on African countries to take a leadership role in the international fight against corruption in the public and private spheres. The Convention also establishes an Advisory Board on Corruption within the AU to promote and encourage the adoption and application of anti-corruption measures in the continent and to advise governments on how to deal with corruption in their domestic jurisdictions. Ratifying the Convention would ensure that the Board has jurisdiction to deal with the problem of corruption in Nigeria and give Nigeria an important role as a state party, since it would then be able to participate in the Convention oversight body and to nominate candidates to the Board. The ratification of the Convention by Nigeria would also provide the framework to comprehensively reform the country’s substantive municipal laws in order to remove impunity for perpetrators of acts of corruption. By imposing obligations on governments to tackle bank secrecy, the Convention would reduce the attractiveness of jurisdictions that often serve as a destination point for stolen funds. In addition, it could serve as a tool to bring criminal complaints against those suspected to have been involved in acts of corruption, no matter where the offence is committed. It could also make offshore jurisdictions more accountable in terms of co-operating with requests for mutual legal assistance and to limit bank secrecy in criminal cases, said SERAP. For further information contact SERAP at info@serap-nigeria.org. Posted 7/17/07 * * * British Government Excuses Come Up Empty Allegations of bribery should be investigated; the law is the law "Shaming Britain" is the headline on an editorial in The Financial Times on June 28, 2007 that asserts that, "The British government was mistaken if it thought last December's shabby decision to drop its investigation into alleged corruption around the £43bn Al-Yamamah fighter export deal with Saudi Arabia would end the matter." It noted that the US Department of Justice has decided to launch its own probe into whether BAE Systems has violated the Foreign Corrupt Practices Act. It said this decision shows the UK government's arguments for suspending its investigation - that it would wreck a vital national security relationship with the Saudis and cost thousands of jobs - for what they are: specious realpolitik and economic excuses. It added, “Allegations of bribery should be investigated; the law is the law.” And, it said, “The British government has been pusillanimous and the DoJ has exposed it.” To read past news coverage of the BAE scandal, see News.
UPDATE! UK Government Letter Cites Security As Reason For Ending Major Corruption Probe. On January 25, 2007, the office of the UK Attorney General wrote to the UK's Campaign Against Arms Trade (who forwarded the letter to Ethicsworld - attached here) denying that commercial considerations influenced the Blair Government’s much-criticized decision to quash a corruption investigation into contracts between British Aerospace Systems (BAE Systems) and Saudi Arabia. The letter said the decision was driven by serious anti-terrorism and national security concerns. Denying that the action violates the OECD Anti-Bribery Convention, the letter includes a detailed statement on new UK efforts to enforce the Convention. Governments frequently cite 'national security' in refusing to disclose defense contracts. The letter implies that the UK bowed to Saudi government pressures and saw the investigation as a threat to the two countries' intelligence relationship. Very rarely does the Organization of Economic Cooperation and Development (OECD) - an organization of 30 countries that promotes democratic government and the market economy - publicly rebuke one its member countries, let alone one of its most powerful. However, on January 18, 2007 the new OECD Secretary-General Angel Gurría voiced serious concerns about the recent action by UK Prime Minister Tony Blair to suppress a corruption investigation into alleged bribes paid to senior Saudi Arabian Government officials by the UK’s British Aerospace Systems plc (BAeS) in regard to major defense equipment contracts. The early termination of the investigation for reasons that do not relate to the legal merits of the case sends the message that companies trading with countries that a government claims to be of strategic importance are above the law and can bribe with impunity. This decision risks reversing the progress made in recent years by the 36 signatories to the OECD Anti-bribery Convention to raise standards and level the playing field in international business transactions.” The NGOs added, “It also threatens the implementation of the more recent United Nations Convention against Corruption (UNCAC), which requires all parties, including the new trading powers of China, India and Russia, to investigate and prosecute companies that pay bribes overseas. Finally, it is likely to cause irreparable damage to the UK’s reputation as an anti-corruption champion on the world stage. At the OECD, for example, it is hard to see how the UK can credibly continue to play its role in the process of peer review, through which parties hold each other to account for their implementation of the Convention. Similarly, future efforts by the UK to impose governance standards on developing countries in receipt of aid and debt relief are likely to be viewed as nothing less than double standards. Given the devastating impacts of corruption on democracy, sustainable development, human rights and poverty we call upon the UK Government to re-open the investigation of the Al Yamamah case.” Background In 1985, with the encouragement and support of the Government of Margaret Thatcher, British Aerospace (now BAE Systems/BAeS) signed a contract to supply the Saudi Air force with 200 Tornado fighter planes and related equipment and services: the "Al Yamamah" contract. There were several related contracts, involving Rolls Royce aero engines and others. The first two phases of the contract are estimated to have been worth some £40 billion ($80 billion/€60 billion). BAeS still employs some 3,000 expatriate staff on the contract in Saudi Arabia. The sales were facilitated by the Defence Export Sales Organisation, part of the Ministry of Defence, and involved some government-to-government arrangements. Currently, the third phase of Al Yamamah has been agreed in principle (Mr. Blair visited Saudi Arabia last July). Reports varied as to whether there is much work to be done before a firm agreement is concluded, or about delivery of aircraft under the contract being imminent, or over whether confirmation of the contract was being held up by the criminal investigation. A further £20 billion further £20 billion ($40 billion) of sales of Eurofighter aircraft is said to be involved. * * * Iraq & Corruption “Losing Iraq, One Truckload at a Time” The corruption allegations in a sensitive UK-Saudi Arabian defense contract coincide with rising concerns in the United States about corruption in Iraq. In a remarkable article in The New York Times on January 14, 2007, Captain Luis Carlos Montalvan, an active duty officer at Fort Benning in Georgia in the U.S., who has completed two full tours in Iraq, described in great detail key aspects of corruption in Iraq. He noted that Iraqi unit commanders receive cash to pay unit Iraqi soldiers, but many of the names on the list may just be fiction and that the commanders may well be receiving far more cash than they need to pay active salaries. The vast amounts that these commanders pocket, up to 30% above legitimate claims, may go into the commanders’ pockets, or be passed along to insurgent groups. More vast sums of cash regularly disappear as smuggling of oil by trucks across Iraq’s borders is now commonplace with the direct involvement of hundreds of customs officials. Posted 1/19/07 * * *
In order to complement the Organization for Economic Co-Operation and Development’s (OECD) Anti-Bribery Convention, OECD countries have agreed to step up efforts to avoid giving official support to export contracts that are tainted by bribery. Government-backed export credit agencies provide about $US 60 billion in loans and loan guarantees annually to finance exports for projects around the world. According to the OECD's press release, the new agreement calls for greater due diligence when an exporter appears on the debarment list of the World Bank or other major multilateral financial institutions or if an exporter or their agent is under charge in a national court or has been convicted for violation of laws against bribery of foreign public officials of any country within the last five years. When appropriate, this scrutiny may lead to the suspension of applications and/or denial of support/loss of cover. Members of the OECD Working Party on Export Credits and Export Guarantees reached several agreements, including the following: To take appropriate measures to deter bribery in international business transactions benefiting from official export credit support, in accordance with the legal system of each member country and the character of the export credit and not prejudicial to the rights of any parties not responsible for the illegal payments, including: a) Informing exporters and, where appropriate, applicants, requesting support about the legal consequences of bribery in international business transactions under its national legal system including its national laws prohibiting such bribery and encouraging them to develop, apply and document appropriate management control systems that combat bribery. b) Requiring exporters and, where appropriate, applicants, to provide an undertaking/ declaration that neither they, nor anyone acting on their behalf, such as agents, have been engaged or will engage in bribery in the transaction. c) Verifying and noting whether exporters and, where appropriate, applicants, are listed on the publicly available debarment lists of the following international financial institutions: World Bank Group, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development and the Inter-American Development Bank. d) Requiring exporters and, where appropriate, applicants, to disclose whether they or anyone acting on their behalf in connection with the transaction are currently under charge in a national court or, within a five-year period preceding the application, have been convicted in a national court or been subject to equivalent national administrative measures for violation of laws against bribery of foreign public officials of any country. e) Requiring that exporters and, where appropriate, applicants, disclose, upon demand: (i) the identity of persons acting on their behalf in connection with the transaction, and (ii) the amount and purpose of commissions and fees paid, or agreed to be paid, to such persons. f) Undertaking enhanced due diligence if: (i) the exporters and, where appropriate, applicants, appear on the publicly available debarment lists of one of the international financial institutions referred to in 2 c); or (ii) the Member becomes aware that exporters and, where appropriate, applicants or anyone acting on their behalf in connection with the transaction, are currently under charge in a national court, or, within a five-year period preceding the application, has been convicted in a national court or been subject to equivalent national administrative measures for violation of laws against bribery of foreign public officials of any country; or (iii) the Member has reason to believe that bribery may be involved in the transaction. g) In case of a conviction in a national court or equivalent national administrative measures for violation of laws against bribery of foreign public officials of any country within a five-year period, verifying whether appropriate internal corrective and preventive measures (1) have been taken, maintained and documented. h) Developing and implementing procedures to disclose to their law enforcement authorities instances of credible evidence (2) of bribery in the case that such procedures do not already exist. i) If there is credible evidence at any time that bribery was involved in the award or execution of the export contract, informing their law enforcement authorities promptly. j) If, before credit, cover or other support has been approved, there is credible evidence that bribery was involved in the award or execution of the export contract, suspending approval of the application during the enhanced due diligence process. If the enhanced due diligence concludes that bribery was involved in the transaction, the Member shall refuse to approve credit, cover or other support. k) If, after credit, cover or other support has been approved bribery has been proven, taking appropriate action, such as denial of payment, indemnification, or refund of sums provided. 1. Such measures could include: replacing individuals that have been involved in bribery, adopting an appropriate anti-bribery management control systems, submitting to an audit and making the results of such periodic audits available. 2. For the purpose of this instrument, credible evidence is evidence of a quality which, after critical analysis, a court would find to be reasonable and sufficient grounds upon which to base a decision on the issue if no contrary evidence were submitted. To read the entire agreement please see the OECD's 2006 Action Statement on Bribery and Officially Supported Export Credits. * * *
Two U.S. scholars, pursuing separate and independent research, have come to the same conclusions about practices in international investment that raise questions about the efficacy of the OECD Anti-Corruption Convention and the U.S. Foreign Corrupt Practices Act (FCPA). They have documented cases in Indonesia’s electric power sector where multinational corporations have been instrumental in establishing special partnerships with shareholdings granted to local citizens with very close ties to top government officials. These partnerships, established with no risks to the local investors and often with loans arranged by the international investors, ensure that the citizens involved obtain large incomes. The partnerships have been depicted as being essential to enable the foreign investor to gain a substantial business foothold in Indonesia. According to Theodore H. Moran (Marcus Wallenberg Professor of International Business and Finance School of Foreign Service, Georgetown University, Non-Resident Fellow, Center for Global Development) and Louis T. Wells (Herbert F. Johnson Professor of International Management, Harvard Business School), the existence of the partnerships has been well known to the World Bank and other international agencies, the American government and many of its agencies and the legal and auditing advisers to the U.S. multinational companies, such as Mission Energy and General Electric that have been operating in Indonesia. These companies, said the scholars at the seminar, have won legal opinions that their actions in establishing the partnerships were not in violation of the OECD Convention or the FCPA. “The view that these partnerships are legal is a startling new discovery and it suggests that the G8’s actions to counter international corruption are really a sham,” said Mr. Moran. The Following is From an Abstract of Theodore Mann’s New Paper: How effective are G-8 and OECD efforts to combat bribery and corrupt payments when multinational companies bid on concessions in the developing world? Have the rich countries – and the United States, in particular – done what is necessary to restrain multinational investors from paying off daughters of Presidents and cronies of Ministers to secure favors for their activities? Recent evidence shows that the answer is no. Multinational corporations from the US, Europe, and Japan have devised sophisticated payment mechanisms, as documented and described here, to evade home country anti-corruption laws, including the US Foreign Corrupt Practices Act, with impunity. Indeed, some US companies have laid these payment arrangements out before the US Department of Justice, the Securities and Exchange Commission, and other US agencies, without arousing any objection whatsoever. Without reforms of the kind spelled out here, the OECD and G-8 campaign to prevent corrupt payments will turn out to be a sham. New Evidence The basic structure has been for the multinational to approach a prominent family member or close friend of the host country leadership about forming a partnership to own the target investment project (or respond favorably when approached by a family member or close friend about forming a partnership), loan that family member or close friend the funds needed to take an equity stake in the project, and pay a dividend to the family member or close friend more than what was needed to service the original loan. This arrangement functions as a deferred gift – the loan to fund the equity stake of the family member or close friend was paid off via the dividend over time. The excess return above what was needed to service the loan was a current payoff. Unlike a genuine equity investor, the family-member-or-close-friend partner had no capital of his/her own at risk, nor any responsibility to repay the loan out of his/her own assets. The equity stake came to the family member or close friend for free – the only “service” that was required was to ensure the foreign company was chosen to receive the infrastructure concession (in the Indonesian case discussed later, all but one of twenty-seven internationally-funded power projects were awarded without competitive bids). In some cases, the family-member-or-close-friend partner began to receive “dividends” as soon as the concession was awarded, before the project was even in operation. Then, since the return to cover the loan payments and the current payoff depended upon the project remaining profitable, the family member or close friend had an on-going interest in ensuring that the project enjoy beneficial treatment. Legal Cover What Needs To Be Done? In contrast to the 1999 Convention, the OECD’s informal “Guidelines for Multinational Enterprises” have what the OECD admits is much broader scope. In defining bribery, the Guidelines state “Enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage.” “In particular, enterprises should ….not use sub-contracts, purchase orders or consulting agreements as means of channeling payments to public officials, to employees of business partners or to their relatives or business associates.” To this last sentence should be added, “partnership arrangements”. Second, parallel with strengthening the OECD Convention, there is a need to introduce anti-corruption provisions explicitly into multilateral investor-state dispute settlement mechanisms. Oddly enough, the 2,300-plus bilateral investment treaties (BITs) make no mention of bribery or corruption, and recent tribunals that have heard states defend actions taken against foreign investors as justified because the latter engaged in corrupt practices have rejected this line of argument. To put teeth into anti-corruption efforts, a new balance must be struck. Not only must international investors be protected against misbehavior on the part of host states, but host states must be better protected against misbehavior on the part of international investors. * * * The UN Convention Against Corruption Has Entered in to Force The United Nations noted that the Convention entered into force on 14 December 2005, in accordance with article 68 (1) which reads as follows: “This Convention shall enter into force on the ninetieth day after the date of deposit of the thirtieth instrument of ratification, acceptance, approval or accession.” To be effective many countries need to pass enabling legislation that may well relate to many aspects of the Convention from freedom of information to corruption prosecution. The Convention is widely seen as offering the possibility of enhancing cooperation between authorities in efforts to enforce anti-corruption laws. * * * By Michelle Faul, Associated Press, September 15, 2005
* * * UN Develops a Draft Legislative Guide to Promote the Implementation of the United Nations Convention Against Corruption (UNCAC)
* * * A great deal of activity is being seen around the OAS Convention and with regard to anti-corruption programs involving the ORGANIZATION OF AMERICAN STATES. We are grateful to the
General Secretariat,
Department of International Legal Affairs,
Office of Legal Cooperation for providing us with the following key links to information on this work: Inter-American Convention against Corruption Office of Legal Cooperation of the OAS General Secretariat http://www.oas.org/juridico/english/ Anti-corruption Follow-up Mechanism for the Implementation of the Inter-American Convention against Corruption (MESICIC) Report of Buenos Aires Conference of States Parties of the MESICIC Rules of Procedure of the Conference of States Parties of the MESICIC Conclusions and Recommendations on Concrete Measures to Strengthen MESICIC Committee of Experts of MESICIC * * * |
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