Worldwide: Globalization Of The Battle Against Corruption*

Last Updated: April 30 2008
Article by Carol Welu

For many years following the enactment of the Foreign Corrupt Practices Act of 1977 (FCPA), the criminalization of bribing government officials was a peculiarity of US law. In Europe, it was accepted that bribery was part of business in certain regions, and some bribes were considered legitimate deductible business expenses even in countries where bribery was a crime. Counsel in bribery cases had only to manage risk of prosecution in the United States; prosecutors did not have the jurisdictional reach or political interest to pursue bribery cases. All this has now changed.

The international community has recognized a need for consensus on an anticorruption campaign, and there is a strong and growing commitment by multilateral institutions and NGOs to create a tough, global anticorruption environment. This consensus manifested itself in international conventions, including:

  • Organisation for Economic Co-Operation and Development (OECD) Convention on Combating Bribery of Foreign Officials in International Business Transactions

  • Council of Europe Criminal Convention and Council of Europe Civil Law Convention

  • UN Convention Against Corruption

The OECD Convention has been particularly successful in spurring action by member states. The OECD has taken a very active role in policing compliance with the convention and seeks to ensure that signatories adopt and enforce the requisite legislation. Prosecutors in Europe are bringing government bribery actions against major companies. As of winter 2007, 34 OECD countries, representing almost 67 percent of the world exports, have 270 ongoing bribery investigations. Nations in Europe are conducting nearly 75 percent of the OECD investigations plus 57 bribery prosecutions this past year. Significantly, the 2007 bribery prosecution figure surpasses the 2006 total of 43 prosecutions.

Other international organizations are also focusing on stopping corruption. The World Bank estimates that more than US$1 trillion in bribes is paid annually. Bribery on such a grand scale exerts a significant drag on developing economies, and therefore the World Bank has made elimination of bribery and related practices a major policy objective. One effective enforcement tool of the World Bank is debarment from participation in projects that it funds.

The momentum created by the OECD action and related government initiatives has grown through peer pressure. Nations with meaningful anticorruption programs are pressuring others to adopt systems at least comparable to their own. An overarching reason for the increasingly aggressive position taken by the US enforcement authorities with respect to non-US companies is to motivate other countries to take meaningful action against their own companies. Thus, anticorruption enforcement does not look to slow down in the foreseeable future. Companies with multinational operations or sales should embrace the implementation and endorse anticorruption policies, because in the end they increase market efficiency and decrease costs.

Concerted action by the business community will help expand the market sector driven by value-based competition rather than bribery. The greatest risk for companies is the current transitional stage, when there is increasingly vigorous, effective anticorruption enforcement simultaneous with continuing widespread pressures to pay bribes in numerous countries. Because halting corruption is now a global goal, companies must be especially vigilant during this transition period. They must take effective steps to be certain they are not directly engaged in corrupt activities and they should review their joint venture, distributorship, sales agency and consultancy arrangements.

If improper payments are discovered, to mitigate penalties, a company must consider reporting the situation to the relevant authorities and negotiating an appropriate settlement. Recent enforcement actions suggest prosecutors will be more lenient in negotiating penalties when a company comes forward, self reports and takes a constructive and cooperative approach. If corruption is endemic in a host countrys business culture, consideration may have to be given to withdrawal from or limiting activities in that country. Finally, a company must ensure it has an effective global compliance program in place, including adequate periodic training, in the interest of both the prevention of violations and the mitigation of penalties in the case violations occur.

The following recent US enforcement actions highlight the FCPAs global reach and its increasing enforcement against non-US companies:

  • United States v. Vetco International Ltd (S.D.Tex. 2007): The United States brought an action against the UK-based company Vetco and four subsidiaries, only one of which is a US company, for conspiring with a freight forwarding company to bribe customs officials in Nigeria to evade customs duties and fees. The United States and Vetco settled for US$26 million after Vetco entered a guilty plea.

  • United States v. Sapsizian (S.D.Fla. 2006): The United States charged an official of the France-based telecommunications company Alcatel, who lived and worked in France, with criminal violations of the FCPA in connection with alleged bribery of officials in Costa Rica. The US nexus is that the funds used to pay the bribes were transferred through bank accounts in the United States.

  • United States v. Statoil (S.D.N.Y. 2006): The United States charged senior officials of Norway-based petroleum company, Statoil, with criminal violations of the FCPA in connection with a scheme to bribe officials in Iran through an offshore vehicle owned by a United Kingdom national. The US nexus is that Statoil had registered securities in the United States.

* This article is abridged from a trilogy of articles by Carol Welu, a Squire Sanders lawyer in our international dispute resolution practice and based in London. The full articles may be found at "The International Compliance Clamp-Down," 74 The European Lawyer 51-53 (December 2007/January 2008); "US Bribery Offences: Dont Get Caught Out," XVIII:11 Practical Law Company 23-25 (December 2007); "The Posse Closes In&," 16 Commercial Litigation Journal 2-5 (November/December 2007).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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