Recently, a High-Level Advisory Group on Anti-Corruption and Integrity, “composed of independent experts from a variety of professional backgrounds in the anti-corruption field” drafted a lengthy report to the OECD to “strengthen its work on combating corruption and promoting integrity.”
In the report the Group makes 22 separate recommendations.
Problem is, the report completely misses the mark on the most obvious and effective way to reduce corruption.
A close read of many Foreign Corrupt Practices Act enforcement actions reveals that trade barriers and distortions are often the root causes of bribery. Recent examples include a prohibition on direct selling in China (the root cause of the Avon and Nu Skin Enterprises enforcement actions), the government controlling both wholesale and retain beer sales as well as brewery production hours (the root cause of the ABInBev enforcement action), and numerous examples of various third parties having to be engaged pursuant to foreign law or regulation.
In short, bribery is often about touch points with foreign government officials and a reduction in bribery will not be achieved without a reduction in touch points that arise because of foreign trade barriers and distortions.
- Trade barriers, distortions and conditions create bureaucracy;
- Bureaucracy creates points of contact with foreign officials;
- Points of contact with foreign officials create discretion; and
- Discretion creates the opportunity for a foreign official to misuse their position by making bribe demands.
Whether its 240 certifications and inspections to build a manufacturing facility in Russia (see here) or 142 signatures needed to clear cargo in the port of Lagos, Nigeria (see here), foreign government bureaucracy is often the root cause of bribery As highlighted in this post, there is a clear correlation between foreign government bureaucracy and corruption.
It is fairly remarkable that the the OECD Report, and its 22 recommendations to combat corruption, does not even directly address this salient topic.
Despite this obvious deficiency, other aspects of the OECD Report are worth highlighting including the following from the report.
“There is also serious concern that some OECD and non-OECD countries are facing an increasing incidence of abuse of executive authority manipulation of the judiciary and the legislative process, including legal and regulatory capture, as well as constraints to information and transparency, the media and civil society. This is inimical to a robust rule of law and to the fight against corruption.”
Several of these concerns are relevant to FCPA enforcement.
As highlighted in this article, a commonly accepted rule of law principle is limited government powers. The World Justice Project defines this factor as “systems of checks and balances . . . to limit the reach of excessive government power,” and the distribution of authority “in a manner that ensures that no single organ of government has the practical ability to exercise unchecked power.”
As stated in a report from the Manhattan Institute for Policy Research:
“[P]rosecutors’ virtually unchecked powers under DPAs and NPAs threaten our constitutional framework. To be sure, prosecutors are acting upon duly enacted laws, but federal criminal provisions are often vague or ambiguous, and the fact that prosecutors and large corporations alike feel obliged to reach agreement, rather than follow an orderly regulatory process and litigate disagreements in court, denies the judiciary an opportunity to clarify the boundaries of such laws. Instead, the laws come to mean what the prosecutors say they mean — and companies do what the prosecutors say they must. Federal prosecutors are thus assuming the role of judge (interpreting the law) and of legislature (setting broad policy choices about industry conduct), substantially eroding the separation of powers.”
The OECD Report also states:
“A convincing anti-corruption strategy requires a clear legal framework combined with consistent and impartial enforcement. This can only be done in a system that respects and fosters the rule of law, in which laws are adopted and enforced without fear of – or favour for – vested interests. This aim reflects core values of the OECD and is already incorporated in many of its governance initiatives. For example, rule of law considerations are enshrined into Article 5 of the Anti-Bribery Convention, prohibiting countries from allowing political considerations, economic consequences, or diplomatic ties with other countries from interfering with the investigation and prosecution of foreign bribery.”
Again, several of these concerns are relevant to FCPA enforcement (or lack thereof). For instance, was BAE charged with FCPA offenses? Didn’t think so. (See here for the article “The Facade of FCPA Enforcement” for more about the BAE matter). See also here for the recent post titled “The U.K.’s DPA With Rolls-Royce Violates OECD Convention Article 5 and Other Observations.”
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