08 December 1999
(U.S. mounting monitoring and enforcement efforts) (2120) U.S. Under Secretary of Commerce David Aaron says the success of the Organization for Economic Cooperation and Development's (OECD) Anti-Bribery Convention depends on how effectively it is monitored and enforced. The United States is approaching the task in three critical ways, Ambassador Aaron said December 8 in remarks to the Seventh Annual Conference on the Foreign Corrupt Practices Act (FCPA). First, the Commerce Department's Trade Compliance Center (TCC) is an active participant of the U.S. delegation to the OECD Working Group on Bribery, he said. The group is conducting reviews of the implementing legislation of those countries that have ratified the convention. The group will then send capital examiners to each of those countries to review the actual implementation and enforcement of the laws, he said. To date, 34 countries have signed the OECD convention on anti-bribery, and 18 have ratified it, he said. "Second, the U.S. government has been monitoring other countries' legislation independently," he said. And finally, the TCC has developed the ability to receive bribery complaints over the Internet that can be turned over to the Justice Department for evaluation of possible violations of the U.S. Foreign Corrupt Practices Act (FCPA), he said. Aaron said it is troubling that several key OECD exporting countries -- among them France, Italy, the Netherlands, Spain and Switzerland -- have not ratified the OECD anti-bribery convention. "These countries represent over 20 percent of OECD countries' exports," he said. "It is only with their full participation that the benefits of the convention can truly play out." France's reluctance to ratify the convention is especially troubling since "we negotiated a convention largely at their insistence," Aaron said. The Foreign Corrupt Practices Act (FCPA) is a U.S. law that covers all U.S. and foreign persons who commit an act of bribery of public officials on U.S. territory. The FCPA, Aaron said, has been amended to bring it in to full compliance with the OECD convention, which aims to curb graft internationally. Following are terms and acronyms used in the text: -- billion: 1,000 million. -- OECD: Organization for Economic Cooperation and Development. -- OSCE: Organization for Security and Cooperation in Europe. -- OAS: Organization of American States. -- WTO: World Trade Organization. Following is the text of Aaron's remarks as prepared for delivery: (begin text) [U.S. Department of Commerce Washington, D.C. December 8, 1999] REMARKS OF AMBASSADOR DAVID L. AARON UNDER SECRETARY FOR INTERNATIONAL TRADE U.S. DEPARTMENT OF COMMERCE AN UPDATE ON INTERNATIONAL ANTI-CORRUPTION INITIATIVES BEFORE THE 7TH ANNUAL CONFERENCE ON THE FOREIGN CORRUPT PRACTICES ACT Good afternoon. Thank you for that kind introduction and the opportunity to be here today to address this important conference on anti-corruption initiatives. The presence of corruption -- most simply defined as the abuse of power for private benefit -- is by no means a new phenomenon. In his treatise Bribes, Judge John T. Noonan traces corruption and concern for its practice from ancient India, to biblical times, and then as a common theme in the classic plays of William Shakespeare. In our own country apprehension over corruption dates back to our very foundations -- the Constitution made bribery one of explicitly mentioned crimes which could lead to the impeachment of a U.S. President. At the close of the 20th century, freer media and more democratic governments have no doubt played a role in exposing corruption and in making us more aware of its costs. We now realize more than ever how corruption undermines political processes, leads to the unfair allocation of resources, and generally hinders private and public sector development. At the same time, we are in a better position to work together to root it out. Today I would like to provide a brief update on three very important efforts aimed at curbing corruption internationally: First, the OECD Anti-Bribery Convention, Second, the Inter-American Convention Against Corruption, otherwise known as the OAS convention and Third, the WTO convention on transparency in government procurement. I would also like to touch briefly on Southeast Europe. I recently urged all the countries of the region to adopt an anti-corruption program and was very pleased with the outcome of the recent OSCE summit. OECD CONVENTION At the Commerce Department we have been hearing from exporters for years what an obstacle foreign bribery is in competing for international contracts. As we reported to Congress this past July, from 1994-1998 the outcome of approximately 240 contracts valued at $108 billion may have been affected by bribery involving foreign firms. From May 1998 through April 1999, additional allegations of bribery were made involving 55 contracts worth approximately $37 billion. This is why we have worked diligently to eliminate bribes and corruption in international business transactions. This has been a top priority for Secretary Daley and myself since we joined the Administration. The Foreign Corrupt Practices Act (FCPA) has been the foundation of the Administration's efforts. As many of you know, the FCPA, until just recently, covered only U.S. legal and physical persons, and foreign persons only in limited circumstances. Now the FCPA covers all foreign persons who commit an act of bribery on U.S. territory. The FCPA's jurisdiction has now been expanded to cover U.S. nationals, whether physical or legal persons, who bribe irrespective of whether there is a territorial nexus to the U.S. We have made these changes in the FCPA to implement the most important effort to curb graft internationally -- the OECD Anti-bribery convention. The OECD convention is an initiative that I have worked on for many years. I was U.S. Ambassador to the OECD during the convention's negotiations. So I can attest first hand to its thoroughness in monitoring and limiting corruption. It was a personally gratifying triumph for Secretary Daley, myself, and the whole Administration when the OECD convention was finally signed by 34 countries in December 1997, and entered into force this past February with eighteen countries having ratified it. But, this does not mean that our work is done. Several key exporting countries -- among them France, Italy, the Netherlands, Spain and Switzerland -- have not yet ratified the convention. These countries represent over 20 percent of OECD countries' exports. We need to continue to urge them to ratify the Convention as soon as possible. It is only with their full participation that the benefits of the Convention can truly play out. France is particularly a point of concern. We negotiated a convention largely at their insistence. Their failure to ratify, therefore, is hard to understand. Another important element to the Convention's success is to ensure that it is properly monitored and enforced. At the Commerce Department we have decided to play a major role in this effort. Let me tell you what we are doing: First, Our Trade Compliance Center (TCC), along with attorneys from our General Counsel's office, participate as members of the U.S. delegation to the OECD Working Group on Bribery. So far, in what is termed "Phase I" of the monitoring process, the Working Group has reviewed the implementing legislation of thirteen countries, including the United States, Germany, and Japan. Next week, the Working Group will review the implementing legislation of Australia, the United Kingdom, and Austria. The goal is to have reviewed all of the signatories' implementing legislation by the end of the year 2000. Then, in "Phase II" of the monitoring process, the Working Group will send examiners to capitals to review the implementation of the laws and how they are being enforced. Second, the U.S. Government has been monitoring other countries' legislation independently. Last July, we and the State Department submitted reports to Congress on the implementation of the OECD convention, in which we analyzed the implementing legislation of the eleven countries that had become parties to the convention at the time. And finally, the Commerce Department's Trade Compliance Center is now equipped to receive bribery complaints over the Internet. Depending on the nature of the complaint, we will work with our colleagues at other agencies to refer possible FCPA violations to the Justice Department and to determine whether there has been a violation of one of our trading partner's laws implementing the OECD convention. Information on the hotline and on our Congressional report can be obtained by calling 1-800-USA-TRADE. Another area that we are watching very closely is whether countries are disallowing the tax deductibility of bribes. Under the 1997 Recommendation on Combating the Bribery of Foreign Public Officials in International Business Transactions, OECD convention signatories committed to disallowing deductions of bribes to foreign public officials. Incredibly, some countries still have laws on the books allowing for such deductions, such as Australia, New Zealand, and Switzerland. Other countries, such as France, have passed legislation restricting the practice, but will still allow some forms of tax deductions for bribes. We are working very closely with our colleagues at the Treasury Department to remind these countries that this practice must stop, and that bribes should not be tax deductible under any circumstances. OAS CONVENTION An important regional anti-corruption initiative that I would also like to discuss is the OAS convention. In addition to bribery of foreign officials, the OAS Convention also addresses corruption more generally. For example, the OAS Convention requires state parties to criminalize both domestic and foreign bribery. The domestic anti-bribery provisions are aimed at both the bribe offeror and the recipient, whereas the international anti-bribery provisions address only the offeror. The OAS Convention also lists other acts of corruption that the state parties agree to consider criminalizing under their domestic laws, such as the improper use of information or property by government officials; the attempt by any person to obtain illicit benefits; and the diversion of state property. Furthermore, under the OAS Convention, state parties agreed to consider enacting additional so called "softer" anti-corruption initiatives in their domestic laws, such as measures concerning transparency and accountability in government, ethical standards for government officials, and measures applicable to private concerns. So far, twenty-six countries in our Hemisphere have signed the OAS convention, and it has been ratified by seventeen of those countries. The United States signed the OAS Convention in June 1996 and the President sent it to the U.S. Senate in April 1998 for approval. Unfortunately, the U.S. Senate has not yet ratified it. The Administration's position on this is simple: we should ratify the OAS convention as soon as possible and set an example for our Latin American friends. Secretary Daley and I will be working with you -- the private sector -- and our colleagues in the Senate in an effort to promote a better understanding of this important agreement, and enabling our country to ratify the OAS Convention. (TRANSPARENCY AND GOVERNMENT PROCUREMENT WTO) Finally, during my recent trip to Kosovo, I proposed a six point anti-corruption and good governance program aimed at stimulating the economic development of Southeast Europe. Bribery and corruption create a risky and often costly investment climate. I made it clear that there was a direct correlation between high levels of corruption and low levels of foreign investment. And that the only way opportunities for bribery and corruption can be minimized was through deregulation and privatization, greater transparency, strict ethics rules, and the reduction of the degree of discretion practiced by officials. I urged Southeastern European country leaders to adopt stronger, more reliable, transparent systems that will make for a more attractive investment climate for foreign companies. I also want to report a major breakthrough that happened during the November OSCE Summit in Istanbul. For the first time in its history, the OSCE recognized corruption as a major threat to Europe's future prosperity. We are very pleased that summit leaders have taken an important first step in bringing to bear the prestige and weight of the OSCE in the fight against corruption. The November 19th Summit Declaration tasks the OSCE permanent council to examine how best to contribute to efforts to control corruption and calls for the results of this work to be reported to the 2000 Ministerial meeting. As we end this century, we are poised to reach a global consensus on corruption -- curtailing it significantly to the benefit of all nations. Through our efforts at the OECD, in our own hemisphere with the OAS, and in war-torn regions with our Southeast Europe initiative, we are doing all we can to put an end to bribery, kickbacks, and graft. I look forward to continuing to work with all of you and would be happy to take questions. (end text) (Distributed by the Office of International Information Programs, U.S. Department of State)