Transparency International report shows lacklustre enforcement of foreign bribery

WilmerHale
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On 13 October 2020 Transparency International (TI) published its annual report on enforcement of foreign bribery (the Report).1 The Report analyses foreign bribery enforcement in 43 of the 44 signatories to the Organisation on Economic Co-operation and Development’s Anti-Bribery Convention, plus China, India, Singapore and Hong Kong, which are not signatories but are significant exporters.2 Four countries were given the highest classification of ‘active’ foreign bribery enforcement, nine ‘moderate’, 15 ‘limited’ and 19 ‘little or no’.

Methodology

Each country was given a single score based on TI’s assessment of the country’s enforcement activity over the past four years. This score was based on points awarded for five criteria: Commenced investigations (1 point); Commenced cases (2 points); Commenced major cases (4 points); Concluded cases with sanctions (4 points); Concluded major cases with substantial sanctions (10 points). The definition of ‘major’ involved a range of disparate factors, such as the revenue of the company compared to the country’s GDP, whether the case set a precedent, and the number of ‘steps’ between a bribed public official and the highest public official in that country. Similarly, whether sanctions were considered ‘substantial’ could be influenced by factors such as the ratio between an imposed sentence and the maximum sentence available for that crime.

Each country was also given thresholds for the different levels of enforcement: ‘active’, ‘moderate’, ‘limited’ and ‘little or no’. The thresholds varied from country to country and were set based on that country’s share of world exports, on the rationale that the prevalence of foreign bribery would be proportionate to the country’s exporting activities. For instance, the US accounts for 10.4% of global exports, whilst Israel accounts for just 0.5%. So, the US required a score of 416 or above to be classified as ‘active’, 208 for ‘moderate’ and 104 for ‘limited’, whilst Israel required scores of just 20, 10 and five respectively. Additionally, the ‘moderate’ classification was restricted to those countries that had commenced a major case in the past four years, and ‘active’ to those that had concluded a major case with substantial sanctions in the past four years. Colombia, for instance, has not commenced a major case in the last past for years and so was restricted to the ‘limited’ category, despite it scoring triple the points required to be classified as ‘active’.

TI contrasted the rankings in the Report with those in TI’s Corruption Perception Index, which highlighted a striking lack of correlation between countries’ perceived levels of domestic corruption and their appetite or capacity for enforcement of foreign bribery. For instance, Finland, which has a similar share of global exports to Israel, was one of eight countries to score zero for enforcement of foreign bribery in the Report, yet ranks third lowest for perceived levels of corruption.

UK Performance

The Report paints a mixed picture of the UK’s enforcement of foreign bribery. In terms of transparency, the UK fared relatively well. The Report highlights that UK enforcement authorities regularly issue press releases about charges filed and outcomes, which enhances transparency in those cases. The UK was also one of seven countries studied that has a central register of beneficial ownership that is publicly accessible and without obstacles (such as access fees).

Although the UK has been awarded the accolade of ‘active’, it is worth comparing its position with that of the other three countries awarded ‘active’ status. Israel scored almost double and the US over triple their respective ‘active’ thresholds. Despite a drop of 50% in score from the previous report, Switzerland scored 125 against an ‘active’ threshold of 80. In contrast, the UK scored 147 with an ‘active’ threshold of 144—in by the skin of its teeth.

Moreover, the UK was singled out by TI for criticism on a number of issues. Compensation and restitution are rarely awarded to victims, and are for small amounts when they are awarded. For instance, despite the significant funds paid to the UK in the Airbus DPA, no compensation was awarded to affected governments or people in the affected countries. TI criticised both the SFO for failing to seek compensation and the courts for being unduly restrictive when considering compensation. Further, TI said that the Airbus DPA judgment “suggests an unwelcome shift away from self-reporting as a condition for a deferred prosecution agreement” and the UK was identified as a country with a weakness in its approach to non-trial resolutions. Lack of resources, staff and training for enforcement bodies and the courts were also highlighted as a problem.

Conclusions

The Report suggests that six countries increased their enforcement of foreign bribery since 2018 whilst four decreased.3 Some countries’ performances in successive TI reports seem to suggest a particular trajectory, for instance Germany appears to be on a sustained downward slope in enforcing foreign bribery.4 However, the inherently subjective methodology of the Report and its application in substantially different jurisdictions, mean that it is difficult to draw detailed inferences on individual countries.

The Report’s real value is in the broader picture that it paints. Two striking features emerge: Firstly, the report shows that countries representing around a third of the world’s exports either actively or moderately enforce against foreign bribery, whilst the same proportion have little or no enforcement. That such a high proportion of the world’s exports are not subject to meaningful enforcement is concerning, but not a new development. Secondly, compared with the 2018 report, ‘active’, ‘limited’ and ‘little or no’ enforcement are down 10.5%, 2.7% and 3.1% respectively, whilst ‘moderate’ is up 16.4%. So, assiduous enforcement may be down, but overall the proportion of the world’s exports that are subject to some kind of substantive enforcement is up.


1 Exporting Corruption – Progress Report 2020: Assessing enforcement of the OECD Anti-Bribery Convention, Transparency International, 13 October 2020.

2 Iceland is a signatory to the Anti-Corruption Convention, but was excluded on the basis that it has a negligible share of global exports.

3 Increased: France +1 ‘limited’ to ‘moderate’, Spain +2 ‘little/no’ to ‘moderate’, Denmark, Colombia, Slovenia and Estonia +1 ‘little/no’ to ‘limited’. Decreased: Germany, Italy, Norway -1 ‘active’ to ‘moderate’, Hungary -1 ‘limited’ to ‘little/no’. Exporting Corruption – Progress Report 2018: Assessing enforcement of the OECD Anti-Bribery Convention, Transparency International, June 2018.

4 In 2011-2014 it scored 490 against an ‘active’ threshold of 297, in 2014-2017 308/308, in 2016-2019 273/304.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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