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Foreign bribery.

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Minister for Justice Senator the Hon Amanda Vanstone

Senator for South Australia 



Thursday 30th April 1998


Foreign Bribery


Minister for Justice, Senator Amanda Vanstone, said today that a lack of transparency in decision making i n Asia had contributed to the current financial and economic problems in the region.


Senator Vanstone was speaking on the issue of criminalising foreign bribery at a Transparency International Australia conference in Sydney.


“Some people were so intoxicated by the growth rates recorded in Asia that they believed that the laws of economics which applied elsewhere had been suspended,” Senator Vanstone said.


“Deal making, monopoly granting and corruption have all contributed to an environment where investment decisions have been distorted.


“There seemed to be a view in some circles that Asia had discovered a different approach to economic development. A view which has been shown to be a misguided view.


“Asia’s high growth rates occurred in spite of a lack of transparency, not because of it.”


Senator Vanstone said she expected Australian legislation to criminalise foreign bribery would be introduced later this year, after the current period of public consultation and the Joint Standing Committee on Treaties’ review of the draft legislation.


The draft legislation was prepared as a result of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.


“I have heard some commentators assert that official corruption is part of the way of life of some countries and that it is an unavoidable accompaniment of business life in some places,” Senator Vanstone said.


“I reject this proposition. Bribery is almost always illegal and I doubt it reflects the true community values of the country concerned.


“By introducing our legislation, Australia will be sending out a strong message to the international community that our community takes the problem of bribery seriously.


“Good business sense, as much as morality, drives the campaign against payment of bribes to foreign officials.


“Bribes distort attempts at international competitive bidding, are non-productive and work against the fundamentals needed to ensure free trade is efficient, ie. that contracts are obtained on the basis of price, quality and service.”


Most OECD countries expect to pass or prepare legislation to outlaw foreign bribery by the end of 1998.


Copies of Senator Vanstone’s speech are available:


Media Contact: Kevin Donnellan 0419 400 078



Minister for Justice


Senator the Hon Amanda Vanstone




Conference organised by Transparency International Australia

30 April 1998, 9.00 - 9.20 AM


Millennium Hotel


Top of William Street, Sydney NSW


Chairman, ladies an d gentlemen. Good morning to you all and thanks for attending this meeting to discuss criminalising foreign bribery. I look forward to the results of your discussions on this issue.


I must commend Transparency International (TI) for the commitment they have demonstrated to the goal of promoting an awareness of the need to curb bribery in the marketplace. TI is an international, non-governmental organisation; its membership comes from every continent (except, I imagine, Antarctica, although I am happy to be corrected on this point) and includes:


* business people,

* politicians,

* lawyers,

* economists,

* academics,

* journalists and,

* bankers, amongst others.


Clearly TI is a broadly based group, and it has done fine work in promoting the need for action against corruption.


Over the past 2 months an exposure draft of the proposed Criminal Code Amendment (Bribery of Foreign Public Officials) Bill has been available for public comment and has been the subject of public hearings before the Commonwealth Parliament’s Joint Standing Committee on Treaties. I see today’s program as part of the process of raising awareness about the draft Bill and ensuring everyone has an opportunity to make comments.


Why are we concerned about the bribery of foreign officials? After all, relations between nations are governed by self interest (generally enlightened self interest, no doubt), not by ethical standards. We are often advised that ‘when in Rome; act like the Romans do’. We often hear that it’s not our business to apply our own standards to other cultures.


However, there is good business sense, as much as morality, which drives the campaign against the payment of bribes to foreign officials:


* bribery disto rts attempts at international competitive bidding. Whilst competitive tendering may not be a perfect tool, once bribery comes in it’s entirely useless;


* bribes are non-productive and, as such, are paid from profits (or, if they are tax deductible, are su bsidised by taxpayers);


* if free trade is to be efficient, contracts must be obtained on the basis of good price, good quality, and good service. Bribes promote entirely the opposite effects; and


* bribes, if they are paid, are presumably paid without t he knowledge of the Chief Executive of the corporation. Those CEOs who are wilfully blind, who adopt a ‘Lord Nelson’ approach, to the payment of bribes by their staff, may be responsible for quite deleterious management consequences.


A significant contrib utor to the current difficulties being experienced in Asia is the lack of transparency in decision making. Deal making, monopoly granting, and corruption have all created an environment where investment decisions have been distorted.


Some people were so intoxicated by the growth rates recorded in Asia that they believed that the laws of economics which applied elsewhere had been ‘suspended’. It seemed to be their view that Asia had discovered a different approach to economic development. This has been shown - conclusively - to have been a misguided view. Asia’s high growth rates occurred in spite of the lack of transparency in decision making, not because of it.


I have heard some commentators assert that official corruption is part of the way of life in some countries, that it is an unavoidable accompaniment of business life in some places. I reject this self serving and unjust proposition.


Bribery is almost always illegal and I doubt that it really reflects the true community values of the country concerned. In addition, the fact that bribery may be a common practice in a place does not justify it on ethical grounds. Even tacit official acquiescence or collusion by a foreign government does not justify following the practice. Societies, like individuals, can be ‘ethically handicapped’ in some respects. Slavery and apartheid are evidence of this possibility.


The draft Bill is very much one of the consequences of globalisation. We live in a time of unparalleled social and cultural interactions which demand that we have an international perspective in relation to our ethical and value systems as well as the conduct of business.


I believe the introduction of the proposed Criminal Code Amendment (Bribery of Foreign Public Officials) Bill will convey a message to the world and the Australian community that the Australian Government takes the problem of bribery seriously.


Today I want to canvass some of the issues raised by the Bill, advise you of developments in other countries and explain the process which will occur between now and the enactment of the legislation.


We need a common approach to foreign bribery, one that stems from a coalition of interests between governments and the private sector. The proposed Bill therefore follows the requirements of the OECD Convention on these matters and as such keeps our standards in line with those proposed for other highly industrialised countries.


The world’s trading nations generally accept that lower barriers to trade, and simpler rules that encourage a level playing field, benefit all trading nations. It is for these reasons that the World Trade Organisation was established: to build upon the work done by GATT in encouraging trade which, in turn, has lifted global economic efficiency. Similarly, discouraging bribery in international transactions should equally benefit all participants in international transactions.


Hindering the operation of markets opens the way for bribery and distorted decision making. The use of quotas and monopolies, for example, establishes values which have little, if any, relationship with market values. Transparency in the market place, lik e sunlight, is a good disinfectant against the bacterium of corruption. Market reforms, such as those sponsored by the World Trade Organisation (WTO), make good economic sense, but they also have an ethical dimension.


Transnational corruption and its potential for distorting trade was brought sharply into focus in the mid 1970’s following the ‘Lockheed scandals’. The US legislative response, which also came hard on the heels of the Watergate affair, was the Foreign Corrupt Practices Act 1977 .


One commentator has observed that by legislating to specifically confront transnational corruption:


The United States, in effect, had opened a Pandora’s box which much of the world - particularly those countries most affected by the revelations - would have preferred to have remained closed. On the other hand, the new transnational corruption, once revealed, had to be recognised for what it was - a new and dangerous challenge to the predicability of the international market. [ Transnational Aspects of Political Corruption by Victor T. Le Vine, ‘Political Corruption - A Handbook’, p.687.]


An important factor in the concern which flowed from the ‘Lockheed scandals’ was the involvement of a multi-national corporation. People began to appreciate the financial size and powe r of these corporations whose ownership and control went beyond national boundaries and which have economic resources which dwarf those of many countries.


In view of these concerns, it is not surprising that a strong international response from the world’s most economically powerful nations might be seen as the only solution likely to have any impact.


While an organised international response has taken some time to materialise, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (which Australia is being asked to ratify and implement by the end of this year) is a very significant initiative.


OECD countries account for approximately 80% of global GDP. The OECD includes the world’s 3 largest trading nations, the United States, Germany and Japan, and includes all major European countries, South Korea, Canada, Mexico, New Zealand and Australia.


In December 1996 the United Nations General Assembly adopted a Declaration Against Corruption and Bribery in International Business Transactions. Indeed, the United Nations Economic and Social Council Commission on Crime Prevention and Criminal Justice has been meeting in Vienna over the last few days to discuss, amongst other things, progress on implementation of the declaration.


The effort to combat international corruption is not limited to the OECD. Five (5) countries that are not members of the OECD - Argentina, Brazil, Chile, Bulgaria and the Slovak Republic - have signed the Convention. So there is scope for many more countries to join the international effort to stamp out the bribing of foreign officials.


It is important that Australia embrace the OECD’s initiative to combat the bribery of foreign public officials and be seen in the international arena to take a principled stand against corruption. While I am sure we would all agree it will not completely solve the problem of corruption, implementation of the Convention will reduce it and provide a strong statement about Australia’s values and our confidence in the soundness of those values.


There are others who question why we should limit ourselves to the terms of the OECD Convention - why not go further and cover all bribery, both of public officials and private individuals? Why have an exemption for ‘facilitation benefits’? These are issues that can be discussed further at this conference. However I believe there is good sense in following the strict terms of the Convention at this time.


Exemption for small facilitation benefits is probably the most diff icult issue to be faced. First, the Convention must be read with the ‘Commentaries’, and the two documents together show a clear intention to exclude certain ‘small payments’. Just how these should be defined without undermining the required criminal prohibitions is a matter of some difficulty.


Also in view of the international character of the offence proposed in the Convention (with witnesses and documentary evidence being located outside Australia), it will usually be both resource and skill intensive to investigate and prosecute such offence s. Accordingly, the focus of law enforcement will be, by necessity, on large scale bribes.


In practical terms a specific exemption of facilitation benefits, which is put forward as an option in the exposure draft, might recognise the reality of how the law will be enforced.


At the end of the day small facilitation benefits may be matters which are better left for local authorities to police rather than the law enforcement authorities of other countries regardless of whether there is an exemption in the legislation.


There is a possible alternative to expressly exempting small facilitation benefits. This would be to rely on the prosecutor’s discretion not to prosecute such minor matters. The approach of not specifically exempting minor matters and relying on prosecutorial discretion is more consistent with our domestic law in relation to comparable domestic offences.


On the other hand it might be argued that business people can reasonably expect the law to be framed so they know where they stand rather than having to rely on an uncertain discretion.


I am therefore asking that you approach this issue carefully, taking into account what the Australian community is likely to find acceptable. It is questionable whether a liberal or open-ended interpretation of what is a ‘small’ payment would be acceptable. However this is an issue about which the Government is seeking the views of the community.


Some in business have expressed concerns that the proposed Bill may give Australia a competitive disadvantage if other countries do not implement the Convention.


While I appreciate those concerns, we must consider our reputation and the competitive benefits of eliminating distortions in trade brought about by bribes. Trade based on the quality and true price of the goods and services, rather than on bribes, will be to Australia’s advantage. In the aid context, bribery can lead to a very poor selection of projects which in turn can lead to the diversion of resources away from areas of greatest need.


However it has always been the intention of the Government that it will only move at a pace which is consistent with progress in a significant number of OECD countries. Quite apart from the terms of the Convention itself, the OECD has agreed that Governments will aim to pass legislation by the end of 1998. It is important that all countries move together to bring pressure to bear on countries which might be slow in implementing the Convention.

I am pleased to advise that at this stage most OECD countries have responded well to the call to prepare legislation and pass it by the end of 1998. Belgium, the Czech Republic and Germany advise they have introduced legislation and 7 countries have, like Australia, prepared draft legislation which they hope to introduce in their legislatures in the near future. These 7 countries are:


* Austria,

* France,

* Greece,

* Korea,

* Norway,

* Spain and,


the USA. (The USA has drafted amendments to existing legislation which substantially implements the Convention.)


Another 21 countries hav e advised they are in the process of preparing draft legislation but still expect to pass it before the end of 1998. Those 21 countries are:


* Argentina,

* Brazil,

* Bulgaria,

* Canada,

* Chile,

* Denmark,

* Finland,

* Hungary,

* Iceland,

* Ireland,

* Italy,

* Japan,

* Luxembourg,

* Mexico,

* New Zealand,

* Poland,

* Portugal,

* The Slovak Republic,

* Sweden,

* Switzerland and,

* Turkey -


While the Netherlands is doubtful that it can achieve passage of the legislation this year, it ex pects to have legislation early next year. The UK has said its existing legislation complies with the Convention.


While it is still early days, the level of activity within the OECD suggests that there will soon be a net of legislation amongst the developed countries proscribing the bribery of foreign officials. This will make the bribery of foreign public officials an extremely hazardous activity. One which could land any who chose to be involved in gaol for many years.


The form of the overseas legislation is also interesting. Of the 13 countries who have advised us of their intentions, only the US and the Netherlands apparently favour having a provision which specifically excludes facilitation payments. There are a numb er of countries where that matter is still under consideration.


The US position is important, because a number of Australian companies already operate within the requirements of the US Foreign Corrupt Practices Act 1977 , so there remain good reasons for following that approach.


It is expected that the Joint Standing Committee on Treaties will report on the Convention and proposed Bill by 2 July 1998. The Government will examine that report, review progress and trends in other OECD countries, and make any appropriate adjustments to the Bill. Subject to there being appropriate progress in other countries, the Government will introduce the legislation in the sittings beginning in August and will seek to have the Bill enacted as quickly as possible.


The proposed Bill allows commencement to be delayed to allow adequate time for everyone to become aware of the relevant obligations. This will ensure that Australian corporations have time to put in place training courses and information programs which alert their staff to the requirements of the legislation as finally enacted.


It is the Government’s intention that Australia approach the ratification of the Convention and its implementation in an orderly and carefully considered manner. I see today’s seminar as an important part of that process and note that there will be other opportunities for you to comment on the Convention and the proposed Bill.


In contrast with experiences you may have had with the previous Government, this Government has not rushed in and signed the Convention. It has not produced a Bill which is set in concrete, and it recognises there are some matters where those outside Government can give us a valuable perspective on what might be the most effective way of dealing with these issues.


By bringing forward this Bill, Australia is showing it can respond quickly to international concerns while at the same time giving all Australians an opportunity to properly consider the implications of committing Australia to binding obligations.


Thank you again, and I wish you all the best for today’s seminar.