Bribery case highlights failings

David Greybe
Business Day
August 2, 1999

The multimillion-rand bribery and corruption case involving a former boss of the Lesotho Highlands Water Project could test the industrialized world’s resolve to curb the offering of bribes by international business.

A dozen well-known European and North American firms have been linked to charges of bribery and corruption against the Lesotho government’s former top official at the R10bn water project. Companies allegedly involved include Impregilio of Italy, Dumez International of France, Acres International of Canada, Swedish-Swiss ABB and Germany’s Hochtief.

The governments of industrial countries have come under increasing fire for a perceived lack of balance in dealing with corruption. They are accused of failing to act decisively against “bribe givers” based in their countries, while calling for anticorruption campaigns in developing countries.

The Lesotho bribery case and a new anticorruption convention signed by the world’s richest nations could test the resolve of industrialized nations to clamp down on domestic bribe givers.

In December 1997 the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was signed by representatives of the 29 member governments of the Organisation for Economic Development and Co-operation. (OECD).

They are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Greece, Germany, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, the UK and the U.S. Five nonmembers also signed the convention: Argentina, Brazil, Bulgaria, Chile and the Slovak Republic.

The convention called on each of the 34 countries to enact legislation last year “to criminalise foreign bribery”.

However, the organization’s deputy seceretary-general, Joanna Shelton, announced in June that only 15 of the 34 signatories had so far “passed national legislation and deposited their instruments with the OECD”.

Three of the countries that have not yet complied with the convention -France, Italy and Switzerland- have domestic companies linked to the Lesotho bribery case.

According to Frank Vogl, vice-chairman of Transparency International (which monitors corruption throughout the world), too often “discussions on how to combat corruption have focused more sharply on the recipients of the bribes than on those who pay them”.

“Those who pay bribes are sometimes depicted as innocent parties, forced by ruthless officials to provide kickbacks and do special favours in return for business.”, Vogl wrote in June last year in the International Monetary Fund’s influential quarterly magazine Finance and Development.

“The reality is that both parties to corrupt practices conspire and defraud the public, to undermine fair trade, to waste resources, to frustrate development, and often to increase human suffering.”, he said.

Vogl welcomed the OECD anticorruption convention as “a first step toward the development of a comprehensive set of curbs on businesses paying bribes in international commerce”. But, he added, “it is only a first step. The convention does not cover every aspect of international bribery and its coverage of some areas is vague.” In addition, its success would depend on “the manner in which it is monitored”.

Vogl said OECD ministers had decided on a strategy based on “soft law”, as part of a broad international anticorruption approach. In the OECD context he said, “soft law” means a recommendation for action by governments, as distinct form “hard law”, which is a binding treaty obligation.

The ministers recommended, for example, that member countries (and the wider international community) should take steps to end tax deductibility for illicit payments and to tighten accounting requirements.

“Although these actions may be taken most effectively outside the convention, it is clear that only a holistic approach to the question of curbing corruption by corporations engaged in international business holds any prospect of success” Vogl wrote.

According to Stiaan van der Merwe, CEO of Transparency International SA, “Cross-border bribery of officials by international businesses is the most obvious form of corruption” However, “the issue is a lot more complex and bigger than some people in the industrialized world are prepared to admit, and, therefore, to deal with.”

He said: “The problem of international bribery and corruption will not disappear if we ‘clean up’ the public sector in the developing world.”

In the Lesotho Highlands Water Project bribery case, for example, “the more important question at the end of the day will be: did the various governments and role players involved in the project from day one know about instanced of bribery and corruption?”

“Hopefully, the court case will shed light on this” Van der Merwe said.

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