Both Rick and Matthew’s posts earlier this week discussed the effectiveness of the 1997 OECD Anti-Bribery Convention in combating international corruption. Rick emphasizes the Convention’s success in prosecuting supply-side bribery, noting the hundreds of convictions and settlements since the Convention came into force. But as Matthew pointed out, and as the OECD itself has acknowledged, the impressive-sounding aggregate enforcement numbers mask the fact that enforcement is highly unevenly distributed: the majority of the Convention’s 40 member countries still do not enforce their anti-bribery laws effectively (if at all)–and most of the increase in enforcement that Rick highlights comes has come not from the countries that recently adopted extraterritorial anti-bribery laws, but from the United States, which has had such a law – the FCPA – on the books for more than 35 years.
One might conclude from this that the OECD Convention has had only a modest effect, and cannot (yet) be deemed a success. But I think that conclusion is incorrect. The OECD Convention has already had a powerful positive effect on anti-bribery enforcement efforts–but not for the reasons that most people think.
In my view, the OECD Convention has increased bribery prosecutions not (or at least not primarily) by directly causing signatory governments to enforce anti-bribery laws against their own companies, but by providing the US government with cover to do so. In other words, I think that the surge in U.S. FCPA enforcement over the last 15 years is partially attributable to the OECD Convention.
- First, by acceding to the OECD Convention, governments indicate their acceptance of the proposition that bribery of foreign public officials should be prosecuted, and that extraterritorial jurisdiction is a proper means of doing so. This is a stark contrast to other contexts, such as antitrust, in which other developed nations have been extremely hostile to US extraterritorial enforcement activity, going so far as to pass “blocking statutes” to bar compliance with US enforcement activities. Thus the OECD Convention makes it easier for the US to go after foreign companies under the FCPA (as it has done — nine of the top ten FCPA enforcement actions have been against firms based in non-US OECD member states).
- Second, the existence of the OECD Convention–coupled with the fact that the US enforces the law against foreign firms over which it has jurisdiction–weakens the “uneven playing field” argument that U.S. business interests often advance as a reason for restrained enforcement of the FCPA. At least nominally, other countries have signed onto the same commitments. And although their lax enforcement is a concern, the objections to the FCPA likely get less political traction than would be the case if the U.S. were the only jurisdiction that even had a law like the FCPA on the books.
- Third, some scholarship suggests that the undertaking of large FCPA actions against a domestic company may cause other OECD Convention signatories to start enforcing their own domestic laws more strictly. Thus, even if the most direct initial impacts of the Convention were based on American extraterritorial enforcement, this enforcement itself may cause a diffusion of effective anti-bribery enforcement into other signatory states.
What implications, if any, follow from this? If I’m right, it may mean that Matthew is too pessimistic about the likely effects of expanding the Convention to include countries like China, Saudi Arabia, and the rest of the G20. Even if such an expansion is not accompanied by serious enforcement by new signatories, and even if it does weaken the peer review process (as Matthew fears), it will further entrench an anti-bribery norm and give U.S. prosecutors greater political cover in continuing to enforce the FCPA aggressively against multinational firms.
Interesting argument, Phil. I was wondering, though, if expansion might actually lead the other way — not to further entrenchment of anti-bribery norms, but to the dilution of them.
In my experience working with international law, I’ve seen two major buckets of countries when it comes to adopting international treaties and covenants: First, those countries that are willing to accede to almost anything because they don’t take their enforcement commitments seriously. The large number of states in this bucket (including highly oppressive, autocratic regimes that sign onto extremely progressive, rights-creating treaties) has resulted in an enormous number of beautifully written human rights treaties applying to states that clearly violate them without a second thought.
And second, there are countries (and the United States may be the foremost example) that take an extremely legalistic approach to joining international treaties and covenants. Sometimes they refuse even to join explicitly nonbinding treaties to preserve their persistent objector status lest the nonbinding treaty support the creation of customary law with which they would not or could not comply. These countries, I take it, believe that it’s worse to sign onto a treaty and then flagrantly violate it than it is not to have the treaty at all. While the United States gets a fair amount of flak for not joining many treaties, I think it and other countries make the calculation that building a robust international legal system requires building credible and reliable institutions and legal regimes — even if that means moving slowly. From this view, norms are actually more damaged by their de facto violation than bolstered by their de jure ratification.
If you buy that the most important thing for the development of international law is building highly effective and credible institutions, rather than merely proliferating more and more unmet obligations, you might conclude that the best thing for the further entrenchment of anti-bribery norms is expanding the OECD Convention club only to those states willing to work hard to meet its requirements.
On a (perhaps tangentially) related note, even if you’re (Phil) right that expanding the OECD convention might help strengthen US extraterritorial enforcement of the FCPA in the near term, is that practice sustainable in the medium/long-term?
In other words, if Eden’s worry about expansion is the resulting dilution of anticorruption norms, mine is entrenchment of the US-as-world-police regime in the anticorruption field.
I think that both of these concerns are valid, and potentially troubling. To address your question first, Michael, I think that there is some indication that other countries (at least certain western European countries) are stepping up the enforcement of their own laws. For a variety of reasons, my personal view is that this is (at least in part) a result of US enforcement, although there’s not a huge amount of evidence on this score. My hope and feeling is that the trendline is point up, in terms of broader enforcement, and that while long-term global policing by the US DOJ is not ideal, it’s also likely to be self-limiting.
Eden, I think that – like it or not – there’s already a pretty serious issue with underenforcement among member states, despite some of the innovative review mechanisms contained within the convention itself (e.g., http://www.oecd.org/daf/anti-bribery/SouthAfricaPhase3ReportEN.pdf). I agree that the issue of nominal commitment is a problem, but I actually think that increased US enforcement against companies from signatory companies could help to limit this problem, in that countries planning to ratify this convention might see doing so as a real commitment, rather than a vague aspiration.
Interesting post Phil! I think to test your hypothesis, it would be interesting to look at the data. When did most countries ratify the OECD Anti-Bribery Convention, and what was the FCPA enforcement trend in the years following the ratification? From a quick glance at the data, it seems that most countries ratified/enforced the OECD Convention between 1998-2001, whereas FCPA enforcement really began to take off around 2004 a total of 5 FCPA cases were filed by the SEC and the DOJ). Being cautious that correlation doesn’t mean causation, the data may suggest that your hypothesis is correct given the time it usually takes to register change and to file an FCPA case, but it may also suggests that there are factors other than the OECD Convention that spurred the sharp increase in enforcement of the FCPA that we have seen over the last few years.
Click to access antibriberyconventionratification.pdf
This is thought-provoking. Do we know why more countries want to sign onto the OECD Convention? What is the motivation?
Not entirely clear to me; one might think that this would decrease incentives to join, but that doesn’t really seem to have played out in real life. This isn’t like a BIT, in which countries are trying to improve the perceived benefits of investing within their territory. My feeling is that most countries do so for PR reasons, and to be able to make claims about how tough they are on corruption.
I agree that PR is one of the main reasons countries would join the OECD convention. One of Matthew’s earlier posts talked about how governments use corruption enforcement to improve perceptions of legitimacy. Joining the OECD Bribery Convention seems to be a relatively easy way of doing so without much additional political or financial cost.
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