Anti-Bribery Convention Research Articles

Clearing the Hurdle of Corruption: Indonesia’s Path to OECD Accession

Indonesia has recently entered into formal talks with the Organization for Economic Cooperation and Development (OECD). While debate persists about the wisdom of such a move, it is relevant to recognize that there are many hurdles to overcome. The OECD has provided Indonesia a roadmap outlining both procedures and substantive legislative provisions required for accession to the OECD treaty. Among these requirements, OECD membership candidates must establish law that are in compliance with the OECD Anti-Bribery Convention. Given Indonesia’s history, this component may pose a significant impediment to OECD membership. To explore this, the study examines the accession path of other recent members to the OECD and provides guidance for clear changes that are required to Indonesia’s legal framework surrounding corruption. This study found that compliance with the OECD Anti-Bribery Convention as imperative, as demonstrated by the experiences of countries that have recently joined the OECD and other candidate countries that are further along in the accession process than Indonesia. This research also demonstrates that significant legislative changes to Indonesia’s legal framework on corruption are required for full accession to the OECD Convention

Three decades of international cooperation against corruption—looking ahead

Abstract Corruption, a ubiquitous phenomenon throughout history and societies, has been long criminalized in many countries. However, international cooperation against corruption only gained momentum in the 1990s. Since then, the international legal framework has expanded significantly through conventions like the Organisation on Economic Co-operation and Development (OECD) Anti-Bribery Convention and the UN Convention against Corruption. Nearly all states have now ratified at least one anticorruption treaty. However, implementation and enforcement of these standards has been uneven across states. Domestic reforms have also lagged in some areas like prevention. Corruption remains widespread, and its socioeconomic costs have not appreciably decreased. This Symposium aims at assessing the outcomes of three decades of international cooperation in combating corruption, while also exploring the future directions of international anticorruption rules and cooperation. Through a positive, critical, and normative legal analysis, complemented by empirical research and behavioral science, it focuses on the dynamic interactions between international anticorruption instruments and municipal law, highlighting understudied problems, both substantive and methodological. After discussing the origins and evolution of international anticorruption law, this introductory article presents the state of the art on the questions tackled by this Symposium and highlights its contribution to existing literature on the topic. In doing so, it brings together various trends emerging from the articles contained in this Symposium and explores avenues for further research and reflection.

Transnational Legal Spillover? A Re-Appraisal of the OECD Anti-Bribery Convention

Abstract Can prosecutions by US authorities help spread enforcement of foreign bribery laws to other countries? In this article, we explore this question by re-examining earlier scholarship that found that US prosecutions of foreign corporations under the Foreign Corrupt Practices Act (FCPA) increase the likelihood that the corporation's home state will enforce its own foreign bribery laws. Using a conditional-frailty Cox model that allows us to model foreign bribery enforcement actions as repeat-events, we do not find evidence that FCPA prosecutions lead to sustained increases of foreign bribery enforcement by target countries. We also find that prior results are not robust to the inclusion of an important confounding variable: a country's level of exposure to corruption in their trading partners. Still, while our findings indicate a more limited role of US law enforcement in this area, we nonetheless see many promising avenues for future research on transnational law enforcement and its consequences.

Do corporate regulations deter or stimulate investment? The effect of the OECD anti-bribery convention on FDI

AbstractCountries prohibit firms’ transnational financial crime by coordinating their regulations under international organizations (IOs). Under these IOs, states threaten to prosecute firms’ foreign misconduct at home. Such threats can help conscript companies to diffuse sustainable business models abroad. This paper studies the effect of corporate criminal regulations on firms’ foreign direct investment (FDI). Critics of these policies claim they push firms’ investment away from host economies where financial crime is more likely to happen. Yet, regulations should also cut informal costs of crime and favor investment. I reconcile these opposed expectations and show they are special cases of the same argument. I claim that the effect of multilateral anti-bribery policies on FDI depends on the level of corruption of the host economy. It is null in non-corrupt countries. It is positive where corruption is moderate: here, laws provide legal leverage to refuse paying bribes and cut corruption costs. The effect is negative where corruption is endemic: here, anti-bribery laws expose firms to additional regulatory costs. I support the argument with multiple evidence. Company-level data on investment by 3871 firms between 2006 and 2011 show that regulated corporations have a $$27\%$$ 27 % higher probability of investing in moderately corrupt economies than unregulated firms, which plummets to $$-52\%$$ - 52 % in extremely corrupt countries. A synthetic counterfactual design using country-dyadic FDI flows corroborates this finding. Results show that regulatory policies harmonized by IOs change international competition for FDI in ways that do not necessarily harm regulated firms.

When do anti-bribery laws affect international trade?

This paper studies the relationship between anti-corruption enforcement and trade, offering a novel empirical perspective on the OECD Anti-Bribery Convention (ABC), in which signatory countries agreed to prosecute bribery of foreign officials. Existing literature on ABC focuses on its early years, claiming that it led OECD firms to avoid exporting to corrupt destinations, with the effect of diverting business away from developing countries. Yet these early years involved little actual enforcement, and I argue that the redirection of trade in this period owed not to the anti-bribery laws themselves, but to an underlying trend of increased political cooperation among OECD countries, as indicated by several factors including patterns in UN voting affinity. Only when enforcement of the laws intensifies, during the OECD’s Phase 3 initiative, do the laws begin having real effects, diverting OECD countries’ trade away from corrupt destinations.

부패방지를 위한 국제적 노력에 대한 국내 부패방지 법제의 대응과 과제

Corruption is not a problem confined to one country, and since its harms transcend national borders, the international community has been working together to solve this problem for decades. The international community's anti-corruption discussion and cooperation began with the enactment of the Foreign Corrupt Practices Act (FCPA) in the United States in 1977, through the enactment of the Organization for Economic Cooperation and Development's (OECD) Anti-Bribery Convention in 1999, and the conclusion of the UN Anti-Corruption Convention in 2003. The G20 Summit, a global economic consultative body that emerged in the wake of the 2008 global economic crisis, recognized corruption as the main cause of the global financial crisis, and the 2010 G20 Seoul Declaration emphasized cooperation on corruption at the international level. The <Anti-Corruption Action Plan> was adopted in the form of an annex. This action plan includes contents to urge member countries to join and ratify major international conventions against corruption, such as the United Nations Anti-Corruption Convention and the OECD Anti-Bribery Convention, as well as a cooperative system to prevent corrupt public officials from using the financial system and to prevent corrupt public officials from entering and providing shelter. Measures that require close cooperation between countries, such as Goryeo and support for the recovery of hidden assets overseas, were included. In addition, each member country agreed to report the situation every year so that the <Anti-Corruption Action Plan> could lead to effective policies. In order to lead and actively participate in these changes in the international situation, it is judged that Korea, a member of the G20, needs basic research for active implementation and policy and institutional reorganization based on this.
 This paper examined the contents of international activities centered on the UN Anti-Corruption Convention to respond to corruption, the foundation of the domestic legal system and the current status of domestic legal implementation of international agreements. In addition, institutional and policy directions to be improved for future anti-corruption activities were presented.

From Well-Side Meetings to Pelican Strategy: A Context-Based Approach to Combat Corruption

This article takes up the question of what strategy is to be used among different communities to eradicate corruption across borders. The debate between two legal scholars, Steven Salbu and Philip Nichols, over the viability of extraterritorial application of anti-bribery laws remains thought-provoking when we look at the effectiveness of the OECD Anti-bribery Convention or FCPA in curbing corruption. Empirical research shows that firms from countries with extraterritorial legal restrictions do not necessarily refrain themselves from paying bribes in foreign transactions. This article ties the Salbu-Nichols’ debate, ISCT, mediating institutions theory, and Pelican Gambits strategy together to structure a context based anti-corruption framework. It builds on ISCT’s authenticity and legitimacy principles to give context of the norms in order to apply various strategies to combat corruption. This article is by no means to promote elimination of laws or regulations of corruption or acquiescence of illegitimacy of corruption in international business. Instead, the framework emphasizes the importance of the interactive dynamics between a firm and its community when designing anti-corruption strategy in a global environment.

The Challenges of Political Corruption in Australia, the Proposed Commonwealth Integrity Commission Bill (2020) and the Application of the APUNCAC

Political corruption affects each nation-state differently, but the outcomes are nominally the same: a deficit of public trust, weakened government institutions and undermined political systems. This article analyzes issues of political corruption in Australia by framing them within a national integrity ecosystem (NIE) and addressing them against the proposed Commonwealth Integrity Commission (CIC) 2020 bill. It also discusses prevalent ‘grey’ areas of Australian politically-corrupt behavior where they interact with the private sector: the revolving door, political donations, and lobbying; and the state of Australia’s implementation of the OECD Anti-Bribery Convention. This article argues for their inclusion within the mandated scope of the proposed CIC. There is a need for strong legislation, both domestic and international, to fight corruption. This article then discusses the application of the provisions of the draft Anticorruption Protocol to the UN Convention Against Corruption (APUNCAC) that may apply with respect to these ‘grey’ issues, and how an International Anti-Corruption Court may provide another institutional model for Australia to follow. Finally, this article links these proposals to the 2021 UN General Assembly Special Session (UNGASS) on Corruption and the 9th Conference of States Parties on the UNCAC (COSP9). These events illustrate multilateral momentum and progress on anti-corruption. As a country that has historically supported the UN multilateral framework and its institutions, this article recommends a proactive approach for Australia so that the passing of a strong domestic anticorruption initiative will contribute to the adoption, and eventual ratification, of the APUNCAC.

Does corruption matter for FDI flows in the OECD? A gravity analysis

In this paper, the effect of corruption on foreign direct investment (FDI) flows is analyzed. The literature is thus far divided regarding the effects of corruption: One hypothesis argues that corruption greases the wheels of government and is therefore beneficial while the other hypothesis argues that it sands the wheels of government leading to suboptimal results in an economy. For the empirical analysis, a dataset consisting of bilateral FDI data from the OECD and the control of corruption measure from the World Governance Indicators of the World Bank is compiled. To further analyze the effects of corruption the Panama Papers revelation is used as a corruption increasing event and the implementation into law of the OECD Anti-Bribery Convention is used as a corruption decreasing event. Finally, the difference between corruption levels in the target and the origin country, will be examined. Then, a gravity model with dyadic and time-fixed effects is employed to analyze the data. Findings are ambiguous in that corruption is positively correlated with FDI inflows in the target country and negatively correlated with FDI inflows in the origin country. The Panama Papers variable shows strong evidence, that the release of the Panama Papers resulted in a drop in FDI flows. Therefore, it seems that corruption has complex country specific effects and that target and source countries have to adopt varying policies with regards to corruption. The general effect of corruption harms FDI flows, as shown by the Panama Papers revelation.

OECD Anti-Bribery Convention. Implications on Corporate Criminal Liability in Latin America

This article analyses the impact on corporate legal liability legislation in Latin America as a result of the celebration of the OECD Anti-Bribery Convention in 1997, which established legally binding standards to criminalize bribery of foreign public officials in international business transactions. For that purpose, the legal background for liability of legal persons will be examined and the nature of corporate legal liability in each of the jurisdictions under analysis (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Peru). It also explores whether there have been any sanctions imposed on legal persons and individuals as a consequence of the modifications introduced in the domestic legislations as a response to the recommendations made by the Convention. OECD Anti-Bribery Convention, Corporate Criminal Liability, Latin America, bribery, sanctions

Sunshine or Curse? Foreign Direct Investment, the OECD Anti-Bribery Convention, and Individual Corruption Experiences in Africa

AbstractIt remains unclear if foreign direct investment (FDI) benefits local citizens in host countries. Combining geo-referenced FDI data and household level surveys, this paper uses spatial-temporal techniques to assess how FDI impacts individual corruption experiences. We investigate if this relationship is conditional on the corruption levels, or engagement with the OECD's anti-bribery convention (ABC), of the FDI's source country. We find evidence that FDI flows reduce individual bribery experiences, but only when existing levels of corruption are high. We find it is FDI from comparatively more corrupt, and non-ABC engaging, countries that locates to areas of high corruption. Further, FDI appears to improve both the employment prospects and financial positions of local households. Collectively, we argue that these results suggest that individual empowerment via a wealth effect, rather than spillovers from firm professionalization or regulatory pressure mechanisms, is what stems individual corruption experiences.

The efficacy of multilateral anti-bribery convention with national government enforcement

Purpose The purpose of this paper is to investigate the role of multinational enterprises’ (MNEs) home country corruption in their decision to bribe officials in foreign host countries. Design/methodology/approach A model that predicts MNE bribing by controlling for a multitude of foreign host country factors is used. The information contained in the orthogonal residuals from this model is exploited to see whether MNE’s home country factors, particularly the level of public corruption, work to amplify illegal behavior by respective MNE in abroad. Findings MNEs pay more in bribes when the foreign officials they face are more corrupt. This behavior worsens when MNE’s home country has more corruption. Social implications All UN member countries are signatories to the UN Convention against Corruption that proscribes the bribing of foreign public officials by respective MNEs. The Convention’s reliance on home country enforcement of stipulations against the bribing of foreign officials by respective MNEs exposes its efficacy of the malfeasance of home country public officials. Originality/value This paper extends the literature to an examination of MNE’s use of bribes in a world with a global anti-corruption regime. Additionally, it ties MNE behavior in foreign countries to corruption in MNE’s home country.

Do Operations in Corrupt Foreign Countries Affect Auditor Behavior?

Auditors are required by the Foreign Corrupt Practices Act and other rules to evaluate the probability that a firm’s management bribes foreign government officials. However, anecdotal evidence suggests that auditors do not always follow the rules. In this study, we examine the role that international anti-bribery cooperation plays in auditors’ reaction to foreign corruption risk. In difference-in-differences analyses, we find that the staggered implementation of the Organisation for Economic Co-operation and Development’s Anti-Bribery Convention significantly increases audit fees charged to U.S. multinational firms with operations in corrupt foreign countries. The audit fee increase is larger for firms with operations in corrupt countries with strong enforcement of the Anti-Bribery Convention. In cross-sectional results consistent with expectations, we find that the impact intensifies when a firm has more extensive operations in corrupt countries; its internal control system has material weaknesses; and there is no recent FCPA enforcement in the industry or foreign country where the firm operates. We also document that audit delays rise after the Anti-Bribery Convention is instituted, reflecting that auditors exert more effort afterward. Taken together, our evidence implies that stricter enforcement of the FCPA through international cooperation in anti-corruption motivates auditors to become more sensitive to their clients’ foreign corruption risk.

A Study on Implementation Evaluation of the OECD Anti-Bribery Convention Comparing to Korea, USA and Japan

A Study on Implementation Evaluation of the OECD Anti-Bribery Convention Comparing to Korea, USA and Japan

The Impact of International Cooperation on FCPA Enforcement

This paper’s goal is to analyze the impact of the UNCAC and the OECD Convention in improving international cooperation in foreign bribery. For the purposes of this study, the U.S. actions will be used as a proxy to determine if the OECD Anti-Bribery Convention and the UNCAC were able to enhance the articulation between countries. Since the U.S. was the only country to have a statute that forbade foreign bribery before the OECD Convention, it is useful to perceive how the U.S. has implemented mechanisms of coordination among other countries when bringing FCPA cases, after other countries adopted the Convention. This paper is divided into three parts. The first part analyzes the OECD Convention and the UNCAC provisions about international cooperation and the modification it has provoked in the FCPA. The second part presents an analysis of the enforcement actions carried by the U.S. Department of Justice before and after the OECD Convention was in effect. In the third part, two selected cases are analyzed in more detail in order to assess the level of effectiveness of international cooperation in FCPA cases. This paper argues that the latest FCPA enforcement actions have benefited from international aid from other government and taken into consideration the measures adopted by other countries.

The dynamic of general compliance with the OECD anti-bribery convention: two interpretative approaches

The way in which people understand the dynamic of signatories’ enforcement of the OECD Anti-Bribery Convention determines the way in which they formulate policy recommendations, and a comprehensive understanding of the dynamic of signatories’ Convention enforcement demands the coordination of two different analytic approaches—the rational-choice approach and the institutional approach. The popular rational-choice approach in current literature highlights the “under-enforcement” problem of the Convention, assumes the decisive influence of signatories’ self-seeking nature on Convention enforcement, and seeks to identify the structural failure of the anti-bribery collaboration which generates unsatisfactory cost-benefit calculations and encourages signatories to shirk. While a branch of the rational-choice account converges on the failure of the existing monitoring system in deterring free riders by borrowing wisdom from cooperation theories, it fails to illustrate that the anti-bribery collaboration by its very nature is incompatible with a centralized monitoring approach—a conventional effective solution to cooperation dilemmas. To fill this gap, Part I & II of this study lays bare the incompatibility of a centralized monitoring approach with the anti-bribery collaboration based on the findings of current rational-choice account and frames a decentralized monitoring system as an alternative. On the other hand, Part III of this study argues that another face of the dynamic of Convention enforcement—the developmental reality in leading jurisdictions, is also noteworthy. An institutional approach which highlights the relevance of favorable domestic institutional contexts to robust Convention enforcement is proposed as a counterpart to the rational-choice approach. By analyzing the case of the SEC’s increasingly zealous enforcement of the FCPA in the US during the period from the 1980s to the 2000s, this study concludes that local agencies’ adherence to other official duties in an ever-evolving institutional context may result in an effect of “unconscious enforcement” of anti-bribery laws.

Nonstate Actors and Compliance with International Agreements: An Empirical Analysis of the OECD Anti-Bribery Convention

AbstractInternational relations scholarship has made great progress on the study of compliance with international agreements. While persuasive, most of this work has focused on states’de jurecompliance decisions, largely excluding thede factobehavior of nonstate actors whose actions the agreement hopes to constrain. Of particular interest has been whether the OECD Anti-Bribery Convention (ABC) might reduce the propensity of multinational corporations (MNCs) to bribe officials in host countries through its mechanisms of extraterritoriality and extensive peer review. Unfortunately, research is hampered by reporting bias. Since the convention raises the probability of investors’ punishment for bribery in their home countries, it reduces both the incentives for bribery and willingness to admit to the activity. This generates uncertainty over which of these incentives drives any correlation between signing the convention and reductions in reported bribery. We address this problem by employing a specialized survey experiment that shields respondents and reduces reporting bias. We find that after the onset of Phase 3 in 2010, when the risk of noncompliance increased for firms subject to the OECD-ABC, those MNCs reduced their actual bribery relative to their nonsignatory competitors.

Intimations of Global Anti-Bribery Regime and the Effectiveness of Extraterritorial Enforcement: From Free-Riders to Protectionism?

One topic has featured in discussions of bribery of foreign public officials over the last few years – the rise of the broad extraterritorial use of national anti-bribery laws (based on the OECD Anti-Bribery Convention) which might reach domestic or foreign companies anywhere in the world. The problem is that extraterritoriality pushes or even exceeds traditional principles of public international law which may both support and undermine the core values of the international order. In this context, it is still unknown how and to what extent this practice is effective; i.e. whether positive effects of extraterritoriality outweigh negative effects. This paper aims to develop an outline of the effectiveness model of the OECD anti-bribery enforcement regime. It builds on existing theoretical concepts which assess effectiveness of global prohibition regimes. The analysis reveals that on the one hand extraterritoriality has positive effects because the anti-bribery laws are applicable to a widening range of foreign firms coming from jurisdictions where transnational bribery is under-regulated or even not criminalized at all. It can be concluded that increasing number of directly subjected firms, as consequence of the U.S. enforcement leadership, has been reducing the incentives to bribe for any other firm. This is because of indirect effects of these laws on private contractual arrangements which de facto create private implementation processes connected with community enforcement. Consequently, this dynamics also creates incentives for non-enforcers to become active. However, national enforcement authorities often use enforcement strategically to offer domestic companies a competitive edge. Thus, as the OECD anti-bribery regime lacks an enforcement mechanism, extraterritoriality often results in multiple uncoordinated investigations and therefore undermines stability of the anti-bribery enforcement. Extraterritoriality in the context of transnational bribery is a new phenomenon. The paper focuses on anti-bribery law, but much of it also relates to lager issues concerning the role of extraterritoriality in legal and economic globalization and in the evolution of public international law. The paper presents implications for further empirical and doctrinal research.

Peer Review and the Global Anti-Corruption Conventions: Context, Theory and Practice

This article analyses the international anti-corruption framework and the peer review monitoring process. Peer review is described as the “systematic examination and assessment of the performance of a state by other states, with the ultimate goal of helping the reviewed state … comply with established standards and principles.” However, despite its growing importance as a regulatory process, peer review has not been comprehensively analysed, resulting in a “literature famine” on its nature and operations. Indeed, to date, there has been very limited academic discussion on peer review. As a result, one aim of this article is to contribute to a stronger understanding of its process. While our focus is on peer review in the anti-corruption context, where possible, universal characteristics of the process are discussed. The second objective of this article is to consider the merits of the peer review process in incentivising states to take action against corruption. Peer review is the mechanism for evaluation of the United Nations Convention against Corruption (UNCAC), the Organisation for Economic Cooperation and Development (OECD) under its Anti-bribery Convention and the African Union’s (AU) good governance objectives under good governance objectives under the Peer Review Mechanism (APRM). Whilst acknowledging the criticisms of peer review, this article argues that peer review has been successful in particular contexts in increasing state compliance with these international instruments. In particular, peer review has contributed to the acceptance of anti-corruption norms and focused on the need for all countries to regulate corruption at the national level.

Poverty, corruption, trade, or terrorism? Strategic framing in the politics of UK anti-bribery compliance

What explains longstanding UK non-compliance with international anti-bribery norms? Drawing on evidence from a comparative study of state compliance with the Organization for Economic Cooperation and Development (OECD) anti-bribery Convention and building on the literature on ‘framing’ in Sociology and International Relations, this article identifies and illustrates the impact of strategic policy framing on UK anti-bribery policy in the years following the United Kingdom’s commitment to criminalize transnational business bribes, in 1997. The research examines the way in which anti-bribery proponents and opponents framed the practice of transnational bribery differently across four distinct policy contexts in the United Kingdom: international development and poverty reduction, domestic anti-corruption, strategic trade, and—following 11 September 2001—international anti-terrorism. The analysis shows that: (a) policy advocates’ choice of frame crucially affected the timing and scope of UK anti-bribery legislation and the extent of UK (non)compliance with international anti-corruption law; and (b) the expedient frame was not necessarily the most conducive to full compliance.