OECD Convention: Analysis of Anti-Bribery Measures and Limitations

This report provides a detailed analysis of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. It explores the convention's objectives, which include preventing bribery and its adverse economic impacts, and the common goals shared by signatory nations like Australia, the UK, and the USA. The report examines the convention's articles, focusing on the criminalization of bribery, jurisdictional issues, and cooperation among member states. It also highlights the limitations of the convention, such as its narrow definition of bribery and foreign public officials, as compared to the UK Bribery Act 2010. Furthermore, the report discusses the US Foreign Corrupt Practices Act of 1977 and its extra-jurisdictional reach, providing a comparative analysis of anti-corruption legislation. The report also touches upon the challenges of corruption in countries like Libya, emphasizing the need for effective enforcement mechanisms and international cooperation in combating bribery and corruption.

Australia, UK and USA have signed the OECD Convention. Australia has signed the
Convention on 7 June 1971; UK has signed the Convention on 2 May 1961 and USA has signed
the Convention on 12 April 1961 and USA is the first to sign the Convention. The OECD
Convention purports to prevent bribery activities and its adverse economical impact. The
Common objective with which the three nations have signed the Convention is to prevent corrupt
practices like bribery. All the signatories to the Convention have signed the OECD Convention
on Combating Bribery of Foreign Public Officials in International Business Transactions. This
chapter shall discuss about the different approaches of this three countries towards prevention of
corruption practices, which shall be explained individually.
The OECD has been a driving force for preventing corruption. Surveys showed that about
70-75% of bribery allegations involved companies from OECD members1. As indicated in
earlier chapters, corruption discourages and/or distorts domestic and international investment.
Investors avoid investing in countries that are known for high levels of corruption. Corruption
also fragments loyalties and shatters confidence in public institutions, thereby destabilizing
countries’ political and social systems. The then US President Bill Clinton summarized the case
against corruption when signing amendments to the Foreign Corrupt Practices Act in 1998. “We
have long believed bribery is inconsistent with democratic values, such as good governance and
the rule of law. It is also contrary to basic principles of fair competition and harmful to efforts to
promote economic development”2.
The enactment by the US of its Foreign Corrupt Practice Act 1977 put pressure on the
OECD, which in 1994 recommended that its members criminalise the offering of bribes to
foreign public officials related to business transactions. In 1996 the OECD adopted another
1 Barbara George, et al "The 1998 OECD Convention: An impetus for worldwide changes in attitudes
toward corruption in business transactions." (2000) 37(3) American Business Law Journal 485-525.
2 William J Clinton "Statement by the President." Office of the Press Secretary, The White House (2000).

resolution recommending members denounce laws allowing tax deduction for bribes. The OECD
members thought that the best way to combat the bribery of foreign officials was a binding
convention and after lengthy negotiations the convention was signed in February 1999.3
Distinguishing between private and public functions is in practice far from easy in that
the Article leaves much scope for circumvention. A public function has been defined simply as
any function which is carried on by a public official defined above. However it may happen that
the public official engages in conduct which is beyond the scope of their authority. The question
in this case would be whether such functions are considered as public functions or not. On the
other hand functions of private individual in connection with the public authorities also create
confusion and make it difficult to identify what kind of function is being carried out. Thus, it is
not often easy to differentiate between a Public and a private function.
The OECD Anti-bribery Convention:
The OECD Convention obligates all members to enact domestic laws making the bribery of
foreign public officials a criminal offence. Article 1 states:
[E]ach 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 undue pecuniary or other advantage, to a foreign public official, 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. Likewise, complicity in any attempt or any
3 The OECD Convention for Combating Bribery of Foreign Public Officials in International Business Transactions
was signed on 17 December 1997 and came into force on 15 February 1999. PUT THE REFERENE TO THE
OECD WEBSITE NOT A SECONDARY SOURCE, EXAMINERS WOULD BE VERY UNHAPPY ABOUT
THE USE OF ASECONDARY SOURCE FOR THIS BASIC INFORMATION..

conspiracy to bribe a foreign public official in any form described in Article (1) is
also regarded as a Criminal offence4.
In the same vein, Article (2) binds member states to affix liability to legal persons for
bribing public officials abroad. Article (3) stresses that sanctions on violators will be “effective,
proportionate and dissuasive.” It provides that in jurisdictions where criminal liability does not
apply to legal persons, such persons would be subjected to sufficient civil penalties to ensure that
any proceeds of that are confiscated. Article (4) discusses jurisdictional issues:
[E]ach party shall take such measures as may be necessary to establish its
jurisdiction over the bribery of foreign public officials when the offence is
committed in whole or part in its territory and each party which has jurisdiction to
prosecute its nationals for offences committed abroad shall take such measures as
may be necessary to establish its jurisdiction to do so in respect of the bribery of a
foreign public official, according to the same principles5.
Article (5) states that the investigation and prosecution of those charged with bribing
foreign officials ‘ shall not be influenced by consideration of national effect upon the
relations with another state, or the identity of the natural or legal person involved.’
Article (8), on financial books, records and disclosure reports, prohibits, ‘...the
establishment of off-the-book accounts.’ The Convention stresses the necessity for
member states to co-operate in their fight against bribery of foreign public officials.
Mutual obligations for legal assistance and extradition are treated in Articles 9, 10 and
11. Article 12 mandates full co-operation by member states in implementing the
4 Spahn, Elizabeth. "Implementing global anti-bribery norms from the foreign corrupt practices act to the OECD
Anti-Bribery Convention to the UN Convention Against Corruption." (2013).
5 Paulus, Michal, and Eva Michalikova. OECD Anti-Bribery Policy and Structural Differences Inside the EU. No.
2016/23. Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, 2016.

Convention: ‘[They] shall co-operate in carrying out a programme of systematic follow-
up to monitor and promote the full implementation of this Convention.’6
Limitations of the OECD Convention:
This Convention, despite its successes in reducing bribery by state members, has its
limitations as compared to the UK Bribery Act 2010. Article (1) defines the act of bribery as
‘.any person intentionally offer[ing] or give[ing] any undue pecuniary or other advantage to
foreign public official”. This ignores passive bribery. The Commentary on the Convention states
says that this Convention deals only with what is in the law of some countries referred to as ...
active corruption. There is a difference between the terms’ bribery and corruption’ where bribery
is a particular offence that is concerned with the practice of offering something, usually, money
and purporting to obtain any illegal advantage. On the other hand the term’ corruption’ refers to
abuse of a position of trust conducted for the purpose of gaining an undue advantage. Active
corruption involves promising to give a bribe, in contrast to ‘passive bribery’, the offence
committed by the official ‘who receives the bribe.’ The Article (1) definition of bribery is weak,
since it only deals with donors and ignores recipients (the bribed officials).7.
The further problem is that the Article (1) definition of a ‘foreign public official’ is too
narrow. It is limited to persons exercising functions for a foreign country, a public enterprise or
to officials or agents of public international organisations, ignoring politicians, political parties
and party members.8 Corruption and bribery are common among politicians, party officials and
6 Spahn, Elizabeth K. "Multijurisdictional Bribery Law Enforcement: The OECD Anti-Bribery Convention." Va. J.
Int'l L. 53 (2012): 1.
7 Tarullo, Daniel K. "The Limits of Institutional Design: Implementing the OECD Anti-Bribery
Convention." Va. J. Int'l L. 44 (2003): 665.
8 Pacini, Carl, Judyth A. Swingen, and Hudson Rogers. "The role of the OECD and EU Conventions in
combating bribery of foreign public officials." Journal of Business Ethics 37.4 (2002): 385-405.

political candidates. This limited definition of bribery also excludes bribes paid to officials of
state owned companies. A public official is any person holding a position of an official authority
which is conferred to they by the state. In other words the person holds an administrative,
judicial or legislative authority in any form whether elected or appointed.9.While Article (1), says
that ‘foreign public official’ includes ‘any person exercising a public function for foreign
country, for a public agency or public enterprise’, the Commentary Article (15) to the
Convention states that:
An official of a public enterprise shall be deemed to perform a public function
unless the enterprise operates on a normal economic basis in the relevant market10.
It also omits the bribery of foreign subsidiaries. Article (2) of the Convention mentions bribery
of subsidiaries but only indirectly, when it states:
[E]ach party shall take any measures necessary to establish that complicity in,
including incitement, aiding and abetting, or authorization of an act of bribery of a
foreign public official shall be a criminal offence.
Although this provision may be read as prohibiting parent companies in state members
from using foreign subsidiaries as conduits for bribes, it would be hard to implement, because
legally proving the acts of legally distinct subsidiaries are connected with parent companies
would be extremely difficult.11
It also ignores acts of bribery committed independently by subsidiary bodies and
disguised bribes, such as favouritism shown to relatives of foreign public officials, both of which
9 Harms, Brian C. "Holding Public Officials Accountable in the International Realm: A New Multi-Layered
Strategy to Combat Corruption." Cornell Int'l LJ33 (2000): 159.
10 Carr, Indira M., and Opi Outhwaite. "The OECD Anti-Bribery Convention Ten Years On." (2009).
11 D'Souza, Anna. "The OECD anti-bribery convention: changing the currents of trade." Journal of Development
Economics 97.1 (2012): 73-87.

facilitate circumvention. So also does the Convention’s interpretation of the phrase ‘other
improper advantage in the conduct of international business’ in Article (1). The Commentaries
on the Convention in trying to clarify the meaning of “important advantage” states in (8):
It is not an offence, however, if the advantage was permitted or required by the
written law or regulation of the foreign public official’s country, including case
law.
In most developing countries politicians and political parties and dominant senior public
officials can influence or amend existing laws or draft new ones to serve their interests.
Permitting all payments, whether justified or not, so long as they are allowed in a foreign
country, may facilitate bribery and so defeat the intent of the Convention. In countries whose
‘culture’ allows such payments, the permission is usually contained in unwritten traditions rather
than written laws. Corruption is a major obstacle for the proper development of Libya12.
Widespread corruption has infected almost all sectors of Libya and oil industry along with public
procurement are among the most hit sectors in the county by corruption. Favouritism and Bribery
are common practices in most sectors and mostly all business suffer unethical competition from
business owned by the states who also have domination in the local market. Under Gaddafi’s rule
the situation got worse in the period post revolution13. There is a defected institutional structure
to combat corruption in the county and violence along with political instability undermines the
rule of law14. The process for drafting a written constitution is still under progress of the Libyan
Constitution Drafting Assembly and because of the delay the legal framework is still extracted
12 Domoro, Omer M. Othman, and Syed Omar Syed Agil. "Factors Influencing Police Corruption in Libya-A
Preliminary Study." International Journal of Economic and Management Science 2.2 (2012): 25-35.
13 Domoro, Omer M. Othman, and Syed Omar Syed Agil. "The influence of organizational culture on police
corruption in Libya." Journal of Business and Management 2.5 (2012): 33-38.
14 Rose-Ackerman, Susan, and Bonnie J. Palifka. Corruption and government: Causes, consequences, and reform.
Cambridge university press, 2016.

from the constitutional declaration coming into force when Gaddafi was oust. The security
apparatus along with the Judiciary also proving to be ineffective which is making the proper
implementation of law very difficult15.
It lacks effective enforcement mechanisms. Determining which corporations do not
comply with its demands and deciding who is bribing whom, are left to the police forces of state
members. They may be lax in discharging this function, as each country’s police may look to its
own interests. The appropriate solution was to establish a central body entrusted with monitoring
all member countries’ compliance with the Convention.
For all its limitations, the OECD Convention is a step forward in combating bribery and
corruption.
The US Anti-Corruption Legislation has been referred to in order to discuss in details the
concerns related to bribery of foreign officials. The Foreign Corrupt Practices Act of 1977 is a
Federal legislation in the United States that mainly deals with accounting transparency
requirements stipulated under the Securities Exchange Act 1934 and issues relating to bribery of
foreign officials.
US Foreign Corrupt Practices Act 1977
The US legislation is contained in the Foreign Corrupt Practices Act 1977. An
important aspect of the legislation is its s extra-jurisdictional reach. Through the process of
Extra-jurisdictional reach a government may exercise authority over any territory which is not
under its jurisdiction however an understanding has to be present with the other government
having jurisdiction of such place in order to carry out this process. The legislation 1977 prohibits
15 Rose-Ackerman, Susan, and Bonnie J. Palifka. Corruption and government: Causes, consequences, and reform.
Cambridge university press, 2016.

U.S. firms and individuals from making payments as bribes to foreign officials for the purpose of
a business deal and in contrary to the duties of the foreign officials. The Foreign Corrupt
Practices Act states that it is unlawful to bribe any employee or officer of a foreign government
or department or any person who is works on behalf of government, agency, department or
instrumentality in an official capacity. A facilitating payment is a payment that is made to a
government official or public. Such payment acts as incentive for the officials to complete some
action or procedure expeditiously for the benefit of the person making such payment. The
process also refers to the legal provisions of a country going beyond its territories in connection
to authorising the court of the other country to impose their jurisdiction against persons before
them in relation to an act done outside the country.
The FCPA applies only to the bribery of non-US public officials (other US statutes
criminalise commercial bribery e.g. the Travel Act 1961) and significantly impacts upon US
business in relation to corruption and bribery offences. This is because companies which fall
under the control of the FCPA are increasingly becoming wary of buying businesses which do
not come under the provisions of the FCPA because of the fear that may be subjected to
liabilities that would lead to expenditure. In addition, businesses that do not come under the
provisions of FCPA show significant reluctance in getting associated with transactions which
may potentially bring them under the control of the FCPA. The consequences arising out of
FCPA are significantly visible in post transaction integration cost such as proper compliance of
the FCPA of a company which was not under the provisions of the act and transaction cost
denoting efforts of increased due diligence. The FCPA criminalises conduct by certain classes
of persons and entities making payments to foreign government officials with the ‘corrupt
intention’ of obtaining or retaining business. More specifically provided by the FCPA

The anti-bribery provisions of the FCPA prevents the intentional use of the mails or any
source of instrumentality of interstate commerce to be used dishonestly pertaining to any offer,
payment, that has been promised to be paid, or the authorization of the payment in monetary
form or anything valuable to any person. The use of such sources are prohibited, in particular,
with teh knowledge that all or a portion of such money or valuable thing offered, given or
promised, directly or indirectly, to a foreign official with a view to influence the foreign official
in his or her official capacity. The provision prohibits the use of portion of such money or
valuable thing for inducing the foreign official to do or omit to do any conduct that is
contravenes his/her lawful duty, or for securing any improper advantage to assist in obtaining or
retaining business for or with, or directing business to, any person.16
The FCPA applies to all US persons and certain foreign issuers of securities. According
to the preamble of OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions, bribing foreign public officials leads to serious political and
moral concerns and weakens good governance and economic development. It further results in
distortion of international competitive conditions. Amendments to the Act in 1998 ensured
conformity with the OECD Convention while simultaneously ensuring the anti-bribery
provisions also applied to foreign firms and persons acting directly or via agents to make corrupt
payments in the ‘territory’ of the US. The term ‘territory’ has been broadly interpreted by the
Department of Justice as their Criminal Resource Manual for prosecutors indicates that it applies
‘whenever a foreign company or national causes an act to be done within the territory of the
United States by any person acting as that company's or national's agent’.17
16 The Foreign Corrupt Practices Act 1977 (FCPA), 15 USC 78dd-1, et seq.
17 Deming, Stuart H. "The potent and broad-ranging implications of the accounting and record-keeping provisions of
the Foreign Corrupt Practices Act." J. Crim. L. & Criminology 96 (2005): 465.

This interpretation enables the prosecution of foreign nationals who have never been to
the US, provided that they caused some act in furtherance of the offence to occur in the US, and
of foreign companies who are liable for acts carried out on their behalf – a form of strict liability.
Prosecutions are often brought in relation to the accounting provisions of the FCPA that require
companies with securities listed on any US stock exchange to (a) make and keep books, records
and account that accurately and fairly reflect the transactions of the corporation and (b) devise
and maintain a system of internal accounting controls.
There are instances, which is the evident of the fact that in US, very few disincentives is
provided to several bribe-givers in international transactions. The FCPA statute in the US
considers payment of bribes by the US firms to abroad as an offence which calls for a change.
The OECD Ministers have agreed to such change in the G7 Summit held in June which forms
the issue that is proposed in the OECD Convention. Such provisions enabled Siemens and
Innospec to be prosecuted in the US (see chapters 4.4 and 4.5). Another instance of activities
related to foreign corrupt practices that was carried out in the USA was the Wa-tergate Scandal.
It involved illegal political payment made by several US corporate leaders.
The US Act cannot be viewed in isolation from other legislative provisions whose purpose is to
deter corruption, particularly important is whiste blower legislation.
Whistle-blower legislation
In the US, whistle-blowers are provided both protection and incentives. The Securities and
Exchange Commission (SEC) is authorised to pay eligible individuals who provide information
are eligible by providing good quality information which constitutes an action over $ 1 million

under the FCPA18. The monetary benefits provided to such individuals range from 10-30% of the
total penalties imposed. In order to supervise the SEC’s Program related to Whistle-blowers the
office of Whistleblower has been initiated. The law prohibits any kind of retaliation with respect
to whistleblowers and fines have been imposed by the SEC on companies in relation to actions
such as removing the whistleblowers from their positions, giving the investigation
responsibilities to the whistleblowers of the action which has been reported by them, changing
the job function of the whistleblowers, taking away the supervisory responsibility of the
whistleblowers and marginalising whistleblowers.
There may be leniency, which may be created in relation to organizations having a self-
reporting policy of reporting and cooperating with the department as identified by the
Department of Justice and SEC. The decision related to disclosing voluntarily is fact dependent
and complex and has broad consequences, which have to be considered carefully. The policy of
the Department of Justice is the primary policy related to the federal prosecution of the business
organizations. A memorandum had been published by the DOJ which described the FCPA pilot
program to motivate voluntary decisions and self-reporting in April 2016. The report of
investigation contains the SEC’s policy with respect to section 21(a) of the Securities Exchange
Act 193419.
American Anti-Corruption Act 1977
18 Smarzynska, Beata K., and Shang-Jin Wei. Corruption and composition of foreign direct investment: Firm-level
evidence. Vol. 7969. Cambridge, MA: National bureau of economic research, 2000. NO. NO NO, YOU must go to
the original source NOT someone else saying what it is. WHAT IS THE ACT, WHAT IS THE SECTION, WHAT
DOES THE ACT SAY
19 Securities Exchange Act 1934 (US) WHAT SECTION

The American Anti-Corruption Act (AACA)20 covers three areas. including the prevention of
political bribery, overhauling lobbying, ending illegitimate money through the dramatic
enhancement of transparency and creating citizen funded elections to give every voter a voice.
The provisions of the FCPA apply to Domestic Concerns, Issuers, agents acting on behalf of
domestic concerns and anyone who breaches the provisions of the FCPA within the territories of
the US. ’'Issuers’ means, any business organization which has its shares listed on the US
exchange, companies having shares in “Over the counter market” and having the requirement of
filing reports with the SEC periodically. Out of jurisdiction issuers who have their American
Depository Receipts listed on US exchanges are also considered to be as issuers under the FCPA
subjected to a few exceptions.
The term of domestic concern is even broader and includes any US national, citizen or resident
along with any business organization which is established under US laws or having its primary
dealing place in the US. Entities and foreign nationals are covered by the term “person” who
breach the provisions of the FCPA.
You need a paragraph about why this is all important, how these statutory provisions interact to
combat bribery and corruption. Note also how corruption is tackled on a number of different
fronts not just simply criminal provisions. A sentence indicating that these types of provisions
could be considered by Libya in deciding what is the best approach to corruption and its
prevention
It might also be good to give some recent examples of its application in relation to foreign
nationals. If we remember correctly we have previously sent quite a few from newspaper
reports that you could include.
20 Steiner, George A., and John Steiner. Business, government and society. New York, 1994. Who is the publisher?