*EPF406 06/29/00
Text: Executive Summary of State Department Bribery Report
(Assesses implementation of OECD Convention) (2130)
The Clinton administration says Brazil, France, Italy and the Netherlands -- major exporting countries that are important for the global fight against corruption -- have not yet taken the necessary steps to implement an international convention outlawing the bribery of foreign public officials.
"The United States will continue to press these countries to complete their legislative and ratification processes without further delay," the State Department said in a report released June 29.
The report, "Battling International Bribery 2000," analyzes the implementation of the Organization for Economic Cooperation and Development's (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The document is the second annual report to Congress detailing the progress in the global battle against corruption.
Thirteen of the 34 countries that signed an international convention outlawing bribery of foreign public officials two and a half years ago have yet to ratify it, the State Department said.
The 29 member countries of the OECD plus five countries in Latin America and Eastern Europe signed the convention in December 1997. The convention took effect in February 1999 in the United States and 11 other countries that had ratified it.
Among the 21 countries that have ratified the convention, several of them, including Japan and the United Kingdom, do not appear to have legislation capable of fighting bribery, the report said in its executive summary.
The U.S. government will continue to urge the completion of the ratification process and the strengthening of implementing legislation, the report said.
The executive summary said during the six years from May 1994 to June 2000, the U.S. government received allegations that bribes were offered in 353 contracts worth about $165,000 million. U.S. firms lost 92 contracts worth about $26,000 million during that time, the executive summary said.
Following is text of the executive summary of the report:
Note: in text, "billion" equals 1,000 million.
(begin text)
Executive Summary
Bribery of foreign public officials by businesses is a serious problem in the international marketplace. This corrupt practice penalizes firms that play by the rules and compete on the merits of their products and services. But the damage is not limited to billions of dollars of lost exports. Bribery of public officials in commercial dealings undermines good governance, retards economic development and is especially damaging to developing countries and those in transition to market economies.
The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions represents a concerted effort by the world's major trading nations to combat this pernicious practice. Battling International Bribery 2000 is the Department of State's second of six annual reports on enforcement and monitoring of the OECD Convention. The reports are required by Paragraph (c)(1) of the Senate Resolution of Advice and Consent to ratification of the Convention dated July 31, 1998. The report is the result of close collaboration among a number of federal agencies, including the Departments of State, Commerce, Justice and Treasury, the Office of the United States Trade Representative, and the staff of the United States Securities and Exchange Commission. The analysis reflects the same key points and findings as those contained in the Department of Commerce's second annual report to the Congress required under the International Anti-Bribery and Fair Competition Act (IAFCA) of 1998.
The OECD Convention marks a major milestone in U.S. efforts over more than two decades to have other major trading nations join us in criminalizing the bribery of foreign public officials in international business transactions. The Convention, which has been signed by all 29 OECD members(1) plus Argentina, Brazil, Bulgaria, Chile, and the Slovak Republic, entered into force for the United States and 11 other signatories on February 15, 1999. As of June 10, 2000, an additional 9 countries had deposited their instruments of ratification of the Convention with the OECD and several more were expected to do so in the near future.
This second annual report continues to focus on the progress that is being made by each signatory country in ratifying and implementing the OECD Convention. National legislation is critical for governments to fulfill their commitments under the Convention to criminalize the bribery of foreign public officials and to implement the OECD Council recommendation to end the tax deductibility of bribes. The assessment of implementing legislation in Chapter 2 of this report represents the views of the U.S. government agencies that prepared it. The assessment is based on information from a variety of sources, including the implementing legislation of the countries, reporting of U.S. embassies, publications, private sector comments, and other public sources. Our views are not necessarily those of other governments. The report also addresses other related issues raised in the Senate Resolution. These include the adequacy of enforcement, an assessment of the need for strengthening the Convention and the desirability of expanding the membership of the Convention to other countries.
Key Points
-- Over the past year, further progress has been made on the first priority of ensuring that all signatories deposit an instrument of ratification with the OECD. As of June 10, 2000, twenty-one of the thirty-four signatories, representing approximately 78 percent of OECD exports, had completed their internal approval processes and deposited an instrument of ratification with the OECD secretariat. Nevertheless, a number of significant exporting countries important for the global fight against bribery, including Brazil, France, Italy, and the Netherlands, had not yet taken the necessary steps to bring the Convention into force. The United States will continue to press these countries to complete their legislative and ratification processes without further delay.
-- The procedures established by the OECD to monitor implementation of the Convention have proven effective in providing a thorough, unbiased examination of parties' implementing legislation. The review process is continuing. Examination of implementing legislation to date has been rigorous, comprehensive, and frank in identifying shortcomings. Thus far, the OECD Working Group on Bribery has reviewed the implementing legislation of twenty-one countries, including the United States.
-- The State, Commerce, Justice, and Treasury departments are working together as a team to monitor implementation and enforcement of the Convention. U.S. agencies have established a comprehensive monitoring process that includes active participation in OECD meetings on the Convention, bilateral discussions with other governments on implementation issues, and careful tracking of bribery-related developments overseas.
-- Countries that have ratified the Convention have generally taken a serious approach to fulfilling their obligations on criminalizing the bribery of foreign public officials. The relevant legislation of twenty foreign countries is reviewed in this report. We have concerns, however, about the implementation of the Convention by several countries, including Japan and the United Kingdom, whose current legislation appears inadequate to accomplish the goals of the Convention. Bilaterally and multilaterally in the OECD Working Group on Bribery, the United States is urging countries to take action to correct deficiencies in implementing legislation.
-- Since the Convention has been in force for only a short time and not yet for all signatories, it is still too early to make judgments regarding the effectiveness of enforcement measures. Now that the review of implementing legislation is well advanced, the United States is urging the Working Group on Bribery to begin the review of enforcement actions later in 2000, as originally endorsed by OECD ministers. Future reports, therefore, should begin to develop a record of enforcement. As far as we have been able to determine, the United States remains the only country to have prosecuted persons for the bribery of foreign public officials.
-- Both government authorities and nongovernmental organizations have made greater efforts over the past year to promote public awareness of the Convention and support anticorruption initiatives. Notable efforts have been made in Australia, Bulgaria, Canada, the Czech Republic, Germany, Korea, Poland, the Slovak Republic, and Sweden. The United States continues to encourage all signatories to promote public awareness of the Convention and the importance of combating corruption.
-- Substantial progress has been achieved in implementing the OECD Council recommendation to eliminate any remaining tax deductibility for bribes to foreign public officials. We remain concerned, however, about the effectiveness of some countries' actions to disallow tax deductibility. The United States, in cooperation with other OECD members, is providing technical assistance to the OECD's Fiscal Affairs Committee in order to improve its monitoring of national laws and practices and to help the Committee establish a more complete record of each signatory's legal, regulatory, and administrative framework for disallowing tax deductibility.
-- As the Convention enters into force for more signatories, greater attention is being given to considering new participants and using the OECD to promote antibribery activity among interested nonsignatory countries. The most appropriate candidates for accession to the Convention are likely to be significant global or regional exporters whose governments are well equipped to take on the responsibilities of implementing the Convention. The OECD has undertaken initial outreach activities with these criteria in mind.
-- The United States has succeeded in keeping issues related to strengthening the Convention on the agenda of the OECD Working Group on Bribery despite the lack of support from many members. We have made special efforts to focus attention on issues of particular importance to the United States: bribery acts in relation to foreign political parties, party officials, and candidates for public office. Developing support for addressing our key issues of concern is expected to require a long-term effort as we differ sharply with other Working Group members on the need to expand the scope of the Convention. Other issues on the agenda relating to the Convention include making bribery of foreign public officials a predicate offense for money laundering legislation and the roles of foreign subsidiaries and offshore financial centers in bribery transactions.
-- U.S. business associations and nongovernmental organizations, such as Transparency International, are playing an important role in helping the U.S. government monitor implementation of the Convention and educating the public and the business community in signatory countries on the need to enact and enforce antibribery laws. The U.S. government will continue to involve the private sector in its efforts to monitor the Convention and promote its goals. The U.S. government also actively assists the business community on corruption issues. The Department of State has published a brochure, "Fighting Global Corruption: Business Risk Management," and the Department of Commerce has opened a bribery hotline on its Internet site. The Department of Justice, under its Foreign Corrupt Practices Act Opinion Procedure, will issue opinions regarding the antibribery provisions of the Foreign Corrupt Practices Act (FCPA) with respect to certain prospective business transactions.
-- A classified annex to this report (transmitted separately) demonstrates that a large number of competitor firms from other countries have been engaged in bribery of foreign public officials. The annex covers the six-year period since May 1994, most of which period was prior to the entry into force of the Convention. It lists foreign firms on which credible information exists indicating that they have been engaging in activities that would be prohibited by the Convention. During that period, we received allegations that bribes had been offered in some 353 international contracts worth about $165 billion. In deals where there were bribery allegations, reported U.S. competitors, and known outcomes, American firms lost 92 contracts worth approximately $26 billion. The annexes to future reports will help to indicate the effectiveness of the Convention in leveling the playing field for American business.
The fight against corruption is a high priority in U.S. foreign policy, and the OECD Convention represents a key element in this broader campaign. Our leadership in combating international corruption started with the FCPA of 1977. Since then our efforts against corruption have not only involved the OECD. Another important initiative was Vice President Al Gore's first Global Forum on Fighting Corruption held in February 1999, in which 90 countries participated. The United States is cosponsoring a second Global Forum scheduled to be held in the Netherlands in 2001. Over the past year, the United States has also developed or supported anticorruption and transparency initiatives in a number of other global and regional forums. These include the Organization of American States (the Inter-American Convention Against Corruption, which the United States signed in June 1996, is currently before the U.S. Senate), the Global Coalition for Africa, the Organization for Security and Cooperation in Europe, the Stability Pact for Southeast Europe, the Council of Europe, the Asia-Pacific Economic Cooperation forum, and the World Trade Organization. In January 2000, the United Nations Ad Hoc Committee Negotiating the Organized Crime Convention concluded that a global instrument against corruption is desirable and that work in the United Nations toward such an instrument should begin once the Organized Crime Convention and its three protocols are complete. Concerned U.S. government agencies are considering our approach to this initiative and are consulting with other governments.
Through all the above initiatives, the United States seeks to capitalize on the growing international political will to combat corruption and to employ it to achieve concrete actions supporting our good governance goals.
(1) The member states of the OECD are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.
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(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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