In the seven years since agreement was reached on a multinational anti-bribery convention, all 35 signatories have ratified the treaty and adopted legislation that criminalizes the bribery of foreign public officials by persons within their jurisdiction, the U.S. Department of Commerce says.

In a July report to Congress on implementation of the Organization for Economic Cooperation and Development's (OECD) anti-bribery pact, the department also said that South Korea and Sweden have obtained convictions under their new laws and that momentum continues to build for new investigations and prosecutions.

"The United States will continue to advocate for rigorous enforcement of parties' anti-bribery laws," Commerce Secretary Donald Evans said in a June 29 news release. "We will continue to show leadership in the fight against global corruption."

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was signed in December 1997 and entered into force in February 1999. It includes all 30 OECD member countries as well as non-member countries Argentina, Brazil, Bulgaria, Chile and Slovenia.

The Commerce Department's annual report was mandated by Congress in the U.S. law implementing the anti-bribery treaty. Commerce's 2004 report -- the sixth and final report required by Congress -- includes reviews of the implementing legislation of Brazil, Chile and Turkey.

All three countries have taken "significant steps" toward meeting their obligations under the convention, but issues of concern remain, Commerce said.

As examples, the report cited the absence in Brazil of the concept of criminal liability for "legal persons," a term that typically refers to corporations. In Chile, areas of concern include the liability of legal persons, the level of sanctions and jurisdictional issues. Problems in Turkey include areas of corporate liability and the definition of a foreign public official.

Commerce also reported that enforcement of the anti-bribery convention remains uneven. Apart from the United States, South Korea and Sweden, the department said it was unaware of any other country in which a conviction had been obtained for bribery of a foreign public official. Canada, France, Italy and Norway have initiated investigations or legal proceedings in some cases, but many other countries "have been slow to apply enforcement resources to address transnational bribery," the department said.

To illustrate the magnitude of the problem, Commerce cited U.S. government estimates that between May 1, 2003, and April 30, 2004, the competition for 47 contracts worth $18 billion may have been affected by bribery by foreign firms of foreign officials.

The text of the annual report and more information are available at www.export.gov/tcc

U.S. Department of Commerce
International Trade Administration
July 2004

Addressing the Challenges of International Bribery and Fair Competition 2004

The Sixth Annual Report Under Section 6 of the International Anti-Bribery and Fair Competition Act of 1998

Executive Summary

This sixth and final annual report under the International Anti-Bribery and Fair Competition Act of 1998 (IAFCA) examines the progress that parties have made in implementing and enforcing the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Antibribery Convention).

Major Findings

The OECD Antibribery Convention has been ratified by all 35 signatories and each party has also adopted implementing legislation that is currently in force. These are notable achievements in the short time since the Antibribery Convention entered into force on February 15, 1999.

-- Since our last report, Ireland deposited its instrument of ratification with the secretary general of the OECD on September 22, 2003.

The U.S. government reviews of the implementing legislation of Brazil, Chile, and Turkey are included in this report. The implementing legislation of all parties except Slovenia has now undergone an assessment by the OECD Working Group on Bribery and the U.S. government. As summarized in the reviews, Brazil, Chile, and Turkey have taken some significant steps toward meeting their obligations under the convention, but there are some remaining issues of concern.

-- In Brazil for example, there is no concept of criminal liability for legal persons. In addition, it is unclear whether applicable administrative remedies will be sufficiently effective, proportionate, and dissuasive.

-- In Chile such issues include the liability of legal persons, the level of sanctions, limited jurisdictional coverage and mutual legal assistance.

-- Finally, in Turkey concerns remain in the areas of corporate liability, an effective regret exception, the definition of a foreign public official, and some of the Turkish sanctions provisions.

We are generally encouraged by the efforts of the parties to implement the Antibribery Convention. However, for a number of countries, we still have the same concerns that were identified in prior years' reports about the absence of specific legislative provisions to fulfill obligations under the convention.

-- The U.S. government and the OECD Working Group on Bribery are continuing to follow up on these problems with the countries concerned during the enforcement review process. In addition, the U.S. government may, if circumstances warrant, continue to engage countries bilaterally to encourage progress to implement their commitments under the convention.

With regard to the enforcement of the Antibribery Convention, performance remains uneven.

-- Other than the United States, we are aware of only two parties (South Korea and Sweden) whose authorities have obtained convictions under their respective implementing laws for bribery of a foreign public official.

-- Several other parties have initiated investigations or legal proceedings that are now in the public eye (Canada, France, Italy, and Norway), and other cases are in the investigative stage.

-- Unfortunately, some parties, particularly those whose firms are very active in export markets, have been slow to apply enforcement resources to address transnational bribery.

-- Based on information available from a variety of sources, we estimate that between May 1, 2003, and April 30, 2004, the competition for 47 contracts worth US$18 billion may have been affected by bribery by foreign firms of foreign officials. Although this represents an increase over last year's report of 40 contracts, the value of the contracts dropped, from $23 billion to $18 billion. U.S. firms are known to have lost at least eight of the contracts, worth $3 billion.

-- We will continue to urge parties to address credible allegations of bribery of foreign public officials. When information is received relating to acts of bribery that may fall within the jurisdiction of other parties to the convention, the information will be forwarded, as appropriate, to national authorities for action.

The U.S. government continues to believe that raising public awareness of antibribery laws is a very important element in making the convention a success. This includes informing the relevant prosecutorial authorities of the new tools they have to prosecute corruption, as well as counseling businesses and the general public about antibribery laws. However, based on reports from U.S. embassies and public sources of information, such efforts continue to vary widely among the parties.

-- Some parties continue to rely on historical perceptions of low levels of corruption within their communities and direct few if any resources to the effort.

-- Others, faced with limited resources, assign greater importance to other initiatives and neglect to address this important component of implementation and enforcement.

-- Nonetheless, some parties have recognized the need to raise awareness of the convention among their public and private sectors.

The U.S. government believes that a rigorous peer review mechanism will encourage parties to take the necessary steps to investigate and to prosecute unlawful conduct by persons subject to their jurisdiction. To this end, the U.S. government worked to persuade other OECD countries to join the consensus to increase funding for convention peer monitoring.

-- In 2003 the OECD Working Group on Bribery negotiated a compromise package of institutional, structural, and financial reforms that will provide for stable funding reviews through 2007. The OECD Council approved the reform package in February 2004.

Phase II enforcement reviews, begun in late 2001 with a review of Finland, have been accomplished for eight other parties; Bulgaria, Canada, France, Germany, Iceland, Luxembourg, Norway, and the United States. The United States assessed the initial pace of the enforcement peer review cycle to be too slow. Additional budget resources will enable the OECD Working Group on Bribery to review the rest of the parties by the end of 2007.

-- The goal of Phase II of the monitoring process is to study the structures that parties have in place to enforce the laws and rules implementing the convention and the Revised Recommendation and to assess their application in practice. Summaries for Bulgaria, Canada, France, Luxembourg, and Norway are included in this report.

Each of the 35 signatories to the Antibribery Convention has affirmed that bribes paid to foreign public officials are not tax deductible. Despite important positive steps taken by the parties to disallow the deductibility of bribes, we remain concerned that the practice of tax deductibility still continues. Careful monitoring is needed to ensure that the rules are actually enforced; the United States will continue to play an active role in this effort.

In April 2004, the working group recommended that Estonia be invited to join the working group. Estonia's accession may occur before the end of 2004. The United States advocates a careful and deliberate approach to enlargement of the convention parties' group. The primary focus should be to attract countries whose accession to the convention would bring significant mutual benefit, and whose companies are important global market participants.

-- The financial resources of the working group are not sufficient to permit the rapid expansion of membership without reducing OECD staff support for priority activities such as peer review of convention enforcement. Therefore, the United States will continue to advocate a careful and incremental enlargement strategy.

The U.S. government believes that the issues of bribes to political parties and candidates related to possible coverage by the convention continue to merit the attention of the working group and will seek to achieve consensus among convention parties to ensure such coverage.

The United States will continue to encourage other governments to increase public awareness within their countries. We will urge other governments to promote awareness of the convention and national laws in their business communities. In addition, fulfilling our commitment to our G-8 partners at Sea Island, Georgia, in June 2004, we will encourage efforts of our private sectors to develop and implement corporate compliance programs to promote adherence to laws against foreign bribery.