INTERNATIONAL BUSINESS TRANSACTIONS AND CORRUPTION
II. GENERAL ISSUES OF CORRUPTION IN INTERNATIONAL
A. Definition of corruption
B. Causes, costs and consequences of corruption
1. Causes of corruption
2. The costs and consequences of corruption.
III. MEASURES TAKEN TO FIGHT CORRUPTION IN INTERNATIONAL
A. Legal Instruments
1. Foreign Corrupt Practices Act
2. The OECD Anti- Bribery Convention
3. Inter-American Convention
5. Criminal Law Convention on Corruption
6. Civil Law Convention on Corruption
B. Measures Taken by International Organizations
1. United Nations
2. European Union
3. The World Bank
4. International Monetary Fond
5. International Chamber of Commerce
6. World Trade Organization.
7. Transparency International.
IV. HOW TO DO BUSINESS IN HIGHLY CORRUPTED COUNTRIES……………………27
After collapse of the communism in the Central and Eastern European countries, in modern
conditions of economic growth, globalization, and new developments in technology, possibilities of
doing business around the world have tremendously increased for American businesses. But at the same
time and in the same conditions serious obstacles for business activities at the global level have increased
too. These obstacles include development of organized crime and corruption in countries with transition.
As discussed later in the paper, high level of corruption and criminalization of economy have negative
influence not just at countries itself but at foreign and multinational corporations, which have intent to do
business in those countries as well. This situation has attracted the attention of the international business
community to problems of corruption in international business transactions and demanded some actions,
including legislative ones.
For attorneys who are going to practice law in the sphere of international business, it is very
important to know about measures taken by the international community and the United States
government in fighting and preventing corruption in international business transactions as well as
recommendations developed by international organizations in this field. Moreover, the existence of the
Foreign Corrupt Practices Act requires an attorney to be aware of corruption everyday in every s ingle
transaction especially when dealing with highly corrupted countries. As usual, American companies are
trying to avoid conflicts with FCPA and the attorney in the majority of cases has the burden to deal with
This paper intents to familiarize attorneys with: modern international concept of corruption and
its influence at international business transactions; provisions and effects of FCPA on American
businesses in foreign countries; measures taken at the international level to reduce corruption in
international business transactions; and some possible practical solutions for doing business in highly
Part II of this paper briefly analyses general issues of corruption: definition, causes, costs and
consequences both for emerging economies and international corporations. The main idea is that
corruption mostly effects developing countries in political, social and economic aspects but at the same
time it has a very strong influence on foreign businesses too.
Part III describes measures taken at international level to reduce influence of corruption at
international business transactions. It includes analysis of international conventions to which United State
is a party, FCPA, and measures taken by the main international organizations to reduce corruption in
international business transactions.
Part IV of the paper investigates practical solutions of doing business in conditions of highly
II. GENERAL ISSUES OF CORRUPTION IN INTERNATIONAL BUSINESS TRANSACTIONS
A. Definition of corruption
There are a lot discussions devoted to the understanding of corruption. Different authors express
different approaches in defining corruption. The narrowest approach contains definition of corruption as
use of public office for private gain.
The broad approach contains abuse of not only public office but private or commercial one too.
Based on these approaches authors distinguish three big groups of corruption: political, personal and
commercial. The basic difference is in the office, power and position, which are abused, and aim of
abuses. Political corruption may include bribery, use of governmental offices for private enrichment and
Maria Dako lias and Kim Thachuk, The Problem of Eradicating Corruption from the Judiciary: Attacking Corruption in
the Judiciary: A Critical Process In Judicial Reform, 18 Wis. Int'l L.J. 353, 355 (2000). [Hereinafter Dako lias & Thachuk]
substitution of particularistic for universalistic norms of public decision- making2 . Personal corruption
may include violations of fiduciary duty, mendacity for private gains among friends and insider trading. 3
Commercial corruption takes place when a supplier bribes a purchasing agent to induce a sale, a
customer pays off an airline clerk to obtain access to first class, a firm’s public relations department pays
a reporter to write a favorable story or managers at the top levels of a corporation might be paid to
provide inside information on upcoming deals to investors and stock brokers. 4
Corruption could have a lot of manifestations, which could be divided into two groups: criminal
and civil. Criminal forms usually contain: bribery, extortion (exacting money coercively), fraud (an act of
deception deliberately practiced with the view of gaining unlawful advantage), trafficking,
embezzlement, (appropriating fraudulently to one's own use what is entrusted to one's care). Civil forms
are different kinds of clientelism or patron-client relationships (where individuals use their public offices
for personal aggrandizement or to gain favorable advantages for themselves or their friends, relatives). 5
The main difference between these two forms is existence of criminal liability for acts of corruption. It’s
clear, that corruption is anti-social phenomenon but it is not always a crime.
Some authors look at corruption like at system but not a single act. Such approach considers two
analytical points. First, corruption may be represented as following a formula: C = M + D - A.
Corruption equals monopoly plus discretion minus accountability. For instance, “whether the activity is
public, private, or nonprofit, and whether it is carried on in Ouagadougou or Washington, one will tend to
find corruption when an organization or person has a monopoly power over a good or service, has the
discretion to decide who will receive it and how much that person will get, and is not accountable.” 6 And
Id. at 356
Kim Lane Scheppele, The Inevitable Corruption Of Transition, 14 Conn. J. Int'l L. 509, 510-514 (1999).
UNITED NATIONS DEVELOPM ENT PROGRAM, (3, July 1997), M DGD Discussion Paper 3, Economic Causes of
Corruption, at http://magnet.undp.org/docs/efa/corruption3/o_UN-07b_Chp1.pdf
Dakolias & Thachuk , supra note 1 at 355-356.
Robert Klitgaard, International Cooperation Against Corruption, International Monetary Fund Finance & Develop ment
(March, 1998), No. 1, Vo l. 35, Pg. 3, LEXIS, Nexis Library, IAC-ACC-NO: 20519366.
second, corruption is a crime of calculation, not passion. “There are both saints who resist all
temptations and honest officials who resist most. But when bribes are large, the chances of being caught
small, and the penalties if caught meager, many officials will succumb”. 7
Here we need to distinguish system of corruption and systematic corruption, which some authors
discuss too. 8 While system of corruption discusses a nature of corruption, “systemic corruption”
illustrates the scale of corrupted activity.
A lot of authors don’t pay attention to the distinction between bribery and corruption, what is
wrong. Bribery as we can see is narrower then corruption and it’s not always the same. I need to pay
attention to this and distinguish bribery from other forms of corruption because major legal documents
that will be discussed later contain term “bribery” but not corruption. Briber y, as an act of corruption,
always deals with obtaining of illegal payments with abuse of public or commercial office. 9 The payment
need not always involve the exchange of money (could be other gifts or advantages, such as membership
of an exclusive club or promises of scholarships for children, special favors or influence).
As an act, despite the form it takes, corruption is always a two-way transaction; it requires a
supply side (the briber) and a demand side (the one who receives the bribe).
Different degrees of corruption could be highlighted too. Like, for example "petty" corruption
and "grand" corruption. “Petty” corruption usually involves small sums paid to low level officials to
"grease the wheels" or cut through bureaucratic red tape. Correspondingly “grand” corruption takes place
when large multinational companies paying millions of dollars to government leaders or politicians to
obtain lucrative business contracts. But, in the author’s opinion this distinction does not mean that some
James P. Wesberry Jr., International Financial Institutions Face the Corruption Eruption, 18 J. INTL. L. BUS, 498, 509
(1998). [Hereinafter Wesberry ]
See John T. Noonan, Bribe (1987) for discussion of bribery.
Enery Quinones, What is Corruption, OECD Observer, (April 1, 2000), Pg. 23; LEXIS, Nexis Library IAC-ACC-NO:
64333488. [Hereinafter Quinones ]
forms of corruption are worse than others. “Indeed, petty corruption which can interfere with the delivery
of basic education and healthcare programs, can have very serious consequences, even to the extent of
causing many more years of grinding poverty for the world's economically disadvantaged.” 12
B. Causes, costs and consequences of corruption
1. Causes of Corruption
In general, it’s very difficult to deal with things if you don’t understand where they come from
and why they exist. That’s why before starting a d iscussion about measures against corruption it’s
important to understand its roots 13 It’s like in medicine, before starting a treatment, a doctor must
diagnose the patient.
The other important point I have to make is that when we are talking about roots of corruption we
mean developing countries where a business is to be done by American corporation. Of course societies
in each country with emerging economy are different as well as cultures, governments, mentality of
people. An attorney should bear these diversities in mind when dealing with particular country. And it is
very good idea to look at specific country’s custom before take some actions. For purposes of this paper,
there is no need to go in deep and discuss each developing country separately. I’m taking broad approach
and just name causes of corruption in developing countries. Such conditions could cause corruption in
any country, not just developing, but for today the majority of these factors or all of them do exist in
Causes of corruption could be divided into two big groups: socio-political and economic.
See Nancy Bord, International Corruption: So What? World and I, (April 1, 1999), No. 4, Vo l. 14, Pg. 86, LEXIS, Nexis
Library IAC-ACC-NO: 54703786, fo r discussions of causes and consequences of corruption. See also State Dept's Wayne on
Anti-Bribery Report to Congress, (1670), (29 June 2000) at http://www.fas.org/irp/news/2000/06/000629-bribery.ht m, for
discussions See also DENNIS M. A RROYO, MON DAY MORE TRADE MAY LEAD TO LESS C ORRUPTION , Ph ilippine
Daily Inquirer (April 16, 2001), Pg. 3, LEXIS, Nexis Library, WDPI file;
a. Socio-political causes of corruption are following: (a) weak governance of a country; (b)
dysfunctional government’s budgets; (c) delays in the release of budget funds, especially when this
involves pay; (d) closed political systems dominated by narrow vested interests; (e) use of public office
for private gain by senior officials and political leaders; (f) divergence between the formal and the
informal rules governing behavior in the public sector; (g) weak accountability, eroded ethical values,
inoperative financial management systems resulting in no formal mechanism to hold public officials
accountable for results; (h) low and declining civil service salaries and promotion unconnected to
performance and a public service long dominated by patron-client relationships, in which the sharing of
bribes and favors has become entrenched; (j) civil services receive inadequate supplies and equipment;
(k) adequate legislative controls are lacking (a lack of protection for those who resist corruption and
special anti-corruption bodies turned into partisan instruments whose real purpose is not to detect fraud
and corruption but to harass political opponents); (l) unenforced rules of conduct and conflict of interest
with ineffectual watchdog institutions such as ombudsmen, auditors, and the media or absent; (m)
international sources of corruption associated with major projects or equipment purchases. 14
b. Economic causes of corruption are closely connected with political ones. They are following:
(1) existence of trade restrictions leads to payments to governmental officials in order to get import
licenses which are in limited quantity; (2) existence of a big number of government subsidies regulate
industrial policy, governmental officials strongly involved in price controls; (3) existence of multiple
exchange rate practice and foreign exchange allocation schemes leads to attempts to gain the most
advantageous rates by bribing governmental officials; (4) low wages in civil services leads to extortion
bribes by civil servants to improve their financial situation; (5) natural resources endowments leads to
bribes of governmental official to get the best prices in avoidance of government regulations. 15
Wesberry, supra note 8, at 498. See also QUINONES, supra note 9.
Paolo Mauro, Why Worry About Corruption? 4-6 (1997). [Hereinafter Mauro]
2. Costs and consequences of corruption.
Corruption has very strong effect at political, social and economic life of a country where it takes
place. The existence of corruption in this case puts some costs and some benefits of political, jud icial,
and bureaucratic actions to different members of the society. 16
In the field of International business transactions the corruption has an impact at both sides:
countries where corruption takes place and foreign companies, which are doing or trying to do business
in those countries. Correspondly the country is suffering social, political and economic loses and
business suffering from commercial loses. Losses of countries could be divided into two big groups:
economic and non-economic.
a. Non-economic losses are following: (a) it undermines democracy by effecting rights of
ordinary people and small entrepreneurs; (b) it causes harm to the environment; (c) it retards
development; (d) it erodes the moral fabric of every society; (e) it leads to contempt for the rule of law;
(f) it is often connected with trans-border criminal activity, including drug trafficking, organized crime
and money laundering.
b. Economic loses are following: (1) corruption lowers investment and retards economic growth
to significant extent 17 ; (2) it reduces the effectiveness of aid flows through the diversion of funds; (3) it
leads to loss of tax revenue and to adverse budgetary consequences; (4) it leads to lower quality of
infrastructure and public services; (5) it may distort the composition of government expenditure; 18 (6)
distorts the allocation of resources and undermines competition in the market place; (7) it harms
consumers and taxpayers, develops a threat to taxpayer confidence; (8) country credit ratings drop; (9) it
lessens trade with other countries; lowers growth.
See Henry R. Luce, The Role of The World Bank in Controlling Corruption, 29 Law & Pol'y Int'l Bus. 93, 95-97 (1997) for
6 situations where bribery p lays role of the distributor of costs and benefits.
See Vito Tan zi, Roads to Nowhere:Hhow Corruption in Public Investment Hunts Growth (1998).
Mauro, supra note 15, at 6-7.
c. Commercial loses for the U.S. companies and others because of high level of corruption are
following: (A) entrepreneurs suffer higher risks and increased costs of doing business; (B) international
bribery results in tens of billions of dollars in lost exports for those who by the rules and seek to win
contracts through fair competition; it the ability of businesses to operate in a transparent, honest and
predictable environment; corruption hurts suppliers of exporters and impedes international trade. It is
estimated that US$ 100 billion is paid out in bribes worldwide every year which is equivalent to nearly
twice New Zealand's GDP and it may be just the tip of the iceberg. 19
III. MEASURES TAKEN TO FIGHT CORRUPTION IN INTERNATIONAL BUSINESS
In such conditions of globalizing economy the most important international organizations both
political and economic ones started to pay close attention to the problems of corruption. In the period
between 1996 and today a lot of legal steps were taken to reduce corruption in international business
transactions at international and domestic level. The most important of them will be discussed now.
A. Legal Instruments
1. Foreign Corrupt Practices Act.
An attorney working for a firm seeking to do business in foreign markets must be familiar with
the Foreign Corrupt Practices Act 20 . (Further FCPA). In general, the FCPA prohibits American
companies from making corrupt payments to foreign officials for the purpose of obtaining or keeping
business. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore
DONA LD J. JOHNSTON, Honesty is the Best Policy, OECD Observer (April 1, 2000), Pg. 3 LEXIS, Nexis Library, IA C-
Foreign Corrupt Practices Act of 1977, Pub. L. No. 95-213, 91 Stat.1494. 15 U.S.C.A. § 78 (1998)
public confidence in the integrity of the American business system. FCPA was amended in 1988 and in
The FCPA's basic anti-bribery prohibition makes it unlawful for a firm (as well as any officer,
director, employee, or agent of a firm or any stockholder acting on behalf of the firm) to offer, pay,
promise to pay (or even to authorize the payment of money, or anything of value, or to authorize any
such promise) to any foreign official for the purpose of obtaining or retaining business for or with, or
directing business to, any person. A similar prohibition applies with respect to payments to a foreign
political party or official thereof or candidate for foreign political office. It is prohibited by the act to
make bribes directly or by intermediaries. The subject of the act is any individual who is a citizen,
national, or resident of the United States, or any corporation, partnership, association, joint-stock
company, business trust, unincorporated organization, or sole proprietorship that has its principal place of
business in the United States or that is organized under the laws of a state of the United States, or a
territory, possession, or commonwealth of the United States (referred in the Act as “domestic concern”).
It is also unlawful to make a payment to any person, while knowing that all or a portion of the payment
will be offered, given, or promised, directly or indirectly, to any foreign official (or foreign political
party, candidate, or official) for the purposes of assisting the firm in obtaining or retaining business.
"Knowing" includes the concepts of "conscious disregard" or "willful blindness."
The Department of Justice is responsible for all criminal enforcement and for civil enforcement
of the anti-bribery provisions with respect to domestic concerns. The Securities and Exchange
Commission (SEC) is responsible for civil enforcement of the anti-bribery provisions with respect to
issuers (issuers of registered securities and issuers required to file periodic reports with the SEC). The
See Barbara Crutchfield George & Kathleen A. Lacey, A Coalition of Industrialized Nations, Dveloping Nations,
Multilateral Development Banks , and Non-Governmental Organizations:A Pivotal Complement to Current Anti -Corruption
Initiatives, 33 Cornell Int’l L.J. 547 (2000) for discussion of the amend ments. See also Stuart H. Deming, Foreign Corrupt
Practices, 33 Int'l Law. 507 ( Su mmer, 1999).
Office of General Counsel of the Department of Commerce also answers general questions of U.S.
exporters concerning the FCPA's basic requirements and constraints.
Violations of FCPA could result in criminal and/or civil penalties. The Criminal penalty for a
legal person is a fine of up to $2 million. Penalties for natural persons depend on his/her position.
Officers, directors, and stockholders are subject to a fine of up to $100,000 and imprisonment for up to
five years; employees and agents are subject to a fine of up to $100,000 and imprisonment for up to five
years. The firm may not pay fines imposed on individuals.
The civil penalties are in the jurisdiction of the Attorney General or the SEC. As appropriate,
these agencies may bring a civil action for a fine of up to $10,000 against any firm as well as any officer,
director, employee, or agent of a firm, or stockholder acting on behalf of the firm, who violates the anti-
bribery provisions. In addition, in an SEC enforcement action, the court may impose an additional fine
not to exceed the greater of the gross amount of the pecuniary gain to the defendant as a result of the
violation, or a specified dollar limitation.
Aside criminal and civil penalties government can take other actions against violators of the Act.
Under guidelines issued by the U.S. Office of Management and Budget, a person or firm found in
violation of the FCPA may be barred from doing business with the U.S. government. Indictment alone
can lead to suspension of the right to do business with the government. In addition, a person or firm
found guilty of violating the FCPA may be ruled ineligible to receive export licenses; the SEC may
suspend or bar persons from the securities business and impose civil penalties on persons in the securities
business for violations of the FCPA; the Commodity Futures Trading Commission and the Overseas
Private Investment Corporation both provide for possible suspension or debarment from agency
programs for violation of the FCPA; and a payment made to a foreign government official that is
unlawful under the FCPA cannot be deducted under the tax laws as a business expense. 22
FCPA has received a lot of criticism. First of all, the FCPA is not ideal as a law: its enforcement
is difficult; it is inappropriate considering the structure of today’s global market, it constitutes moral
imperialism and over reaches into the sovereignty of individual states 23 . As a result, the FCPA has failed
to have any serious impact at bribery as well as other domestic laws. 24 “According to figures cited by
David Hess and Thomas Dunfee in their recent Zicklin Center paper, between 1977-95 the Department of
Justice prosecuted only 16 bribery cases under the FCPA. A Control Risks Group survey reported last
year at the OECD Development Center Washington conference noted that 95 percent of the respondents
believed that U.S. companies "regularly" or "nearly “always" use "middle men" to "get round the
FCPA."25 It also leads to economic losses by U.S. business, especially in transitional economies 26 , which
are very difficult to recover. 27 For example, in very first year of FCPA existence United States had $ 1
billion in lost trades opportunities 28 . But for instance, in 1997 it was affected in international contracts
worth almost $30 billion by foreign firms, which are not bound by anti-bribery laws in their home
jurisdictions. 29 It makes harder decisions on doing business in developing countries. 30 The FCPA is also
blamed for the creation a bifurcated market. While U.S. firms are prohibited from engaging in illicit
U.S. Depart ment of Co mmerce. FOREIGN CORRUPT PRACTICES AN TIBRIBERY PROVISIONS, USIA Electronic
Journal, Vo l. 3, No. 5, November 1998 http://usinfo.state.gov/journals/ites/1198/ijee/factfcpa.htm
Bill Shaw, The Foreign Corrupt Practices Act and Progeny: Morally Unassailable, 33 Cornell Int’l L.J. 689, 702-706
(2000). See also Id. at 701 for analysis of court practices in FCPA
Steven R. Salbu, A Delicate Balance: Legislation, Institutional change, and Transnational Bribery, 33 Cornell Int’l L.J.
657, 681 (2000)
RONA LD BERENBIEM , Tolerance, Compliance And Whistle Blowing, (September 15, 2000) No. 23, Vol. 66, Pg. 726,
LEXIS, Nexis Library IAC-ACC-NO: 66122954
Jeffery P. Bialos, The Foreign Corrupt Practices Act: coping with corruption in t ransitional economies, (1997), at 140.
See Duane Winsdor and Kathleen A. Getz. Multilateral Cooperation to Co mbat Corruption: Normat ive Re gimes Despite
Mixed Motives and Diverse Values. 33 Cornell Int’l L.J. 731 (2000) for d iscussion.
See Id. at 760-762.
Stuart E. Eizenstat, Pro moting The Rule Of Law And Anti-Corruption In A Globalized Econo my, USIA Electronic Journal,
(November 1998) Vo l. 3, No. 5, at http://usinfo.state.gov/journals/ites/1198/ijee/eizen.htm
payments abroad, their foreign competitors can treat bribes as simply other costs of doing business. 31 But
now the adoption by other countries provisions of OECD Convention will make the competition fairer
for the United States firms.
Among advantages of the FCPA we can name the knowledge of business partners that U.S.
companies are under threat of prosecution in their country and presence of interest in business could
reduce costs for bribes for a U.S. company. 32 Other positive influences are: U.S. businesses have
reputation as highly ethical ones and such strategy helps developing countries in some concern.
2. The OECD Anti-Bribery Convention.
The Convention on Combating Bribery of Foreign Public Officials in International Business
Transactions 33 was worked out by the Organization for Economic Cooperation and Development
(OECD) and signed in Paris on December 17, 1997 by the 29 OECD member countries and five non-
member countries. 34 The convention went into effect on February 15, 1999 in 12 countries that had
ratified it. As on February 21, 2001 all 34 signatory states have ratified the Convention 35 and 31 of them
have adopted implementing legislation. 36
This instrument obligates the parties to criminalize bribery of foreign public officials, including
officials in all branches of government, whether appointed or elected, as well as any person exercising a
public function including that of a public agency or enterprise as well bribery of any official or agent of a
public international organization. Responsibility of legal persons is proposed as well; wether criminal or
Bialos, supra note 26, at 138
Id. at 116.
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions,
OECD/ DAFFE/IM E/ BR(97)16/ FINAL (Dec. 18, 1997), reprinted in 37 I.L.M . 1 (1998), also available at
Argentina, Brazil, Bulgaria, Chile and the Slovak Republic.
Steps Taken and Planned Future Actions by each Participating Country to Ratify and Implement the Convention on
Co mbating Bribery of Foreign Public Officials in International Business Transactions at
http://www.oecd.org/daf/nocorruption/annex2.ht m. (Last visited April 24, 2001).
Argentina, Australia, Austria, Belgiu m, Bulgaria, Canada, Ch ile, Czech Republic, Den mark, Fin land, France, Germany,
Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Lu xembourg, Mexico, Netherlands, New Zealand, Norway, Po land,
Slovak Republic, Spain, Sweden, Swit zerland, Un ited Kingdom, United States.
civil one depending on the domestic legal system of each party. The Convention requires the parties to
take necessary measures, within the framework of their relevant laws and regulations, to prohibit the
establishment of off- the-books accounts and similar practices used to bribe foreign public officials or to
hide such bribery. Parties are to make bribery of foreign public officials a predicate offense for purposes
of money laundering legislation on the same terms as bribery of domestic public officials. Jurisdiction is
to be established over offenses that are committed in whole or in part in each party's territory.
Participating governments pledged to work together to provide legal assistance relating to investigations
and proceedings within the scope of the Convention, and to make bribery of foreign public officials a n
extraditable offense. 37
To make sure that signatory countries follow provisions of the Convention, the Working Group
on Bribery in International Business Transactions decided to create a mechanism of monitoring whose
purpose is to review each country's regulatory system, institutions and measures to enforce the anti-
corruption principles laid down by the Convention. 38 It was decided to do this by means of "rigorous"
process of multilateral surveillance upon which the Working Group agreed. The process consis ts of two
phases. Phase I focuses on evaluating whether the legal texts through which participants implement the
OECD Convention meet the standard set by the OECD Convention and phase II follows and focuses on
the performance of countries that have implemented the OECD Convention. 39 The OECD has
recommended measures on implementing the OECD Anti-Bribery Convention in the aspect of
prevention bribery from its officially supported export credits. Among such measures, the OECD
suggests that its members: inform all applicants about the adverse legal consequences of bribery in
See Co mmentaries on the Convention on Combating Bribery of Officials in International Business Transac tions at
http://www.oecd.org/daf/nocorruption/20nov2e.htm (Vis ited April 24, 2001).
Frédéric Wehrlé, Co-ordinator of Anti-Corruption Outreach Activities, Making Sure That International Anti -Corruption
Standards Are Enforced: The OECD Convention Monitoring Mechanism, OECD Global Foru m on Fighting Co rruption:
Safeguarding Integrity A mong Justice and Security Officials, Bucharest, Ro man ia, March 30-31 2000 at http://
usinfo.state.gov/topical/econ/integrity/buchor/homepage.htm (Vis ited April 20, 2001).
Stephane Bonifassi, Implementation in France of the OECD Convention on Combating Bribery of Foreign Public Officials,
International Enforcement Law Reporter (January, 2001), Vo l. 17, No. 1, LEXIS, Nexis, Library, IELR file
international business transaction; invite applicants to declare in writing that neither they, nor any agents
on their behalf, have been engaged in or will engage in bribery; refuse to provide support, deny payment
of claims and demand refunds of any claims determined to have been connected to bribery; and refer all
evidence in connection with bribery to appropriate national authorities 40 .
On June 27, 2000, (OECD) adopted the OECD Guidelines for Multinational Enterprises, revising the
guidelines first published in 1976 and last revised in 1991. They form part of the OECD Declaration on
International Investment and Multinational Enterprises (MNEs). The Guidelines are non-binding
recommendations to MNEs made by the 33 governments (29 OECD Member countries and 4 non-
Member countries), including the U.S. The goal is to help MNEs operate in harmony with government
policies and societal expectations. They provide guidance on appropriate business cond uct across the full
range of MNE activities including standards as to labor, environment, human rights and corruption
It’s important to remember that OECD Convention is a free-standing instrument, open to non-
member countries and it’s not an instrument of the OECD. The Convention is open to accession by any
non-signatory which has become a full participate in the OECD working Group on Bribery by adhering
to the Revised Recommendation 42 on Combating Bribery in International Business transactions.
3. Inter-American Convention.
The Inter-American Convention Against Corruption 43 was adopted at the Specialized Conference
on Corruption of the Organization of American States (OAS) in Caracas, Venezuela, on March 29, 1996.
OECD Members Agree to Prevent Bribery in Export-Credit Transactions, International Enforcement Law Reporter,
January, 2001, Vo l. 17, No. 1, LEXIS, Nexis, Library, IELR file
Id., see also John R. Sch mert z, Jr., and Mike Meier, Esq., OECD adopts revised guidelines for "responsible business
conduct" by Multinational Enterprises which recommend standards as to labor, environment, human rights and corruption
issues, International Law Update (July, 2000), Vo l. 6, No. 7, LEXIS, Nexis Library, ILAWUP file.
Carolyn Erv in, OECD Actions to Fight Bribery in International Bsusiness Transaction, at
http://magnet.undp.org/Docs/efa/corruption/Chapter10.pdf, (Visited 20 April 2001)
Inter-American Convention Against Corruption, OEA/Ser.K/XXXIV.1, CICOR/doc. 14/96 rev.2 (Mar. 26, 1996), reprinted
in 35 I.L.M. 724 (1996), also available at http://www.oas.org/
It was the first instrument of its kind in the world to be negotiated Twenty-one states signed the treaty on
the date of its adoption. The Convention entered into force on March 6, 1997. To date, 26 states have
signed, and 18 states have deposited their instruments of ratification.
The Convention requires that the States Party take specific steps to combat corruption. It imposes
an obligation on each State Party to enact such legislation as is necessary to criminalize the acts of
corruption specified in the Convention. Such acts include, the solicitation or acceptance of bribes; the
offering or granting of bribes; any act or omission by a government official to obtain illicit benefits for
himself or others; the fraudulent use or concealment of property derived from the above- mentioned acts;
and participation in, or association or conspiracy to commit, such acts. One especially noteworthy feature
of the Convention is the obligation to criminalize the bribery of foreign officials 44 .
The Convention also includes provisions on certain forms of international cooperation and
assistance. These include extradition, mutual legal assistance, and asset seizure and forfeiture. With
respect to all of these forms of cooperation, the Convention expressly provides that cooperation will be
subject to the limitations of applicable existing treaties, including bilateral ones, and to the domestic law
of each country. The Convention also contemplates technical cooperation and exchanges of experiences.
Through such cooperation and assistance, the Convention will facilitate the prevention, detection,
punishment and eradication of acts of corruption. 45
The United States signed it on June 27, 1996 in spite of the fact that existing U.S. law is already
sufficient to satisfy the Convention's provisions regarding require ments for legislation, and the other
provisions in the Convention are self-executing and will not require implementing legislation. 46 On July
27, 2000, the U.S. Senate gave its advice and consent to the OAS Inter-American Convention against
See Id. , Article VIII
Id. Art icle XIII and XIV
U.S. Depart ment of State, Fact sheet, OAS Inter-American Convention Against Corruption (May 27, 1997) at
http://usinfo.state.gov/journals/ites/1198/ijee/factoas.htm (Visited April 20, 2001).
Corruption47 and on 29 September 2000 the United States deposited the instrument of ratification of the
Inter-American Convention on Corruption. 48
Group of States against Corruption (GRECO) was established by the Resolution (99) 5 49 of the
Committee of Ministers of the Council of Europe, adopted on 1st May 1999.50
According to its Statute, 51 the aim of the GRECO is to improve its members' capacity to fight
corruption by monitoring the compliance of States with their undertakings in this field. In this way, it will
contribute to identifying deficiencies and insufficiencies of national mechanisms against corruption, and
to prompting the necessary legislative, institutional and practical reforms in order to better prevent and
GRECO is responsible, in particular, for monitoring observance of the Guiding Principles for the
Fight against Corruption52 and implementation of the international legal instruments adopted in pursuit of
the Program of Action against Corruption (PAC), adopted by the Committee of Ministers of the Council of
Europe in 1996. So far three such instruments have been adopted, the Criminal Law Convention on
corruption, opened for signature on 27 January 1999, the Civil Law Convention on corruption, adopted in
September 1999, opened for signature on 4 November 1999 and Recommendation R (2000) 10 on Codes
of conduct for public officials, adopted on 11 May 2000. 53 The U.S. has joined the GRECO. It declared
that it will apply the "Guiding Principles for the Fight Against Corruption" adopted by the Committee of
John R. Sch mert z, Jr., and Mike Meier, Esq., U.S. Senate approves OAS Corruption Convention, International Law Update,
August, 2000, Vo l. 6, No. 8, LEXIS, Nexis Library, ILAWUP file.
Bruce Zagaris, U.S. Issues Guidance on Transactions Involving Proceeds of Foreign Official Corruption , International
Enforcement Law Reporter, March, 2001, Vol. 17, No. 3, LEXIS, Nexis, Library, IELR file
Resolution (99) 5 at http://www.greco.coe.int/
Representatives of following countries: Belg iu m, Bulgaria, Cyprus, Estonia, Finland, France, Germany, Greece, Iceland,
Ireland, Lithuania, Lu xembourg, Ro mania, Slovakia, Slovenia, Spain, Sweden
Statute of the GRECO, Appendix to the Resolution (99) 5 at http://www.g reco.coe.int/
Resolution (97) 24 20 Guiding Principles for the Fight against Corruption, adopted by the Committee of Ministers at its 101st
meeting on 6 November 1997 at http://www.g reco.coe.int/
Reco mmendation R (2000) 10 on Codes of conduct for public officials at http://www.greco.coe.int/
Ministers of the Council of Europe on November 6, 1997 (Resolution (97)24). Twenty-five states have
now joined the GRECO agreement. 54
5. Criminal Law Convention on Corruption
Council of Europe Criminal Law Convention on Corruption 55 was open for signature by the
member States of the Council of Europe and the non- member States, which have participated in its
elaboration, in Strasbourg, on 27 January 1999. The Convention will enter into force after the deposit of
14 instruments of ratification. Today 30 countries have signed and 9 56 have ratified the Convention57 .
The Criminal Law Convention on Corruption is aimed at coordinating criminalization of a large
number of corrupt practices. It also provides for complementary criminal law measures and fo r improved
international co-operation in the prosecution of corruption offences. It covers the following forms of
corrupt behavior normally considered as specific types of corruption: active and passive bribery of
domestic and foreign public officials; active and passive bribery of national and foreign parliamentarians
and of members of international parliamentary assemblies; active and passive bribery in the private
sector; active and passive bribery of international civil servants; active and passive bribery of domestic,
foreign and international judges and officials of international courts; active and passive trading in
influence; money-laundering of proceeds from corruption offences; accounting offences (invoices,
accounting documents, etc.) connected with corruption offences.
The Convention also incorporates provisions concerning aiding and abetting, immunity, criteria
for determining the jurisdiction of States, liability of legal persons, the setting up of specialized anti-
corruption bodies, protection of persons collaborating with investigating or prosecuting authorities,
John R. Sch mert z, Jr., and Mike Meier, Esq., U.S. joins Council of Europe's GRECO agreement, International Law
Update, October, 2000 Vo l. 6, No 10, LEXIS, Nexis Library, ILAWUP file.
Criminal Law Convention on Corruption, Jan.27, 1999, Europ. T.S. No. 173., also available at
The former Yugoslav Republic of Macedonia, Slovenia, Slovakia, Latvia, Hungary, Den mark, Czech Republic, Cyprus,
Criminal Law Convention on Corruption, Chart of signatures and ratificat ions , at
gathering of evidence and confiscation of proceeds. It provides for enhanced international co-operation
(mutual assistance, extradition and the provision of information) in the investigation and prosecution of
The Convention is open to the accession of non- member States. As soon as the Covention is
ratified, States, which do not already belong to GRECO, will automatically become members. 58 United
States signed the Council of Europe Criminal Law Convention on Corruption (10 October 2000) as well
as the GRECO.59
6. Civil Law Convention on Corruption
Council of Europe Civil Convention on Corruption was opened for signature by the member
States of the Council of Europe, the non- member States, which have participated in its elaboration as
well as the European Community, in Strasbourg, on 4 November 1999 60 . The Convention will enter into
force after the deposit of 14 instruments of ratifications. For today 24 countries signed and 3 countries61
have ratified the Convention. 62
This Convention is the first attempt to define common international rules in the field of civil law
and corruption. It requires Contracting Parties to provide in their domestic law "for effective remedies for
persons who have suffered damage as a result of acts of corruption, to enable them to defend their rights
and interests, including the possibility of obtaining compensation for damage" 63 . The Convention is
divided into three chapters, they cover: measures to be taken at national level, international co-operation
and monitoring of implementation and final clauses. In ratifying the Convention, the States undertake to
Criminal Law Convention on Corruption, Explanatory Report, at http://conventions.coe.int/treaty/EN/cadreprincipal.ht m
Bruce Zagaris, U.S. Issues Guidance on Transactions Involving Proceeds of Foreign Official Corruption, International
Enforcement Law Reporter, March, 2001,Vo l. 17, No. 3, LEXIS, Nexis, Lib rary, IELR file
Civil Law Convention on Corruption , Nov. 4, 1999, Europ. T.S. No.174, also available at
http://conventions.coe.int/treaty/en/Treaties/Html/174.ht m, [hereinafter Civil Law Convention]
Estonia, Bulgaria and Albania
Civil Law Convention on Corruption, Chart of signatures and ratifications, at
See Civil Law Convention, supra note 60, Art icle 1.
incorporate its principles and rules into their domestic law, taking into account their ow n particular
The Convention deals with: compensation for damage; liability (including State liability for acts
of corruption committed by public officials); contributory negligence: reduction or disallowance of
compensation, depending on the circumstances; validity of contracts; protection of employees who report
corruption; clarity and accuracy of accounts and audits; acquisition of evidence; court orders to preserve
the assets necessary for the execution of the final judgment and for the ma intenance of the status quo
pending resolution of the points at issue; international co-operation.
The Group of States against Corruption (GRECO) will monitor commitments entered into under
the Convention by the States Party. The Convention is open to Council of Europe member States, to non-
member States, which took part in drawing it up 64 as well as to the European Community.
B. Measures Taken by Inte rnational Organizations
1. United Nations.
Today, the three most important U.N. documents were drafted to deal with issues of corruption:
United Nations Declaration against Corruption and Bribery in International Commercial Transactions 65 ,
International Code of Conduct for Public Officials 66 , and Code of Conduct for Law enforcement
Officials 67 .
The Draft United Nations Convention against Transnational Organized Crime, in it’s article 4
ter68 also envisages the criminalization of corruption when an organized criminal group is involved. The
Convention includes following acts: corrupt activities involving an international civil servant, a foreign
Belarus, Bosnia and Herzegovina, Canada, the Ho ly See, Japan, Mexico and the United States of America
United Nations Declarat ion Against Corruption and Bribery in International Co mmercial Transactions, U.N. GAOR, 51 st
Sess., U.N. Doc. A/RES/51/191 (Dec. 16, 1996)
United Nations International Code of Conduct for Public Officials, U.N. Doc A/ RES/51/59 (Dec.12, 1996)
Code of Conduct for Law enforcement Officials General Assembly Resolution, U.N.Doc A/34/196 of (Dec. 17 1979)
Draft Un ited Nations Convention against Transnational Organized Crime, U.N. Doc. A/AC.254/4/ REV.6
public official, a judge or other official of an international court. The draft convention is aimed at corrupt
activities towards international officials. Additional international measures were proposed for further
combating corruption the 10th U.N. Congress 69 included “develop, ratify and incorporate international
instruments to encourage strengthen anti-corruption programs at the national level” and “Consider the
development of a comprehensive United Nations convention against corruption”70 .
2. European Union
A number of measures have been taken by European Union as well. On May 21, 1997, the
European Commission adopted a Communication to the Council and to the European Parliament on a
Union Policy Against Corruption71 . The Communication provides member states with a consistent and
coherent policy on corruption in international trade and commerce well as in other pertinent area. But the
Communication does not have legal effect of corruption.
The Convention criminalizes bribery of E.U. officials as well public officials of E.U. member
states, but does not concern transnational bribery with foreign officials of countries that are not members
of the European Union. 72
The Convention on the Fight against Corruption involving Officials of the European Community
or Officials of Member States of the European Union 73 , adopted on May 26 1997, criminalized active
and passive corruption of officials even where financial damage to the Union was not at issue. The Joint
10th Un ited Nations Congress on the Prevention of Crime and The Treat ment of Offenders, Vienna, 10-17 April 2000,
International cooperation in combating transnational rime: new challenges in the twenty -first century. Background paper for
the workshop on combating corruption prepared by the United Nations Interregional Crime and Justice Research Institute.
U.N. DOC A/conf.187/ 9, available at http://www.uncjin.org/Documents/10thcongress/10thcongress.html
Eu ropean Union, Resolution on the communication fro m the Co mmission to the Council and the European Parliament on a
Union policy against corruption, (May 21, 1997), COS/1997/2116, also available at http://wwwdb.europarl.eu.int/
Convention on the Fight Against Corruption Involving Officials of the European Co mmun ities or Officials of Member
States of the European Union, May 26 (1997), O.J.C. 195, 26.5.1997
Action of 22 December 1998 adopted by the Council on the Basis of article K.3 of the Treaty on
European Union, on corruption in the private sector, constituted another important instrument.” 74
3. The World Bank
The World Bank started pay attention at the problem of corruption, since 1995 with the
appointment of James Wolfensohn as the president. At the 1996 meeting, Wolfensohn made combating
bribery a top priority. In 1997, with help of Transparency International, the bank adopted a
comprehensive program, including strong contro ls to prevent bribery on World Bank-financed projects
and assistance to governments to promote reforms. 75
It was decided that bank will fight corruption by following means: (a) preventing fraud and
corruption in World Bank- financed projects; (b) assisting countries fight corruption, if and when they
request it; (c) seriously considering corruption in the World Bank's internal planning, in the design of its
projects and in its analysis and policy dialogue with countries which lead to agreeing upon strategies; (d)
supporting international efforts against corruption. 76
As a practical matter the World Bank’s approach has been to support these efforts by: (1) helping
coordinate both cross-border and in-country anti-corruption efforts; (2) focusing the Bank’s effo rts on
areas of its comparative advantage; (3) forming strategic collaborations with other organizations; (4)
gaining and disseminating knowledge about corruption internationally, and (5) explaining and
developing Bank policy. So far the Bank has participated in a number of international anti-corruption
efforts. For over two years, the Bank has participated in the OECD’s Working Group on Bribery in
International Business Transactions and contributed to the formulation of this Convention. It collaborates
See, European Union, Joint Action of 22 December 1998 Adopted by the Council on the Basis of Article K.3 of the Treaty
on European Union, on Corruption in the Private Sector, 1998 O.J. (L358), also available at
John Brademas and Frit z Heimann, Tackling International Corruption; No Longer Taboo, Foreign Affairs, October,
1998, Pg. 17, LEXIS, Nexis Library in M EGS file. [hereinafter Brademas and Heimann]
Wesberry, supra note 8, at 501-502.
closely with the other Multi- lateral Development Banks in the MDB Working Group on Governance,
Corruption and Capacity Building. It maintains observer status at Interpol conferences and on the
Financial Action Task Force on Money Laundering (FATF), in order to educate itself on international
crime and money laundering. At the regional level the Bank partners with organizations such as the
Organization of American States (OAS) and the Global Coalition for Africa. The Bank has also
recognized the important role played by international NGOs such as Transparency International. Most
recently the Bank co-sponsored a number of Anti-Corruption Conferences and workshops. 77 It has also
developed Country Assistance Strategy, which deals with discussion of country’s governance conditions
including public sector institutional reforms as well as an assessment of the corruption risks to Bank
projects before beginning of its operations; created Economic and Sector Work (ESW) what is the vast
range of evaluative Bank reports on economic and sectoral issues at the country level; shifted obligations
to Operations Evaluations Department to carry out an evaluation of the Bank’s anti-corruption program
in 2000. It was promoting training programs, research and analysis as well as the development of new
diagnostic tools, Anti-Corruption Knowledge Management System, and the website 78 .
4. International Monetary Fond
The IMF, going beyond its traditional focus on monetary and fiscal policy, is emphasizing the
need for transparency and other steps to curb corruption. 79 On August 4, 1997, the IMF Executive Board
released guidelines, which instructed IMF staff to consider corruption and accountability is sues in its
relations with borrowing countries. The IMF guidelines are worded in the language of economists, which
makes them difficult to understand for laypersons. The Guidelines do, however, officially recognize the
The World Bank Group, Supporting International Efforts to Reduce Corruption, at
http://www1.wo rldbank.org/publicsector/anticorrupt/supporting.htm (Visited April 20, 2001).
The World Ban k Group, Mainstreaming Anti-Corruption
RESULTS SO FAR at http://www1.worldbank.org/publicsector/anticorrupt/resultsmainstreaming.ht m (Vis ited April 20,
Brademas and Heimann, supra note 75
problem of corruption for the first time. More importantly, they call the attention of IMF staff to the
threat that corruption poses to international lending for development. The IMF guidelines specifically
seek to provoke greater attention to involvement in governance issues by advocating po licies and
development of institutions and administrative systems with aim to eliminate opportunity for corruption
and fraud. It also expresses great concern that corruption issues be addressed only based on economic
considerations within its mandate prohibiting IMF adopt the role of an investigative agency or guardian
of financial integrity in member countries.
5. International Chamber of Commerce
The International Chamber of Commerce in Paris plays an important role in encouraging the
international business community to become active in fighting corruption. The Chamber's focus is on
improving corporate self-regulation programs. The biggest Chamber’s achievement is the "Rules of
Conduct to Combat Extortion and Bribery". 81 For the first time the ICC issued its Rules of Conduct to
Combat Extortion and Bribery in International Business Transactions in 1977 establishing a set of
guidelines to promote high standards of corporate conduct. On 26 March 1996, the ICC's Executive
Board updated the Rules 82 and expanded them to cover a broader range of corrupt practices. If the 1977
Rules only prohibited extortion and bribery in connection with obtaining or retaining business; the new
Rules prohibit extortion and bribery for any purpose. Thus, extortion and bribery in judicial proceedings,
in tax matters, in environmental and other regulatory cases or in legislative proceedings are now covered
by the Rules. In 1999 the Rules were revised again.
Wesberry, supra note 8, at 515-516
International Chamber of Co mmerce, Rules of Conduct to Combat Extort ion and Bribery (revised) at
http://www.iccwbo.org/home/statements_rules/rules/1999/briberydoc99.asp , (Visited April 20, 2001), [hereinafter rev ised
International Chamber of Co mmerce, Ru les of Conduct to Co mbat Extortion and Bribery at
http://www.iccwbo.org/home/statements_rules/rules/1996/1996/briberydoc.asp , (Visited April 20, 2001).
The Rules deal with such issues as payments to sales agents and other intermediaries, business
entertainment and gifts, and political contributions. They cover not only bribery of public officials but
bribery within the private sector as well. The basic approach of the Rules is the need for action by
international organizations, governments and by enterprises, nationally and internationally, to meet the
challenging goal of greater transparency in international trade. The 1996 version consisted of two parts.
Part I “Recommendations to Governments and International Organizations” contains such provisions as
need for WTO’s active role, because bribery and extortion are clearly important factors distorting
international trade; additional efforts should be taken to deal more effectively with extortion by foreign
public officials. To that end, national governments must strengthen their enforcement of laws prohibiting
the solicitation and receipt of bribes, as well as the payment of bribes; to regulate political contributions
by enterprises and to ensure that they are publicly recorded; to stimulate cooperation between
governments and world business. Part II “Rules of Conduct to Combat Extortion and Bribery” sets forth
the Rules of Conduct recommended by ICC for voluntary application by enterprises. New emphasis is
placed on implementing mechanisms within companies to enforce corporate codes of conduct.
Revised 1999 version of the Rules 83 was amended by Part III ”ICC Follow-up and Promotion of
the Rules”. The Standing Committee on Extortion and Bribery is established with the aim to promote and
monitor the widest possible acceptance and application of the Rules of Conduct. Its principal purpose
will be to stimulate action by enterprises and business organizations in support of self- regulation, as an
important factor in effectively combating extortion and bribery.
Now the Chamber is preparing a manual to assist companies in complying with the Rules and
with the OECD convention84 . ICC is currently working to produce further rules to tackle 'private-to-
Revised Ru les, supra note 81
Brademas and Heimann, supra note 75
private' extortion and bribery, as opposed to corrupt practices between private and governmental
entities 85 .
6. World Trade Organization
WTO has also recently mobilized its efforts against corruption. So far the only one legal action
was taken by the WTO: the 1996 WTO Ministerial Declaration 86 which included a provision establishing
the Transparency in Government Procurement working Group to study transparency in government
procurement practices. In 1999 the Group has issued its first report 87 . Within the WTO the most feasible
possibility is to revise the Agreement on Government Procurement 88 , focusing on anticorruption aspects.
This agreement entered in force on January 1, 1996, but only a few courtiers, mostly in industrial world,
have adopted its provisions. The U.S. and multinational organizations dema nd more actions from the
7. Transparency International
Transparency International is a non-governmental organization established in 1993 in Berlin. It
has former governmental officials and business people as its members. The main aim of this organization
is to increase governments’ accountability and curbing both international and national corruption. 89 The
most important actions by the Transparency International are information gathering and raising public
awareness. For example, it publishes a Corruption Perceptions Index90 that scores countries on ten-point
ICC statement on behalf of wo rld business to the Heads of State and Government attending the Cologne Su mmit at
http://www.iccwbo.org/home/statements_rules/statements/1999/g7_statement.asp (Visited April 20, 2001).
See WTO Singapore Ministerial Declaration (Dec. 13 1996) at
http://www.wto.org/english/thewto_e/minist_e/min96_e/wtodec.htm (last updated 18/10/2000)
See WTO Report (1999) to the General Council (Oct.12, 1999) at
http://www.wto.org/english/tratop_e/grpoc_e/tran99_e.htm, (Vis ited April 20, 2001).
See WTO Text o f the Agreement on Govern ment Procurement at
http://www.wto.org/english/tratop_e/gproc_e/agrmnt_e.htm (Visited April 20, 2001).
Transparency International, Welcome! at http://www.transperency.de/welcome.ht ml (visited 20 Apr il 2001)
See Transparency International Corruption Perception Index/ Bribe Payers Index at
http://www.transparency.de/documents/cpi/index.ht ml (Visited April 20, 2001)
scale, a score of ten indicating a highly clean country and zero indicating a highly corrupt country. 91 TI
also publishes a Bribery Index of Leading Exporting Nations 92 to uncover the sources of bribery by
scoring countries on a ten-point scale with a score of ten indicating negligible bribery and zero indicating
very high levels of bribery. 93
IV. HOW TO DO BUSINESS IN HIGHLY CORRUPTED COUNTRIES
From previous text, the prospective of doing business in developing countries looks scary. On the
other hand, recent legislative and other measures taken at the international level to reduce corruption in
international business transactions gives some hope for better. I have to admit that a lot of big
corporations which are doing business in highly corrupted countries started to do it long time ago in more
difficult conditions and succeeded. The secret of this success was adoption of good risk management
policy. One of the examples of such a policy could be so called “Sullivan Principles” which were
proposed and developed by Leon Sullivan who was a member of the board of directors of General
Motors, back in 1977. The original idea was to help to promote racial equality in South Africa through
the influence of large corporations. 94 The original set of six principles 95 was a voluntary code designed to
guide the practices of U.S. corporations doing business in South Africa.
Based on Global Sullivan principles, so-called C2 (Combating Corruption) principles were
developed for international corporations. Under such principles corporations would: (a) establish a clear
policy against employees paying bribes and kickbacks; (b) train and discipline employees, (c) accurately
record and report transactions that are independently audited; (d) require agents and suppliers to affirm
David Hass and Thomas W. Dunfee. Fighting Corruption: A Principled Approach; The C 2 Principles (Combating
Corruption), 33 Cornell Int’l L.J. 593, 616 (2000). [Hereinafter Hass and Dunfee]
See Id. n.144. at 620
that they have not engaged in improper payments; (e) establish a monitoring system; (f) report
solicitation of payments to a group such as Transparency International, and (g) protect employees who
similarly make such reports. 96 Such principles could be broader or narrower but to have an impact on the
practice of corruption, any set of principles must (1) emphasize transparency; (2) provide guidance
concerning specific practices associated with paying bribes; (3) be relevant to organizational
environment; (4) identify itself with and be supported by an independent entity such as not-governmental
organization or an academic center, and (5) be capable of monitoring and assessment by external,
independent entities, such as social and financial auditors. 97 It is established that approximately 65 to 85
% of all U.S. companies have established ethical codes or compliance programs designed to prevent
violations of the FCPA. 98
Aside ethic codes, there are some other measures could be taken to mitigate risks of corruption it
could be: use of know your partner strategy, include provisions concerning FCPA for joint venture or
employment contract; compliance program which require the joint venture to establish an inter nal control
program. The key provisions of the Compliance program are: senior management commitment;
procedures; record keeping and control. 99
Some practical advices how to organized business in country with high level of corruption do
exist as well. One of them is how to do business in Russia, based on the Principles and analysis of the
situation in the country, which to my mind could be used in any developing country in the world. The
very first advice will be: never give bribes. One time is enough to get such a reputation and then requests
for payments will rise like a snowball what does not make life easier. Next suggestion is to not to be
Timothy L. Fort & James J. Noone, Gi fts, bribes, and Exchange: Relationships in Non-Market Economies and Lessons for
Pax E-Commercia, 33 Cornell Int’l L.J. 515, 542 (2000). See also Hass and Dunfee supra note 94 at 621-22 for whole list of
the Princip les
Hass and Dunfee, supra note 94, at 618.
Bialos, supra note 26, at 89.
Bialos, supra note 26, at 90-95.
alone. It’s very important to cooperate with other U.S. or West European corporations by sharing
experience in dealing with extortion of bribes and similar activity. It is also important to hire private
security firms for protection of premises and/or executives and never limit itself to one security
company. 100 Next step is to formulate and publicly promulgate and follow a set of guiding principles for
operating in Russia. Signatories can go on record that they oppose working with corrupt elements. The
contents of the code need not be elaborate and, in fact, may be relatively simple but should contain main
provisions, discussed above. By avoiding bribery and giving publicity to anti-corruption measures taken
against corruption a company will inform Russians that U.S. companies do not consider corruption part
of the way of doing business. On the other hand publicity will le nd support to attempts by government
reformers who wish to legislate and enforce legislation against corruption. Companies that wish to
engage in business with honest Russian entrepreneurs will become known 101 as well as honest Russian
entrepreneurs. This could be very helpful in future.
From this paper we can conclude first, that corruption is not just domestic issue of developing
countries but a global one too. In conditions of the economic globalization the corruption affects
everybody in different aspects. Second, international community has recognized global character and
threat of corruption by and number of measures were taken both at international and domestic levels.
International political and economic organizations have developed and are developing rules and
recommendations about reducing corruption in international business transaction. The United States
In May 1998, in Southampton, UK, I took part in conference, which was devoted to problems of doing business in
Co mmonwealth of Independent States. Representatives of two big corporations: “Carlsbery” and “British and American
Tobacco” shared their experience. “Carlsbery” representative, which has a factory in Russia suggested to use help of some
private security services and representative of “British and American Tobacco”, which has some factories in Ukraine, had a
good experience in dealing with State Guard Service which is part of the Min istry of Interio r.
Richard T. De George, "Sullivan-type" Principles for U.S. Multinationals in Emerging Economies, 18 U. Pa. J. Int'l
Econ. L. 1193, 1206 (1997).
plays leading role within those organizations in this field. Third, level of corruption in developing
countries is really high but it does not mean that it’s impossible to do business in those countries.
Knowledge of international and domestic legal instruments and local custom, use of code of ethics and
wise risk management policies could make it possible and successful to do business in any developing
country and with avoiding conflicts with FCPA. And forth, provided legal instruments and measures are
only rudimentary steps towards reducing corruption in international business transactions. There is a lot
of to be done 102 and the fight is going on.
The recent measures taken at the international level to combat corruption are: Global
Organization of Parliamentarians Against Corruption was created with very strong support of Canada. It
has a chapter in Africa and others are in the works in Europe, India, South-East Asia has already received
support from Latin American and Caribbean parliamentarians to join it. It would promote issues such as
open and transparent government, press freedom, independent prosecutors and judiciaries, limit s on
discretionary powers of bureaucrats and open appeals processes. 103 In France Investors and lenders
demand high standards of corporate governance free of corruption. 104 On January 16, 2001, the U.S.
Department of Treasury, the Federal Reserve Board, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Department of State
announced the issuance of new guidance to help U.S. financial institutions avoid transactions that may
involve the proceeds of foreign official corruption. 105
See Beverley Earle, Bribery and Corruption in Eastern Europe, the Baltic States, and the Commonwealth of Independent
States: What is to be done? 33 Cornell Int’l L.J. 483, 509-512 (2000). The author suggests four directions to deal with
corruption in future: legal, polit ical, economic, technological and ethical.
Canada promoting global organization to fight political corruption, Canadian Press Newswire March 8, 2001, LEXIS,
Nexis Library CBCA-ACC-NO: 5064262.
International Chamber of Co mmerce, Investors demand good corporate governance free of corruption (February, 2000) at
http://www.iccwbo.org/home/news_archives/2000/investor_demand.asp (Visited April 20, 2001).
Bruce Zagaris, U.S. Issues Guidance on Transactions Involving Proceeds of Foreign Official Corruption,
International Enforcement Law Reporter, March, 2001, Vo l. 17, No. 3, LEXIS, Nexis, Library, IELR file.