Matthew recently expressed skepticism about proposals to expand the OECD Anti-Bribery Convention to countries like China and India. As he explained, adding new parties may undermine the peer review system that is key to the Convention’s success. To succeed, that system requires (in Matthew’s words) that “(1) countries are willing to issue harsh reports about their peers, and (2) countries care about the reports, and find bad reviews embarrassing and/or politically damaging.” But what if public shaming isn’t enough? Imagine that a member state didn’t care enough to change its ways after critical reports. What would be next? Unfortunately, South Africa might help answer that question soon.
Last month, the OECD Working Group on Bribery (“WGB”) issued a scathing Phase 3 Report on South Africa’s compliance with the Convention. As the FCPA Blog recounted, the OECD appeared to have “encountered a brick wall,” with the reviewing nations “repeatedly express[ing] exasperation with South Africa’s failure . . . to prosecute a single foreign bribery case.” Calling the need for enforcement “imperative,” the WGB insisted that South Africa take “urgent steps” to address a host of infirmities; among other problems, the WGB found that South Africa had allowed political and economic considerations to impede investigations by the nation’s under-resourced anticorruption unit. The OECD also took the unusual steps of (1) asking South Africa to submit a self-assessment and (2) threatening to “take appropriate measures,” including requiring an additional Phase 3bis review, to address South Africa’s continued compliance problems.
With South Africa’s ruling party under increasing fire for its failure to combat corruption, the nation’s 2014 elections could mark a turning point in South Africa’s antibribery efforts. But what if they don’t? What if continuing to embarrass South Africa through follow-on reports and a statement of noncompliance isn’t enough to jumpstart enforcement of the Convention in Africa’s largest economy?
To answer this question is to realize that the key to the Convention’s success is also a symbol of its greatest weakness. Bluster as it might, there is little the WGB can do but to keep trying to shame members into compliance. This state of affairs is a product of compromises embedded in the Convention itself:
- First, the Convention neither provides for sanctions nor contemplates expulsion. These gaps are not surprising. After all, in pushing for the Convention, the United States was trying to get other nations to commit themselves to combating corruption, to acculturate them to an anticorruption norm, and to get them to begin prosecuting transnational bribery for the first time. Given those goals, and the desire to get as many OECD members as possible on board, it didn’t make much sense to push for sanctions (which might scare off new members) or expulsion.
- Second, South Africa acceded to the Convention without becoming an OECD member, as is permitted under Article 13(2). Allowing non-OECD members to become Convention members made sense from the perspective of wanting to draw nations into the fight against transnational corruption as soon as possible. Today, though, the WGB contains several members — like South Africa — over whom the OECD itself exercises little leverage since it cannot threaten their broader membership or other interests in the OECD.
What does this all mean? Perhaps it’s time — as Matthew seems to suggest — to reconsider the next steps for the Convention. Rapid expansion of the WGB, especially if coupled with seemingly defiant noncompliance by members like a recalcitrant South Africa, will threaten the Convention’s continued vitality. Unfortunately, amending the Convention to add a more robust compliance mechanism — e.g., an escalating sanctions regime — is both a political nonstarter (since it would require the votes of even the noncompliant parties) and a death-knell for future expansion.
Perhaps there is a middle ground: In my view, the best way to maintain the effectiveness of the Convention is to:
- Slow down its expansion (accepting only countries with a demonstrated commitment to enforcement in the form of preexisting prosecutions under foreign anti-bribery laws);
- Hope that shame is, in fact, enough for most countries; and
- Develop an extra-Convention agreement among willing members to (a) offer political and economic rewards to noncompliant nations who step up enforcement efforts and (b) impose collateral consequences upon those who don’t.
This approach would hopefully give moderate and active enforcers carrots and sticks with which to flexibly incentivize compliance without scaring off states considering accession in the way that a rigid intra-Convention sanctions regime might.
I like your idea for an extra Convention agreement, something like a bind-ourselves-in-the-future compact. Reform-minded officials in varied countries could establish a broad coalition–even including possibly corrupt officials, or at least some officials w/ currently suspicious financial ties–by agreeing to a compact with a set of incentives that takes effect several years into the future, thus not alienating the currently shady.
Interesting. I have mixed feelings about the extra Convention agreement. On the one hand, it does seem like a useful way to add more substantive carrots and sticks to the Convention (at least among willing members). On the other hand, I worry about whether an extra agreement would dilute the compliance pull associated with the original Convention. If a sub-group of states created and participated in an agreement that provided for real sanctions and incentives, would states that party to the Convention but not the additional agreement feel less obligated to abide by the Convention, since they would have, in a sense, opted out of the the full panoply of obligations? Maybe how we we feel about this extra agreement should depend on how many states would actually be willing to join it at the outset — if a “critical mass” of states were to come on board, that might pressure recalcitrant states to follow suit.
You raise a good point; I hadn’t considered the dilution concern. Your comment also raises the issue of selection bias: it seems possible that the countries we’d want to opt-in to this extra agreement (e.g., South Africa) might be the precise ones who would NOT do so (but I was hoping my in-the-future obligations might alleviate this worry). On your critical mass suggestion, maybe the agreement could have a this-doesn’t-take-effect-unless-X number-of-counties-sign clause?
I have a different concern with such a compact. Couldn’t it change the norms according to which countries accede to treaties and conventions? When South Africa acceded to the Convention, the lack of substantive enforcement undoubtedly factored into its decision. It seems that changing the rules now by “imposing collateral consequences” on countries outside the system to which they agreed threatens to send countries the lesson that they may no longer be able to rely on the rules of a convention to spell out what membership really means. Put another way, unlike the current system, countries will be able to rely on international instruments to tell them the rules, but will NOT be able to rely on international instruments to tell them the sanctions. Turning sanctions into a black box may have an enormous negative effect on the development of international law.
I could see an argument for insisting that, as a fundamental matter of international governance, compliant enforcement should be done WITHIN any given instrument or international legal system. Bootstrapping new enforcement measures (and applying them only to countries that acceded to the Anti-Bribery Convention in the first place rather than all countries with lackluster enforcement records) seems to introduce an element of unfairness to the system that might stunt the growth of international legal regimes in the future. If that’s true, Jordan’s solution, even if adopted, may turn out to be a pyrrhic victory: giving new teeth to this Convention while keeping any new ones from forming.
This is a thoughtful analysis. In thinking about future adjustments to the treaty, it might be helpful to differentiate the mechanisms through which we think that the ‘shame’ of a bad report card could affect a government’s behavior and target those we expect to be most influential. One is through embarrassment or moral suasion itself, which as Jordan suggests may be too soft. A second is by giving ammunition to domestic political constituencies and civic groups that care about the issue. A third is by making other states more skeptical when asked to accord future benefits to non-compliant states, for example through other OECD carrots or mutual assistance treaties. And a fourth could be to effect the incentives of businesses considering operations in South Africa, just as we imagine that corruption indices such as TI’s do when businesses are assessing risk.
Unfortunately one could imagine that, other things being equal, firms might find a lower threat of domestic corruption enforcement to be desirable. But if the outcome of follow-up reports reflects poorly on a government’s regulatory predictability and rule of law (or, alternatively, signals the likelihood of cross-border enforcement from other OECD members), then this could have an effect.
This is an interesting post and I like your suggestions for a middle ground approach to maintain the effectiveness of the Convention. I find your idea for developing an extra Convention agreement intriguing. Do you envision this as an optional protocol for the Convention?
Also, your proposal for having a system in which noncompliant nations could be subjected to rewards and sanctions raises some concern. First, if this extra agreement is created among willing members, is it realistic for noncompliant nations to join? I would assume that nations would willingly subject themselves to stricter obligations for compliance because they currently compliant and believe that continual compliance will not be a challenge. Second, which I think Sam iterated, will this encourage compliance? There is a risk that countries with less resources would choose to be noncompliant and then become more aggressive with compliance to receive political and economic rewards. Perhaps this risk could be reduced through your suggestion for slowing down expansion of Convention parties but one could argue that the OECD should take measures to incorporate countries where demand for bribes is higher.