• I.   Bribery in International Business
• II.  Bribery in Aid-funded Procurement
• III. Strengthening the Resistance of Corruption of Domestic Institution

Appendix
Annex
Endnotes

1. In the OECD, Member countries have been working to mount an effective, concerted campaign against bribery in international business and in contracts funded by development assistance, as well as to find ways to strengthen the resistance to corruption of their own public institutions.

I. Bribery in International Business Transactions

1994 Recommendation on Bribery in International Business Transactions

2. The first milestone in the OECD effort against international bribery was the 1994 Recommendation on Bribery in International Business Transactions [C(94)75/FINAL]. It calls on Member countries to take effective measures to deter, prevent and combat the bribery of foreign public officials in connection with international business transactions. It instructs the OECD Committee on International Investment and Multinational Enterprises (CIME) and its Working Group on Bribery in International Business Transactions to monitor implementation of the Recommendation, explore ways to associate nonmembers with this work, and examine specific issues relating to bribery in international business transactions, including, in close co-operation with the Committee on Fiscal Affairs, the tax deductibility of bribes. It instructs the CIME to review the Recommendation and report back to the Council within three years.

3. In following-up the Recommendation, the CIME and the Working Group on Bribery have sought the co-operation and advice of the private sector, experts in the various disciplines and other international organisations. The Working Group is especially grateful for the advice provided by special prosecutors responsible for corruption cases on the issue of Criminalisation and by experts from private companies, professional associations and Member governments on accounting, auditing and internal company controls. In November 1996, the Working Group held a special meeting with the private sector and non-governmental organisations, including BIAC, the International Chamber of Commerce and Transparency International, in order to obtain their views and reactions on OECD anti-corruption activities in advance of the review of the 1994 Recommendation. A number of international organisations (the Council of Europe, the Organisation of American States, the IMF, World Bank) participate as observers in the Working Group on Bribery; and the Group, in turn, follows closely developments in other international fora. The OECD Secretariat has initiated an informal network which permits the exchange of information on respective anti-corruption activities of a number of international organisations.

Actions by OECD Members

4. OECD Members have taken actions to criminalize the bribery of foreign public officials and to eliminate the tax deductibility of such bribes. A number of Member countries already have a basis in criminal law for the prosecution of bribery of foreign public officials. The United States’ Foreign Corrupt Practices Act is specifically directed at this type of bribery. The anti-bribery laws of some other countries (Canada, Greece, Hungary, Korea, Mexico, New Zealand, Sweden, Turkey, the United Kingdom) are broadly drawn and cover the bribery of foreign officials, at least in some circumstances. Since the adoption of the 1994 Recommendation, Belgium and Norway have begun the process of submitting to their parliaments legislation to criminalize the bribery of foreign public officials.

5. In 1996, on the proposal of the Committee on Fiscal Affairs, the Council adopted a Recommendation on the Tax Deductibility of Bribes to Foreign Officials [C(96)27/FINAL]. Since then, in December 1996, the Norwegian Parliament passed a law disallowing the deductibility of bribes to foreign public officials as well as to foreign private persons. Belgium and Denmark report preparing new legislation to deny the tax deductibility of bribes. In Australia, the Government has recently requested the Commissioner of Taxation to prepare appropriate legislation after considering foreign legislation, administration costs and compliance costs. The CIME welcomed these steps, but considered that the elimination of tax deductibility of bribes by only one country since the adoption of the 1996 Recommendation represents insufficient progress and the pace of implementation by Member countries which continue to allow this deductibility should be accelerated.

1997 Revised Recommendation on Combating Bribery in International Business Transactions

6. The culmination of the work of the past three years of the CIME and its Working Group on Bribery is the Revised Recommendation on Combating Bribery in International Business Transactions [C(97)123/FINAL] which is attached. The new Recommendation preserves the general undertakings of the 1994 text and elaborates more specific commitments in the fields of Criminalisation of bribery of foreign public officials, accounting, and public procurement based on the conclusions of the Working Group on Bribery. The Revised Recommendation urges prompt implementation of the 1996 Recommendation on the Tax Deductibility of Bribes to Foreign Officials and incorporates its text in Section IV. It also refers to the Development Assistance Committee (DAC) Recommendation to combat corruption in aid-funded procurement and incorporates its proposals; this would extend the coverage of the DAC Recommendation to all OECD Member countries and to non-member countries which adhere to the Revised Recommendation. The Revised Recommendation is thus a consolidated text which should provide an effective platform for public information and for co-operation with non-member countries.

7. The commitments contained in the Revised Recommendation would provide the basis for evaluation of Member country actions to combat bribery in international business transactions. The Revised Recommendation contains follow-up procedures to review Members' performance, and instructions for further work and co-operation with non-members and with the private sector and other organisations. These procedures and instructions are consistent with the 1994 Recommendation, but in some cases include activities which go beyond its scope in view of the progress achieved over the past three years.

Criminalisation of Bribery of Foreign Public Officials

8. Section III of the Revised Recommendation on the Criminalisation of bribery of foreign public officials reflects the Working Group on Bribery's analysis of modalities and appropriate international instruments which was requested in 1996 by the Council meeting at Ministerial level. The Council recommends that Member countries should criminalize the bribery of foreign public officials in an effective and co-ordinated manner by submitting proposals to their legislative bodies by 1 April 1998, in conformity with the agreed common elements set forth in the Annex, and seeking their enactment by the end of 1998. The Council decided, to this end, to open negotiations promptly on an international convention to criminalize bribery in conformity with the agreed common elements, the treaty to be open for signature by the end of 1997, with a view to its entry into force twelve months thereafter. It instructs the CIME to review the implementation of Section III and, in co-operation with the Committee on Fiscal Affairs, Section IV on tax deductibility, and to report to Ministers in Spring 1998.

9. All countries consider that conclusion of a convention within the specified deadlines is feasible because of the substantial work which has already been accomplished and, in particular, the agreement on the common elements which set a substantive standard and provide for functionally equivalent action by Member countries within their different legal systems. Member countries will bear in mind other conventions on the Criminalisation of bribery which exist or are being developed in order to avoid establishing conflicting obligations.

II. Bribery in Aid-funded Procurement

Development Assistance Committee 1996 Recommendation concerning Anti-corruption Proposals for Bilateral Aid Procurement

10. The DAC Members¹ share a common concern with the negative effects of corruption on good governance and the development co-operation effort. In May 1996, the DAC approved a Recommendation [DCD/DAC/(96)11/FINAL] on anti-corruption proposals for aid-funded procurement. (See Section VI iii) of Revised Recommendation in the attached appendix.) The Recommendation called on Members, in cooperation with recipient countries and the international development institutions, to introduce or require anticorruption provisions governing aid-funded procurement. Almost all DAC Members have introduced or are about to introduce explicit anti-corruption clauses or have strengthened existing similar provisions.

III. Strengthening the Resistance to Corruption of Domestic Public Institutions

11. The Public Management Committee (PUMA) is working to increase awareness of the ethical issues facing the public sector today. It assists Member countries to develop and maintain an effective framework for promoting integrity and high standards of conduct on the part of public officials. A report published in 1996, Ethics in the Public Service: Current Issues and Practice, identified the factors that are affecting standards of ethics and conduct in the public service, and the initiatives governments are taking to strengthen ethics management frameworks. The report identified instruments governments can use to do this -- an ethics "infrastructure". PUMA is also developing an "Ethics Checklist" as a tool to assist Member countries review and, if necessary, strengthen ethics management systems for the public sector.

12. In November 1997, PUMA will hold a Symposium on Ethics in the Public Sector: Challenges and Opportunities for OECD countries. For this meeting PUMA is surveying a selection of Member countries to assess the effectiveness of measures aimed at preventing corruption in the public sector. At the Symposium public officials with a defined leadership responsibility in relation to ethics, will debate topics related to ethics and corruption, with the objective of producing analysis and conclusions that will be of lasting value in promoting integrity in the public sector. Consideration will be given by the Committee to undertaking further work on ethics and corruption in 1998, with a view to assisting Member countries to put in place an effective ethics infrastructure.

13. In parallel with the above, the joint OECD Centre for Co-operation with Economies in Transition and European Union/Phare initiative on Support for Improvement in governance and Management in Central and Eastern European Countries (SIGMA) is assisting those countries to develop effective instruments for ethics management and corruption prevention.

APPENDIX

REVISED RECOMMENDATION OF THE COUNCIL
ON COMBATING BRIBERY IN INTERNATIONAL BUSINESS TRANSACTIONS,
[C(97)123/FINAL]

THE COUNCIL,

Having regard to Articles 3, 5a) and 5 b) of the Convention on the Organisation for Economic Co-operation and Development of 14 December 1960;

Considering that bribery is a widespread phenomenon in international business transactions, including trade and investment, raising serious moral and political concerns and distorting international competitive conditions;

Considering that all countries share a responsibility to combat bribery in international business transactions;

Considering that enterprises should refrain from bribery of public servants and holders of public office, as stated in the OECD Guidelines for Multinational Enterprises;

Considering the progress which has been made in the implementation of the initial Recommendation of the Council on Bribery in International Business Transactions adopted on 27 May 1994, C(94)75/FINAL and the related Recommendation on the tax deductibility of bribes of foreign public officials adopted on 11 April 1996, C(96)27/FINAL; as well as the Recommendation concerning Anticorruption Proposals for Bilateral Aid Procurement, endorsed by the High Level Meeting of the Development Assistance Committee on 7 May 1996;

Welcoming other recent developments which further advance international understanding and co-operation regarding bribery in business transactions, including actions of the United Nations, the Council of Europe, the European Union and the Organisation of American States;

Having regard to the commitment made at the meeting of the Council at Ministerial level in May 1996, to criminalize the bribery of foreign public officials in an effective and co-ordinated manner;

Noting that an international convention in conformity with the agreed common elements set forth in the Annex, is an appropriate instrument to attain such Criminalisation rapidly.

Considering the consensus which has developed on the measures which should be taken to implement the 1994 Recommendation, in particular, with respect to the modalities and international instruments to facilitate Criminalisation of bribery of foreign public officials; tax deductibility of bribes to foreign public officials; accounting requirements, external audit and internal company controls; and rules and regulations on public procurement;

Recognizing that achieving progress in this field requires not only efforts by individual countries but multilateral co-operation, monitoring and follow-up;

General

I. RECOMMENDS that Member countries take effective measures to deter, prevent and combat the bribery of foreign public officials in connection with international business transactions.

II. RECOMMENDS that each Member country examine the following areas and, in conformity with its jurisdictional and other basic legal principles, take concrete and meaningful steps to meet this goal:

i) criminal laws and their application, in accordance with section III and the Annex to this Recommendation;

ii) tax legislation, regulations and practice, to eliminate any indirect support of bribery, in accordance with section IV;

iii) company and business accounting, external audit and internal control requirements and practices, in accordance with section V;

iv) banking, financial and other relevant provisions, to ensure that adequate records would be kept and made available for inspection and investigation; and

v) public subsidies, licences, government procurement contracts or other public advantages, so that advantages could be denied as a sanction for bribery in appropriate cases, and in accordance with section VI for procurement contracts and aid procurement; and

vi) civil, commercial, and administrative laws and regulations, so that such bribery would be illegal.

vii) international co-operation in investigations and other legal proceedings, in accordance with section VII.

Criminalisation of Bribery of Foreign Public Officials

III. RECOMMENDS that Member countries should criminalize the bribery of foreign public officials in an effective and co-ordinated manner by submitting proposals to their legislative bodies by 1 April 1998, in conformity with the agreed common elements set forth in the Annex, and seeking their enactment by the end of 1998.

DECIDES, to this end, to open negotiations promptly on an international convention to criminalize bribery in conformity with the agreed common elements, the treaty to be open for signature by the end of 1997, with a view to its entry into force twelve months thereafter.

Tax Deductibility

IV. URGES the prompt implementation by Member countries of the 1996 Recommendation which reads as follows: "that those Member countries which do not disallow the deductibility of bribes to foreign public officials re-examine such treatment with the intention of denying this deductibility. Such action may be facilitated by the trend to treat bribes to foreign officials as illegal."

Accounting Requirements, External Audit and Internal Company Controls

V. RECOMMENDS that Member countries take the steps necessary so that laws, rules and practices with respect to accounting requirements, external audit and internal company controls are in line with the following principles and are fully used in order to prevent and detect bribery of foreign public officials in international business.

A. Adequate accounting requirements

i) Member countries should require companies to maintain adequate records of the sums of money received and expended by the company, identifying the matters in respect of which the receipt and expenditure takes place. Companies should be prohibited from making off-the-books transactions or keeping off-the-books accounts.

ii) Member countries should require companies to disclose in their financial statements the full range of material contingent liabilities.

iii) Member countries should adequately sanction accounting omissions, falsifications and fraud.

B. Independent External Audit

i) Member countries should consider whether requirements to submit to external audit are adequate.

Ii) Member countries and professional associations should maintain adequate standards to ensure the independence of external auditors which permits them to provide an objective assessment of company accounts, financial statements and internal controls.

Iii) Member countries should require the auditor who discovers indications of a possible illegal act of bribery to report this discovery to management and, as appropriate, to corporate monitoring bodies.

iv) Member countries should consider requiring the auditor to report indications of a possible illegal act of bribery to competent authorities.

C. Internal company controls

i) Member countries should encourage the development and adoption of adequate internal company controls, including standards of conduct.

Ii) Member countries should encourage company management to make statements in their annual reports about their internal control mechanisms, including those which contribute to preventing bribery.

Iii) Member countries should encourage the creation of monitoring bodies, independent of management, such as audit committees of boards of directors or of supervisory boards.

Iv) Member countries should encourage companies to provide channels for communication by, and protection for, persons not willing to violate professional standards or ethics under instructions or pressure from hierarchical superiors.

Public procurement

VI. RECOMMENDS:

i) Member countries should support the efforts in the World Trade Organisation to pursue an agreement on transparency in government procurement;

ii) Member countries' laws and regulations should permit authorities to suspend from competition for public contracts enterprises determined to have bribed foreign public officials in contravention of that Member's national laws and, to the extent a Member applies procurement sanctions to enterprises that are determined to have bribed domestic public officials, such sanctions should be applied equally in case of bribery of foreign public officials.²

iii) In accordance with the Recommendation of the Development Assistance Committee, Member countries should require anti-corruption provisions in bilateral aid-funded procurement, promote the proper implementation of anti-corruption provisions in international development institutions, and work closely with development partners to combat corruption in all development co-operation efforts.³

International Co-operation

VII. RECOMMENDS that Member countries, in order to combat bribery in international business transactions, in conformity with their jurisdictional and other basic legal principles, take the following actions:

i) consult and otherwise co-operate with appropriate authorities in other countries in investigations and other legal proceedings concerning specific cases of such bribery through such means as sharing of information (spontaneously or upon request), provision of evidence and extradition;

ii) make full use of existing agreements and arrangements for mutual international legal assistance and where necessary, enter into new agreements or arrangements for this purpose;

iii) ensure that their national laws afford an adequate basis for this co-operation and, in particular, in accordance with paragraph 8 of the Annex.

Follow-up and institutional arrangements

VIII. INSTRUCTS the Committee on International Investment and Multinational Enterprises, through its Working Group on Bribery in International Business Transactions, to carry out a programme of systematic follow-up to monitor and promote the full implementation of this Recommendation, in cooperation with the Committee for Fiscal Affairs, the Development Assistance Committee and other OECD bodies, as appropriate. This follow-up will include, in particular:

i) receipt of notifications and other information submitted to it by the Member countries;

ii) regular reviews of steps taken by Member countries to implement the Recommendation and to make proposals, as appropriate, to assist Member countries in its implementation; these reviews will be based on the following complementary systems:

- a system of self evaluation, where Member countries' responses on the basis of a questionnaire will provide a basis for assessing the implementation of the Recommendation;

- a system of mutual evaluation, where each Member country will be examined in turn by the Working Group on Bribery, on the basis of a report which will provide an objective assessment of the progress of the Member country in implementing the Recommendation.

Iii) examination of specific issues relating to bribery in international business transactions;

iv) examination of the feasibility of broadening the scope of the work of the OECD to combat international bribery to include private sector bribery and bribery of foreign officials for reasons other than to obtain or retain business;

v) provision of regular information to the public on its work and activities and on implementation of the Recommendation.

IX. NOTES the obligation of Member countries to co-operate closely in this follow-up programme, pursuant to Article 3 of the OECD Convention.

X. INSTRUCTS the Committee on International Investment and Multinational Enterprises to review the implementation of Sections III and, in co-operation with the Committee on Fiscal Affairs, Section IV of this Recommendation and report to Ministers in Spring 1998, to report to the Council after the first regular review and as appropriate there after, and to review this Revised Recommendation within three years after its adoption.

Co-operation with non-members

XI. APPEALS to non-member countries to adhere to the Recommendation and participate in any institutional follow-up or implementation mechanism.

XII. INSTRUCTS the Committee on International Investment and Multinational Enterprises through its Working Group on Bribery, to provide a forum for consultations with countries which have not yet adhered, in order to promote wider participation in the Recommendation and its follow-up.

Relations with international governmental and non-governmental organisations

XIII. INVITES the Committee on International Investment and Multinational Enterprises through its Working Group on Bribery, to consult and co-operate with the international organisations and international financial institutions active in the combat against bribery in international business transactions and consult regularly with the non-governmental organisations and representatives of the business community active in this field.

ANNEX

Agreed Common Elements of Criminal Legislation and Related Action

1) Elements of the offence of active bribery

i) Bribery is understood as the promise or giving of any undue payment or other advantages, whether directly or through intermediaries to a public official, for himself or for a third party, to influence the official to act or refrain from acting in the performance of his or her official duties in order to obtain or retain business.

Ii) Foreign public official means any person holding a legislative, administrative or judicial office of a foreign country or in an international organisation, whether appointed or elected or, any person exercising a public function or task in a foreign country.

Iii) The offeror is any person, on his own behalf or on the behalf of any other natural person or legal entity.

2) Ancillary elements or offences

The general criminal law concepts of attempt, complicity and/or conspiracy of the law of the prosecuting state are recognized as applicable to the-offence of bribery of a foreign public official.

3) Excuses and defences

Bribery of foreign public officials in order to obtain or retain business is an offence irrespective of the value or the outcome of the bribe, of perceptions of local custom or of the tolerance of bribery by local authorities.

4) Jurisdiction

Jurisdiction over the offence of bribery of foreign public officials should in any case be established when the offence is committed in whole or in part in the prosecuting State's territory. The territorial basis for jurisdiction should be interpreted broadly so that an extensive physical connection to the bribery act is not required.

States which prosecute their nationals for offences committed abroad should do so in respect of the bribery of foreign public officials according to the same principles.

States which do not prosecute on the basis of the nationality principle should be prepared to extradite their nationals in respect of the bribery of foreign public officials.

All countries should review whether their current basis for jurisdiction is effective in the fight against bribery of foreign public officials and, if not, should take appropriate remedial steps.

5) Sanctions

The offence of bribery of foreign public officials should be sanctioned/punishable by effective, proportionate and dissuasive criminal penalties, sufficient to secure effective mutual legal assistance and extradition, comparable to those applicable to the bribers in cases of corruption of domestic public officials.

Monetary or other civil, administrative or criminal penalties on any legal person involved, should be provided, taking into account the amounts of the bribe and of the profits derived from the transaction obtained through the bribe.

Forfeiture or confiscation of instrumentalities and of the bribe benefits and the profits derived from the transactions obtained through the bribe should be provided, or comparable fines or damages imposed.

6) Enforcement

In view of the seriousness of the offence of bribery of foreign public officials, public prosecutors should exercise their discretion independently, based on professional motives. They should not be influenced by considerations of national economic interest, fostering good political relations or the identity of the victim.

Complaints of victims should be seriously investigated by the competent authorities.

The statute of limitations should allow adequate time to address this complex offence.

National governments should provide adequate resources to prosecuting authorities so as to permit effective prosecution of bribery of foreign public officials.

7) Connected provisions (criminal and non-criminal)

- Accounting, recordkeeping and disclosure requirements

In order to combat bribery of foreign public officials effectively, states should also adequately sanction accounting omissions, falsifications and fraud.

- Money laundering

The bribery of foreign public officials should be made a predicate offence for purposes of money laundering legislation where bribery of a domestic public official is a money laundering predicate offence, without regard to the place where the bribery occurs.

8) International co-operation

Effective mutual legal assistance is critical to be able to investigate and obtain evidence in order to prosecute cases of bribery of foreign public officials.

Adoption of laws criminalizing the bribery of foreign public officials would remove obstacles to mutual legal assistance created by dual criminality requirements.

Countries should tailor their laws on mutual legal assistance to permit co-operation with countries investigating cases of bribery of foreign public officials even including third countries (country of the offeror; country where the act occurred) and countries applying different types of Criminalisation legislation to reach such cases.

Means should be explored and undertaken to improve the efficiency of mutual legal assistance.

ENDNOTES

¹ DAC Members are: Australia, Austria, Belgium, Canada, the Commission of the European Community, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States

² Member countries' systems for applying sanctions for bribery of domestic officials differ as to whether the determination of bribery is based on a criminal conviction, indictment or administrative procedure, but in all cases it is based on substantial evidence.

³ This paragraph summaries the DAC recommendation, which is addressed to DAC members only, and addresses it to all OECD Members and eventually non-member countries which adhere to the Recommendation.