On December 17, 1997, representatives
of 34 states signed a new Convention on Combating
Bribery of Foreign Public Officials in International
Business Transactions. The Convention was negotiated
under the auspices of the Organization of Economic
Co-operation and Development (OECD); signatories
include all 29 member states of the OECD (including
the United States) as well as five non-members.
According to the Preamble to the Convention,
the goal of the agreement is to combat the "widespread
phenomenon" of bribery in international business
transactions. As the Preamble puts it, bribery
"raises serious moral and political concerns,
undermines good governance and economic development,
and distorts international competitive conditions."
Article 1 of the Convention obliges states
to criminalize certain forms of bribery. Article
Each Party shall take such measures as may
be necessary to establish that it is a criminal
offence under its law for any person intentionally
to offer, promise or give any pecuniary
or other advantage, whether directly or
through intermediaries, to a foreign public
official, for that official or for a third
party, in order that the official act or
refrain from acting in relation to the performance
of official duties, in order to obtain or
retain business or other improper advantage
in the conduct of international business.
According to the "Commentaries on the Convention"
(adopted by the parties on November 21, 1997),
Article 1(1) merely establishes a "standard"
to be met by states party. The Commentaries
make clear that parties to the Convention need
not use its "precise terms" in defining bribery
in municipal law.
Critics of Article 1(1) have argued
that this standard of "functional equivalence"
fails to level the playing field for states
like the United States, which has already enacted
tough anti-bribery legislation in the form of
the Foreign Corrupt Practices Act. These critics
charge that the Convention stops short of obliging
states to impose criminal sanctions on "legal
persons" (corporations and other businesses),
whereas American corporations already operate
under the threat of criminal prosecution for
bribery of foreign officials. Indeed, Article
3(2) of the Convention provides that a state
that does not impose criminal responsibility
on legal persons is not obliged to do so for
bribery; such a state is obliged only to impose
civil sanctions. Critics also point out that
the Convention does not establish any uniform
penalties on any person - natural or legal -
for bribery. Under Article 3(1), punishment
for bribery need only be "comparable" to the
punishment already prescribed for bribery of
a state party's own public officials.
Supporters of the Convention reply
that it is not realistic to expect thirty-four
different states with different legal systems
to adopt an identical criminal statute on bribery.
They stress that states party that do not impose
criminal liability on legal persons are nonetheless
obliged by Article 3(2) to ensure that legal
persons are subject to "effective, proportionate
and dissuasive non-criminal sanctions, including
monetary sanctions," for bribery. They argue
that there is no functional difference between
civil and criminal liability for legal persons,
since in either event liability results in monetary
sanctions. As for the absence of uniform penalties,
that feature is hardly unique to the Bribery
Convention; other treaties on international
criminal law adopt the same approach. The Genocide
Convention, for example, simply obliges states
to "provide effective penalties" for genocide
without specifying any minimum punishment.
The definition of bribery in Article
1(1) has also been criticized for failing to
cover all bribes to foreign political parties
and candidates for office. Article 1(1) covers
bribes given to a "foreign public official,"
defined in Article 1(4) as any person holding
a "legislative, administrative or judicial office"
of a foreign country, a person "exercising a
public function" for a foreign country or a
"public agency or public enterprise" of that
country, or an official of a public international
organization. This definition does not mention
officials of political parties or candidates
for office, even though bribes of political
parties and candidates can be a serious source
of corruption. The Commentaries to the Convention
do assert that in "special circumstances, public
authority may in fact be held by persons (e.g.,
political party officials in single party states)
not formally designated as public officials."
But neither the text nor the Commentaries offer
any further guidance on when a candidate for
office or an official of a political party might
constitute a person "exercising a public function."
The United States did seek a broader provision
on bribes of foreign political parties, but
it defends the final text as progress in the
right direction. Supporters of the Convention
also note that the OECD has pledged to review
this issue again in the future.
Article 1 has also been faulted
for failing to criminalize certain payments
to officials of state-owned enterprises. Article
1(4) covers a bribe to an official of a "public
enterprise" - but only if that official is exercising
a "public function" for that enterprise. The
Commentaries define a "public enterprise" fairly
broadly, as one over which a government "may,
directly or indirectly, exercise a dominant
influence," as for example when a government
is a majority share-holder. The Commentary goes
on, however, to state that an official of such
an enterprise is not exercising a "public function"
if that enterprise "operates on a normal commercial
basis in the relevant market, i.e., on a basis
which is substantially equivalent to that of
a private enterprise, without preferential subsidies
or other privileges." Critics charge that this
comment opens up a huge loophole, since there
is little agreement on what constitutes "preferential
subsidies or other privileges." Supporters of
the Convention respond that this provision still
marks a step forward. More particularly, they
argue that the distinction between a "public"
and a "private" function is not as untenable
as the critics suggest, since the municipal
laws of many states already draw such a distinction
in a variety of other contexts.
Critics of the Convention point
to what they say is one other loophole in Article
1(1). That provision outlaws bribes made in
order "to obtain or retain business or other
improper advantage." The Commentary to the provision
describes an "improper" advantage as one to
which a company "was not clearly entitled,"
for example an operating permit for a factory
that fails to meet statutory requirements. But
the Commentary also provides that an advantage
is not "improper" if it is "permitted or required
by the written law or regulation of the foreign
public official's country, including case law."
Two commentators have called this provision
"a loophole that will send apologists scurrying
for precedent to excuse inexcusable behavior."
Supporters of the Convention reply that similar
language exists in the U.S. Foreign Corrupt
Practices Act, which recognizes that corporations
are at a significant disadvantage if they are
to be punished for making payments that are
permitted (much less required) under foreign
There is one final aspect of Article
1(1) that deserves comment. The Commentary to
Article 1(1) asserts that the provision does
not cover small "facilitation" payments to foreign
officials to induce them to perform their functions.
Even if such payments are illegal under the
foreign country's law, they apparently do not
constitute payments made "to obtain or retain
business or other improper advantage." The Commentary
acknowledges that this type of petty corruption
is a "corrosive phenomenon" but argues that
it should be addressed by "support for programmes
of good governance" rather than criminal sanctions,
which do not seem a "practical or effective"
alternative. Again, the Foreign Corrupt Practices
Act contains an analogous provision: it permits
a "facilitating or expediting payment" designed
to "expedite or to secure the performance of
a routine governmental action" by a foreign
Not every provision of the Convention
is as controversial as Article 1(1). Article
1(2) extends criminal liability to complicity
in bribery (including incitement, aiding and
abetting, or authorization of bribery) as well
as attempt and conspiracy to commit bribery.
It is commonplace for treaties on international
criminal law and municipal penal codes to establish
criminal responsibility for complicity, attempt
and conspiracy as well as the underlying offense.
Article 1(2) apparently does not require that
attempt and conspiracy carry the same penalties
as the offense itself. Interestingly, the Commentary
suggests that a state party is not required
to punish an inchoate offense like authorization
of bribery if the inchoate offense does not
"lead to further action" - i.e., does not lead
to the actual payment of a bribe.
Article 4 of the Convention relates
to jurisdiction. Not surprisingly, Article 4(1)
requires states party to establish territorial
jurisdiction over the bribery of a foreign public
official. The Commentary suggests that the territorial
basis "should be interpreted broadly so that
an extensive physical connection to the bribery
act is not required," but the Commentary provides
no examples of this "broad interpretation."
Perhaps it is meant to cover bribes laundered
through the banks of a state party, or to authorize
a state party to establish jurisdiction over
a briber whose only connection to that state
is that the briber issues securities in that
state's territory. In any event, the Convention
also provides for nationality-based jurisdiction.
Article 4(2) states that each party that "has
jurisdiction to prosecute its nationals" for
offenses committed abroad "shall" establish
such jurisdiction in bribery cases, "according
to the same principles." According to the Commentary,
this provision means that states that only selectively
exercise nationality-based criminal jurisdiction
are obliged to enlarge that jurisdiction to
cover bribery of foreign officials. Given that
most signatories probably exercise some form
of nationality-based criminal jurisdiction already,
it appears that most states party will be obliged
to extend such jurisdiction to bribery cases.
Article 5 of the Convention obliges
parties to investigate and prosecute bribery
of a foreign public official without regard
to considerations of national economic interest,
relations with other states, or identity of
the subjects under investigation. Article 6
mandates that any applicable statute of limitations
shall allow an "adequate period of time" for
investigation and prosecution of bribery of
a foreign public official. Article 7 provides
that any state party that makes bribery of a
domestic official a predicate offense for money
laundering "shall do so on the same terms" for
the bribery of a foreign official.
Article 8, obliging parties to
take steps to prohibit off-the-books accounts
and other accounting abuses, is most interesting
for what it does not contain: any provision
on tax deductions for bribery of foreign officials.
In many countries, including many states party
to the Bribery Convention, bribes to foreign
public officials are tax deductible. Of course,
many other states (including the United States)
do not allow such deductions, and even in those
countries that do permit deductions, it can
be difficult for a taxpayer to take such a deduction
because the tax law may require disclosure of
the identity of the bribee or because it is
otherwise difficult to document the transaction.
Even so, the deductibility of bribes obviously
undermines enforcement of any effort to stamp
Recognizing this, the OECD in
1994 adopted a non-binding Recommendation on
Bribery in International Transactions, part
of which called for "meaningful steps" on "tax
legislation" that may "indirectly favour bribery."
In 1996 the OECD Council adopted a more pointed
Recommendation on the Tax Deductibility of Bribes
to Foreign Officials, which called on OECD member
states to "re-examine such treatment with the
intention of denying this deductibility." In
1997 an OECD report on implementation of the
1996 Recommendation observed that Norway and
the Netherlands had adopted legislation limiting
the deductibility of bribes to foreign officials,
and that several other states are actively re-examining
the issue. The 1997 report concluded that the
adoption of a treaty criminalizing bribery of
foreign officials would spur states to disallow
tax deductions for such bribery. Time will tell
whether criminalization leads to disallowance
Articles 9 through 11 of the Bribery
Convention deal with mutual legal assistance
and extradition. Article 9 provides for mutual
legal assistance in criminal proceedings and
in non-criminal proceedings brought against
legal persons. Article 10(1) deems bribery an
extraditable offense for the purposes of any
extradition treaties between the parties, and
Article 10(2) provides that the Bribery Convention
can serve as the legal basis for extradition
in the absence of an extradition treaty. Like
most recent multilateral treaties on international
criminal law, Article 10(3) of the Bribery Convention
obliges a state party either to extradite its
own nationals for bribery of foreign officials
or to submit the case to its "competent authorities"
for prosecution. Both Articles 9 and 10 provide
that any requirement of dual criminality should
be deemed satisfied in a bribery case arising
under the Convention. Article 11 provides that
states should designate authorities for making
and receiving requests for extradition and mutual
Article 12 establishes a "programme
of systematic follow-up to monitor and promote"
implementation of the Convention. This ongoing
work is to take place in the OECD Working Group
on Bribery in International Business Transactions.
Among other things, the monitoring process involves
a system of periodic "self-evaluation," in which
parties report on their own progress, and "mutual
evaluation," in which the parties assess each
other's performance. U.S. Undersecretary of
State Stuart E. Eizenstat has described this
as a "unique follow-up monitoring process" designed
to ensure that parties implement the "high-standard
legislation" required by the agreement.
Articles 13 through 17 are the
"final clauses" of the Convention. Interestingly,
Article 13 provides that non-members of the
OECD can sign or accede to the agreement if
they have joined the aforementioned Working
Group on Bribery. The Commentary makes clear
that non-members of the OECD are welcome to
join the Working Group, and thus that the requirement
of membership in the Working Group "should not
be seen as an obstacle by countries wishing
to participate in the fight" against bribery.
Indeed, the Convention has already been signed
by five states that are not members of the OECD:
Argentina, Brazil, Bulgaria, Chile, and Slovakia.
Article 14 provides that the agreement
is subject to ratification, and it designates
the Secretary-General of the OECD as its Depositary.
Article 15 sets forth elaborate
rules for entry into force of the Convention.
It will enter into force either after a certain
number of states with large "export shares"
have deposited instruments of ratification,
or, if the Convention is still not in force
by December 31, 1998, after two or more states
declare their readiness to accept its entry
into force. Article 16 provides that amendment
shall take place by consensus or by "such other
means as the Parties may determine by consensus."
Article 17 permits parties to withdraw from
the Convention one year after giving notice
of intention to withdraw.
Taken as a whole, the Convention
would seem to mark a step forward in the international
effort to battle bribery and corruption. It
comes on the heels of the 1996 OAS Inter-American
Convention Against Corruption and the 1996 International
Chamber of Commerce Revisions to its Rules of
Conduct on Extortion and Bribery in International
Business Transactions. As such, the OECD Bribery
Convention is part of a larger trend toward
greater international regulation of corruption
in international business transactions.
About the author:
Geoffrey R. Watson is a Visiting Associate Professor
of Law at the Catholic University of America's
Columbus School of Law in Washington, D.C. He
is the author of numerous articles on international
law, and he currently serves on the ASIL Advisory
Committee on Insight.
Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions,
Dec. 17, 1997, avail. at OECD website (http://www.oecd.org).
Commentaries on the Convention
on Combating Bribery of Officials in International
Business Transactions, Nov. 21, 1997, avail.
at OECD website (http://www.oecd.org).
Implementing the 1996 OECD Recommendation
on the Tax Deductibility of Bribes to Foreign
Officials, May 26, 1997, avail. at OECD website
Recommendation of the Council
of the OECD on the Tax Deductibility of Bribes
to Foreign Public Officials, April 11, 1996,
35 I.L.M. 1311 (1996).
International Chamber of
Commerce: 1996 Revisions to the ICC Rules of
Conduct on Extortion and Bribery in International
Business Transactions, Mach 26, 1996, 35 I.L.M.
Inter-American Convention Against
Corruption, Mar. 29, 1996, 35 I.L.M. 724 (1996).
Recommendation of the Council
of the OECD on Bribery in International Business
Transactions, May 27, 1994, 33 I.L.M. 1389 (1994).
Edmund L. Andrews, 29 Nations
Agree to Outlaw Bribing Foreign Officials,
N.Y. Times, Nov. 21, 1997, at A1 (reporting
extensively on disagreements over various aspects
of the Convention).
Editorial, Cutting the Supply
of Bribes, N.Y. Times, Nov. 22, 1997, at
Editorial, Banning Bribes,
Finally, Wash. Post, Nov. 28, 1997, at A26.
Stanley J. Marcus & Seth Goldschlager,
An Uneven International Playing Field,
Wash. Post, Dec. 17, 1997, at A25 (op-ed piece
criticizing the Convention).
Letter of Stuart E. Eizenstat,
Undersecretary of State for Economic, Business
and Agricultural Affairs, to the Editor of the
Washington Post, Wash. Post, Jan. 16, 1998,
at A20 (responding to Marcus and Goldschlager).
The purpose of ASIL Insights
is to provide concise and informed background for
developments of interest to the international community.
The American Society of International Law does
not take positions on substantive issues, including
the ones discussed in this Insight.