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.