Laws that try to proscribe bribery and corruption have a long and glorious history. A Roman senator could be dismissed from office for the “moral corruption” of bribery, and under the Magna Carta of 1215 the king’s officials were prohibited from taking commodities without paying for them in an attempt to eradicate corruption.
This article looks at some ways in which the modern laws against bribery and corruption can impact transactional practice in developing markets.
The payment of bribes to public officials is illegal under a number of laws, including the domestic law of many countries around the world. In addition, there are three key pieces of legislation that have international application.
The U.S. Foreign Corrupt Practices Act of 1977 also has a long history and has recently been updated to bring its provisions approximately into line with the OECD Anti-Bribery Convention and the U.N. Convention Against Corruption. The FCPA applies to American companies wherever they do business in the world and is taken very seriously by U.S. corporations, given the penalties that can be applied in their home jurisdiction. Since September 2006, there has been a significant increase in pressure within the United States to enforce FCPA standards and the policing of them.
The Organization for Economic Cooperation and Development adopted its Anti-Bribery Convention in November 1997, and English law has been amended to bring it into line with, and in some cases surpass, the OECD Anti-Bribery Convention. A total of 37 other countries have acceded to the convention and introduced similar domestic law to implement the convention. While, initially, more onerous than the FCPA, these two pieces of legislation are now broadly on the same terms. In addition, the United Nations introduced the U.N. Convention Against Corruption, which came into force in December 2005, having been ratified by 95 countries, including the United States, and is somewhat broader in scope.
As a short summary, these key pieces of legislation contain the following basic provisions:
Prohibition of bribery of foreign officials in international business transactions, by making it a crime in the law of the adopting nation;
Imposition of criminal sanctions for companies as well as individuals (or, at least, equally serious penalties, if the domestic law does not permit criminal liability for corporate entities);
Imposition of domestic sanctions on citizens and companies for their actions abroad;
Prevention of all payments to secure an improper advantage, although under some codes a distinction is made between “facilitating payments” and bribes;
Scope to seize or confiscate the bribe and proceeds of the bribe;
Cover any person who commits, assists or authorizes the bribery; and
Establishment of effective, proportionate and dissuasive criminal penalties, comparable to those applicable to bribing domestic officials.
Clauses prohibiting the payment of bribes and/or requiring parties to comply with the conventions are fairly common in international procurement contracts and project contracts, particularly in the energy field. In fact, they are frequently included in the boilerplate of many global companies’ standard terms of business.