Slowly but surely, the world is becoming a little more open and honest in its business transactions. Bribery and corruption have existed for as long as people have traded with each other and in some parts of the world remain as matter-of-fact as ever. But under pressure from a number of institutions – the UN, the Organisation for Economic Cooperation and Development (OECD), the Council of Europe and others – the noose around those who operate on the borderline of legality in business transactions is being steadily tightened.
In particular, the World Trade Center tragedy of 11 September seems to have imposed a new sense of urgency on national authorities to widen anti-corruption legislation and to enforce it more vigorously.
A recent report by the UN Secretary-General on implementation of the UN Declaration against Corruption and Bribery in International Commercial Transactions analyses the replies received from participating states in guarded but positive terms.
While it was, according to the report, “difficult to ascertain” whether or not the declaration had a direct impact on domestic legislation, “the main principles and provisions embodied in the declaration are reflected, to different degrees and with different modalities, in the implementation of legislation at the national level in many states”.
Far more important, however, is the OECD's Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which entered into force in February 1999 and which makes it a crime to offer, promise or give a bribe to a foreign public official in order to obtain or retain international business deals. A related text effectively ends the practice granting tax deductibility for bribe payments made to foreign officials.
“The idea that corruption is a sort of informal and supplementary tax payable in developing countries has now been entirely discredited. Corruption is, rather, a tax on development,” says the OECD.
All 30 of the OECD member countries plus five associated countries have now signed the convention and the organisation is now moving towards phase two, under which countries will be examined individually by an OECD team for “on the ground” compliance, according to an OECD official. Finland, the first, has now been approved.
The OECD anti-bribery convention is a “landmark measure which promises important results”, says Peter Eigen, chairman of Transparency International (TI), a unique German-based international centre wholly committed to combating corruption. Eigen explains that bribes should no longer be deducted from taxable income as legitimate business expenses in OECD member countries, and that this is a major achievement for the anti-corruption movement.
TI's 'Corruption Perceptions Index' for 2001, incidentally, finds that two-thirds of the 91 countries listed score less than five out of 10 for honesty. Top of the table are Finland, Denmark and New Zealand and bottom are Nigeria and Bangladesh, with the UK coming in at thirteenth and the US at sixteenth.
One of the UK's foremost experts in international anti-bribery and corruption legislation is John Sissons, a former partner of and now a consultant to Herbert Smith in London. Sissons was an adviser to the Attorney-General of Hong Kong in a case relating to the corruption of a senior crown servant, which subsequently changed the way in which the law deals with the proceeds of bribery.
Sissons says that the UK Government's position changed radically following 11 September, with the anti-corruption provisions of the Anti-terrorism, Crime and Security Bill. “Under the terms of the new legislation, the UK criminal courts will have jurisdiction in corruption cases even though none of the acts giving rise to such offences may have taken place within the UK,” he explains.
The UK legislation went further than similar legislation in certain other jurisdictions “in that facilitation payments to induce officials to perform their legitimate functions would be caught, as well as larger sums paid to influence officials in the context of the allocation of new business”, says Sissons. As to the effect this was having on UK firms, Sissons explains that he was “certainly aware of various clients taking advice as to what they need to do to comply with the law, in particular by setting up internal procedures and codes of conduct to ensure that their directors and employees understand what the position is and deal with it accordingly”.
A sampling of opinion among law firms in offshore centres suggests that the changes brought about by the OECD and others have not markedly affected activities, largely because the legislation was anticipated some time back. “It's really been business as usual; we've not felt too much of an impact and haven't seen any downturn, because we have the procedures in place and it hasn't been a struggle to comply,” says Deborah Lang, managing partner at Bailhache Labesse in Jersey.
“Our law firm's work has an element of offshore work, but we do a lot of property work and litigation, which really hasn't felt the impact of anything the OECD has said or done. We've got commercial work obviously – banking, corporate finance and international fund work – but it hasn't really felt the impact,” continues Lang. “Jersey has been well regulated for quite some time, so it's not as if things have been suddenly imposed on us. And in any event, law firms are regulated by Law Society rules and a lot of what we've done in the past is the right sort of thing as far as the OECD is concerned.”
According to Lang, where the OECD has had more of an impact is on trust companies, some of which are linked to law firms. “They've been more affected, but Jersey was a bit ahead of the game here,” she says. Also, Jersey's Financial Services Commission has introduced a law requiring people who do trust company-type business to apply for registration. “Which means you have to have three senior qualified people to oversee the business, and where you've got one or two-man firms who've done some kind of offshore work, then they've had a bit of a problem,” she says.
Regarding money laundering legislation, Lang says: “Yes, we have to make inquiries now, we can't just take a suitcase full of money, but that's the same everywhere. We're not very different from the UK, just more in the spotlight.”
Ita McArdle, managing director of Simcocks Advocates in the Isle of Man, says that her firm has always been very careful. “What we're having to do now is document what we've done and prove it, so it's added cost to us.”
Simcocks has had to employ a compliance person, affecting the level of fees. “It's irritating because really it's London and New York and all the onshore sites that the wrong people are using,” says McArdle. “We've been a very professional jurisdiction for some time, but now what we're having to do is prove what we were doing anyway.”
In Gibraltar, Robert Vasquez, a partner at Triay and Triay, believes that there has always been an anti-corruption and anti-bribery law as part of the general criminal law. Vasquez says that the UK's new anti-terrorism law was extended to Gibraltar by Privy Council order, but added that he was unaware of any bribery and corruption case on the Rock. “I'm not aware of any case where that's happened or even been alleged,” he stated.
|Corruption and bribery – the facts|
• Finland is the world's most “honest” country, according to Transparency International.