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Controlling Corruption in International Business:

The International Legal Framework
Padideh Ala'i
American University Washington College of Law, [email protected]

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Ala'i, Padideh , Controlling Corruption in International Business: The International Legal Framework (September 21, 2002).
Knowledge for Sustainable Development, UNDP/UNESCO, Encylopedia of Life Support Systems (EOLSS)

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CONTROLLING CORRUPTION IN INTERNATIONAL BUSINESS: THE
INTERNATIONAL LEGAL FRAMEWORK

Padideh Ala’i, Associate Professor, American University Washington College of Law,

Washington, D.C.

Keywords
Bribery, active bribery, passive bribery, extortion, kickback, corruption, hard law, soft law,
colonialism, illicit payment, ethics, morality, facilitation payment, gift, transnational corporation,
corporate code of conduct, fraudulent practice

Contents

1. Introduction
2. The First International Anti-Corruption Movement (1975-1980)
3. The Second International Anti-Corruption Movement (1995-Present)
3.1. Overview
3.2. International Legal Framework Against Corruption and Bribery
3.2.1. The Inter-American Convention Against Corruption (OAS Convention)
3.2.2. The OECD Convention on Combating Bribery of Foreign Public Officials
in International Business Transactions (OECD Convention)
3.2.3. Initiatives by the United Nations
3.2.4. Initiatives by the Council of Europe
3.2.5. Initiatives by the Business Sector: International Chamber of Commerce
and Corporate Codes of Conduct
3.2.6. Initiatives by Civil Society: Transparency International and Integrity Pacts
3.3. International Financial Institution’s Efforts against Corruption and Bribery
3.3.1. World Bank
3.3.2. International Monetary Fund
3.3.3. Asian Development Bank
3.3.4. North American Development Bank
3.3.5. European Bank for Reconstruction and Development
3.3.6. African Development Bank
3.3.7. Inter-American Development Bank
3.4 An Assessment of the Second International Anti-Corruption Movement
3.4.1. The Limitations of the Economic Approach
3.4.2. The Problem of Gifts, Facilitating Payments, and Bribes
3.4.3. Corruption, Anti-Corruption, the Rule of Geographical
Morality, and Colonialism

4. Conclusion

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Glossary

Active Bribery: The offence of bribery committed by the person who promises or gives the
bribe.

Arms-length transaction: Said of a transaction negotiated by unrelated parties, each acting in

his or her own self-interest; the basis of a fair market value determination.

Bribery: An offer or payment or promise or authorization of an offer or payment of money or

anything of value with a view to corrupting the behavior of a person, as a public official.

Corrupt Practices: The offering, giving, receiving or soliciting of anything of value to influence
the action of a public official in the procurement process or in contract evaluation. It
includes bribing, as well as extortion or coercion, which involve threats of attack on
person, goods or reputation.

Corruption: Behavior on the part of officials in the public and private sectors in which they
improperly and unlawfully enrich themselves and/or those close to them, or induce others
to do so, by misusing their official position.

Enterprises: Any person or entity engaged in business, whether for profit, non-profit, private,
public or quasi-public, parent or subsidiary.

Extortion: The obtaining of property from another induced by wrongful use of actual or
threatened force, violence, or fear, or under color of official right.

Facilitation Payment: Small payments to public officials in order to expedite routine business
needs, such as clearing customs and obtaining licenses or permits.

Fraudulent Practices: A misrepresentation of facts in order to influence a procurement process

or the execution of a contract to the detriment of the borrower. It covers collusive
practices among bidders (before or after bid submission) designed to establish bid prices
at artificial non-competitive levels and to deprive the Borrower of the benefits of free and
open competition.

Guanxi: A Chinese word referring to interpersonal connections that imply continued exchange
of favors and reciprocal obligations.

Hard Law: Refers to laws that have come about as a result of a domestic legislative process or
are recognized as agreements between sovereign states and are therefore binding and
enforceable.

Illicit Payment: A bribe that may or may not have been paid with a corrupt intent.

Kickback: Any technique where payments are channeled to government officials, relatives or
business associates of a contracting party.

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Passive Bribery: The offence of bribery committed by the person who receives the bribe.

Rule of Geographical Morality: the norm by which a citizen of a country in the North may
engage in acts of corruption in any country in the South, including bribery and extortion,
without the attachment of any moral condemnation to those acts.

Soft Law: Non-binding and non-mandatory initiatives adopted by governments, enterprises,

business groups, non-governmental organizations, or inter-governmental organizations
through recommendations, resolutions, internal rules, guidelines, policies, or voluntary
codes.

COE: The Council of Europe is an organization formed in 1949 that is now composed of forty
three member states, whose primary goal is to achieve a greater unity between members
in safeguarding individual freedom, political liberty and the rule of law.

FCPA: The Foreign Corrupt Practices Act is a U.S. law that prohibits bribery of foreign public
officials or political party candidates and officials.

GRECO: The Group of States against Corruption was set up by the Committee of Ministers of
the Council of Europe on 1 May 1999. The GRECO was conceived as a flexible and
efficient follow-up mechanism, called to monitor, through a process of mutual evaluation
and peer pressure, the observance of the Guiding Principles in the Fight against
Corruption and the implementation of international legal instruments adopted in
pursuance of the Programme of Action against Corruption. The GRECO is financed
through annual compulsory contribution of its member states.

IAIP: The International Agreement on Illicit Payments sought to criminalize the “offering,
promising, or giving” of illicit payments to public officials in connection with
international commercial transactions. Although the IAIP was adopted in the U.N.
ECOSOC and forwarded to the General Assembly for consideration in 1980, the General
Assembly ultimately failed to adopt it.

I.C.C.: The International Chamber of Commerce is a non-profit, private association composed of

individuals from member states that works to harmonize international trade practices and
legislation, and to develop internationally recognized commercial instruments and
mechanisms.

IFIs: International Financial Institutions including the International Monetary Fund, World
Bank, and multilateral development banks.

MDB Working Group: Multinational Development Bank Coordinating Committee on

Governance, Corruption and Capacity Building.

OECD: The Organization for Economic Co-operation and Development is currently comprised
of thirty member countries which, through the governing body of the OECD, produce
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 internationally agreed instruments, decisions, and recommendations to promote ground
rules in areas where multilateral agreement is necessary for individual countries to
progress in the global economy.

OAS: The Organization of American States brings together thirty-five member states from
North, Central and South America, and the Caribbean, to serve as a political forum for
multilateral dialogue and action.

TI : The Transparency International was founded in 1993 to bring civil society, business, and
governments together in a powerful global coalition devoted to combating corruption.
The TI is the most established anti-corruption non-governmental organization with
national chapters in more than eighty countries.

Summary

Since 1995, the anti-corruption movement has had success in developing a global legal
framework to combat transnational bribery and corruption. A distinguishing feature of the
current anti-corruption movement is its emphasis on the economic cost of corruption and the
involvement of the international financial institutions such as the World Bank, the International
Monetary Fund and regional development banks, in the efforts to combat corruption. As part of
their efforts to combat corruption, international financial institutions have made effective anti-
corruption reforms a prerequisite for future allocation of funds. The current anti-corruption
movement has also been successful in enlisting the participation of sectors of international and
domestic civil society, as well as the business community, through integrity pacts and codes of
conduct.

Notwithstanding its relative success, the current anti-corruption movement faces serious hurdles
as incidences of transnational corruption keep rising. On a philosophical level, the economic
repackaging of the problem of corruption has made the anti-corruption effort more acceptable by
excluding any explicit moral judgments that may lead to charges of moral or legal imperialism;
however, the re-packaging is proving to be inadequate given the irrefutable moral and ethical
dimension of corruption. Increasingly, scholars of international business ethics, as well as anti-
corruption advocates, are emphasizing a “virtues’’ approach to combating corruption. The
failure of the anti-corruption movement may also contribute to the de-legitimization of the
“science” of economics. On a more practical level is the difficulty of distinguishing among
different categories of illicit payments, such as a facilitation payment that can be legal; a bribe,
which is illegal, and maintaining a favorable climate payment, which may be legal or illegal.

Finally, the current anti-corruption movement must address the legacy of colonialism and its
impact on how developing countries view anti-corruption efforts. For centuries, corruption has
been associated with the East and anti-corruption with the West. Making free markets, rule of
law, and democratic reforms a part of the anti-corruption campaign may lead to the perpetuation
of the rule of geographical morality and the imposition of Western values. To some, this
approach opens the anti-corruption movement to charges of neo-colonialism.

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1. Introduction

Corruption has existed from the beginning of time. Globalization, however, seems to have
increased the magnitude and impact of such corruption. The end of the Cold War in the early
1990s removed certain incentives for unqualified support of corrupt regimes by the West. It also
resulted in universal application of free market reforms by donor governments and International
Financial Institutions (IFIs). These reforms have, in turn, increased opportunities for corruption.
Since 1995, recognition of the detrimental effects of corruption on economic development has
increased. As a result, IFIs have recognized the relevance of corruption to their economic
mandate, have agreed to control corruption if associated with development projects they fund;
and are linking anti-corruption reforms to the future allocation of funds.

The success of anti-corruption efforts is largely attributable to the repackaging of the problem of
corruption as an economic rather than a political or moral problem. Anti-corruption advocates
have convincingly argued that corruption impedes economic development by distorting public
sector choices towards “wrong” public projects that benefit corrupt government officials while
producing inefficient and inequitable spending. This argument has allowed anti-corruption
advocates to overcome the East-West and North-South divisions that dominated the U.N.
initiatives against corruption and bribery in the late 1970s, i.e., the First International Anti-
Corruption Movement.

2. The First International Anti-Corruption Movement (1975-1980)

On December 15, 1975, the U.N. General Assembly passed Resolution 3514, entitled “Measures
against Corrupt Practices of Transnational and Other Corporations, their Intermediaries and
Others Involved.” The Resolution condemned “all corrupt practices, including bribery, by
transnational and other corporations, their intermediaries and others involved, in violation of the
laws and regulations of host countries.” The Resolution directed the U.N. Economic and Social
Council (ECOSOC) to make further recommendations for eliminating corrupt practices,
including bribery. The ECOSOC responded by forming, an Ad Hoc Intergovernmental Working
Group on Corrupt Practices (U.N. Working Group) which met regularly between 1976 and 1980
and submitted reports of its discussions. The U.N. Working Group concluded that in order to
successfully combat corruption and bribery, “international action” was necessary and, as a result,
drafted the International Agreement on Illicit Payments (IAIP). IAIP sought to criminalize the
“offering, promising, or giving” of illicit payments to public officials in connection with
international commercial transactions. In addition, it criminalized the “soliciting, demanding,
accepting or receiving, directly or indirectly, of any illicit payments” in connection with an
international commercial transaction. IAIP recognized that not all countries attribute criminal
culpability to legal persons, such as corporations, and therefore imposed the requirement of
“comparable deterrent effects.” IAIP also addressed mutual legal assistance, record keeping, and
accounting and extradition.

The IAIP was adopted by the ECOSOC and forwarded to the U.N. General Assembly for
consideration in 1980. That year, however, the G-77 also introduced a decision requiring that

5
the U.N. Conference on IAIP be convened only after completion of the U.N. Conference on the
Code of Conduct for Transnational Corporations (TNC Code of Conduct). This Code, however,
was strongly opposed by many developed nations. Therefore, neither the IAIP nor the TNC
Code of Conduct was adopted by the General Assembly. The U.N. initiatives to combat
corruption failed as a result of political disagreements between the developed and developing
states and succeeded in turning the problem of illicit payments into a divisive political issue. The
developed states blamed the problem on political corruption in the developing world, and the
former colonies placed the responsibility on transnational corporations (TNCs) that provide the
illicit payments.

Until the mid 1990s, the IFIs avoided addressing the corruption problem by arguing that
corruption is a political issue and therefore outside their economic mandate. The IFIs are limited
by their charters from interfering in the political affairs of their member states. Throughout the
1980s and early 1990s, the problem of corruption was marginalized in international forums. The
only notable exception was the United States, which continued to advocate criminalizing
transnational bribery.

In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA) that prohibited
U.S. domestic concerns and issuers from bribing foreign public officials or political party
candidates and officials. From 1977 to 1996, the FCPA was the only domestic legislation that
prohibited bribery of foreign public officials by domestic firms. Throughout this time, the FCPA
was criticized for its extra-territorial reach and its attempt at “moral imperialism.” In practice,
the anti-bribery provisions of the FCPA were rarely enforced. From 1977 to 2000, only 30
FCPA criminal cases were brought against U.S. corporations for violations of the anti-bribery
provisions. Notwithstanding the lack of enforcement, the U.S. business sector remained highly
critical of the FCPA, arguing that the law had created an uneven playing field for U.S.
companies that had to compete with non-U.S. multinationals that were not prohibited from
paying bribes to foreign officials and, in some instances, were even able to deduct the cost of
such bribes under the tax laws of their country of origin.

3. The Second International Anti-Corruption Movement (1995-Present)

3.1. Overview

In view of the political nature of the failure of the IAIP, the new anti-corruption movement
addressed the corruption problem as an economic rather than a moral or political problem. By
1995, economists, lawyers, and political scientists, among others, were focused on the
detrimental effects of corruption on economic development. This detrimental economic effect
was particularly evident in the selection and construction of large infrastructure projects in the
developing world, where corruption resulted in selection of the “wrong” kind of public projects
and inefficient and inequitable spending. The packaging of corruption as an economic problem
allowed the IFIs to address bribery and corruption of government officials. The IFIs created
anti-corruption task forces and amended their procurement and consultant guidelines to include
anti-corruption or anti-bribery provisions.
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This Second International Anti-Corruption Movement (the current movement) has been
successful in concluding two multilateral conventions against bribery and corruption: The Inter-
American Convention Against Corruption (OAS Convention) in 1996 and the Organization for
Economic Development Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions (OECD Convention) in 1997. In 1996, the U.N. General
Assembly adopted its Declaration Against Corruption and Bribery in International Commercial
Transactions (Anti-Corruption Declaration). At the same time, multinational corporations began
to voluntarily adopt codes of conduct and internal controls to combat bribery. Finally, the current
movement enlisted the support of civil society groups in mobilizing grass root support for its
anti-corruption initiatives.

3.2. International Legal Framework Against Corruption and Bribery

Every country has its own domestic legislation that prohibits corruption or bribery of public
officials and acceptance of bribes by such officials. In some instances, countries have created
special units within the government to coordinate anti-corruption activities. The discussion of
specific domestic anti-corruption law and efforts is outside the scope of this short article. The
focus is solely on the international legal framework and those who affect that framework,
including IFIs, multinational corporations, and international civil society.

3.2.1. The Inter-American Convention Against Corruption (OAS Convention)

In 1996, the 34 members of the Organization of American States approved the OAS Convention,
which is aimed at eliminating bribery and corruption of government officials. The OAS
Convention was the first international legal framework that criminalized bribery of foreign
government officials. Generally, the signatories to the OAS Convention are required to develop
and strengthen legal mechanisms to “prevent, detect, punish and eradicate” official corruption.
The OAS Convention requires a signatory state to prohibit not only “Transnational Bribery” but
also “Illicit Enrichment,” “subject to its Constitution and the fundamental principles of its legal
system.” Should a signatory state decide to criminalize both Transnational Bribery and Illicit
Enrichment as offenses under domestic laws, offenses shall be deemed to be “Acts of
Corruption” under the Convention. The OAS Convention specifically identifies the following
“Acts of Corruption”: (1) the solicitation and acceptance of any article of monetary value or
other benefit, such as a gift, by a government official; (2) the offering or granting of any such
article or benefit; (3) any act or omission by a government official in the discharge of his or her
official duties for the purpose of illicitly obtaining benefits for him or herself or for a third party;
(4) the fraudulent use or concealment of property derived from any of the Acts of Corruption;
and (5) participating or conspiring to commit any of the Acts of Corruption. Should a signatory
state decide not to criminalize either transnational bribery or illicit enrichment, the Convention
requires that such a state provide assistance and cooperation to other states in their prosecution
of the offense “insofar as the laws permit.”

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On June 5, 2001, the OAS adopted AG/Resolution 1785 (xxxi-o/01), Enhancement of Probity in
the Hemisphere and Follow Up on the Inter-American Program for Cooperation in the Fight
Against Corruption (Resolution 1785) which sought to encourage the ratification of the OAS
Convention. The United States finally ratified the Convention on September 15, 2000.
Resolution 1785 adopted Resolution 1723, which led to the creation of the Working Group on
Probity and Public Ethics (the OAS Working Group). The OAS Working Group is responsible
for integrating the various international models against corruption with the aim of recommending
the most appropriate model for state adoption. The OAS Working Group has also proposed the
creation of an institutional follow-up mechanism to ensure effective implementation of the OAS
Convention.

The OAS has also created the Inter-American Program for Cooperation in the Fight Against
Corruption (OAS Program). The Program calls for, among other things, reforms in laws, such as
codes of conduct for public officials, as well as institutional reform, including establishment of a
support system for government institutions charged with fighting corruption and helping states
develop education programs in the area of ethics and other matters dealing with corruption.
From April 20 to 22, 2001, the OAS held the Third Summit of the Americas in Quebec City,
Canada, where the States produced the “Fight Against Corruption” Declaration, which reiterates
many of the common anti-corruption themes.

3.2.2. OECD Convention on Combating Bribery of Foreign Public Officials in

International Business Transactions (OECD Convention)

In 1994, the OECD adopted a Recommendation on Bribery in International Business

Transactions (Recommendation), which called upon member countries to take “effective
measures to deter, prevent and combat bribery of foreign public officials in connection with
international business transactions” and instructed the OECD Committee on International and
Multilateral Enterprises (CIME) and its Working Group on Bribery in International Business
Transactions to monitor the implementation of the Recommendation. On May 23, 1997, the
CIME proposed, and the OECD adopted, a Revised Recommendation. The Revised
Recommendation preserved the general undertaking of the 1994 text to combat bribery of
foreign public officials and elaborated on specific commitments to the criminalization of the
bribery of foreign public officials, accounting, and public procurement. Eventually, on
December 17, 1997, the 29 members of the OECD, along with 5 non-members, signed the
OECD Convention. The Convention came into effect on February 15, 1999. The OECD
Convention is not self-executing, and it does not include a model law. Rather, it provides only
rough guidelines for its implementing legislation. The aim is that the signatories, by national
implementation, will provide clear and detailed rules that are functionally equivalent to one
another in punishing and deterring bribery in international business. Notwithstanding the
functional equivalency rule, the OECD Convention contains five mandatory provisions: First,
legislation must criminalize “active bribery.” Second, legislation must make not only the amount
of the bribe but also proceeds or property derived from the bribe subject to seizure or sanctions
of comparable effect. Third, legislation must establish jurisdiction over an offense of bribery of
foreign public officials when the offense is committed in whole or in part in that nation’s

8
territory. If possible under the domestic legal system, legislation must recognize national
jurisdiction with regard to bribery of foreign public officials. Fourth, the OECD Convention also
serves as an extradition treaty allowing for extradition for violations of the anti-bribery
provisions. Finally, penalties must be comparable to those applicable to bribery of domestic
officials and such penalties must be “effective, proportionate and dissuasive.”

The OECD has enacted a number of mechanisms to ensure that signatories of the Convention are
taking appropriate steps to implement its provisions. The OECD Anti-Corruption Division
(ACD) serves as the focal point within the OECD Secretariat to respond to the fight against
corruption in international business. In early June 1999, the ACD launched the OECD Anti-
Corruption Ring Online (ANCORR WEB), a comprehensive online information and resource
center on corruption, bribery, money laundering, and related issues that provide governments,
businesses, civil society, international organizations, and individuals with information they need
to implement better policies and actions to fight corruption. In addition to the ACD, OECD
Public Management Service (PUMA) helps member countries develop and maintain a
framework for promoting integrity and high standards in public officials. PUMA primarily
functions by creating country reviews, comparative analyses, evaluative bench marking, and
producing guidelines that can be used to evaluate and design policies, e.g., the OECD Principles
for Managing Ethics in the Public Service. PUMA has also launched the OECD Journal on
Budgeting, which is intended to make modernizing budgetary practices available to a wide
community. Finally, on June 27, 2000, the 20 member countries and 4 non-member countries
also adopted the OECD Guidelines for Multinational Enterprises.

The OECD Convention is significant in that it is an acknowledgement that investors from the
OECD countries bear responsibility for spreading corruption in the developing countries. The
extent to which a multinational is dissuaded from engaging in active bribery, however, depends
upon the implementation and enforcement of the Convention by each signatory state.
Enforcement of the OECD Convention has proved to be difficult, because of the inefficiency of
national criminal and evidentiary rules in the context of transnational bribery and the fact that the
same companies who engage in acts of bribery and corruption in the developing world often are
the most respected and law-abiding companies in their home jurisdiction.

3.2.3. Initiatives by the United Nations

In December 1996, the U.N. General Assembly adopted its Anti-Corruption Declaration (See
Section 3.1 above) and Resolution 51/59 (Action against Corruption) that had annexed thereto
the International Code of Conduct for Public Officials (U.N. Code of Conduct for Public
Officials) that targeting passive bribery. The Declaration is non-binding and calls on states to
“take effective and concrete action to combat all forms of corruption, bribery and related illicit
practices in international commercial transactions.” In particular, it calls for “effective
enforcement of existing laws prohibiting bribery,” encourages Member States to criminalize
bribery of foreign public officials “in an effective and coordinated manner,” and recommends
many of the provisions found in the OAS and OECD Conventions. The U.N. Code of Conduct
for Public Officials sets forth guidelines and recommendations to be used as tools by states in

9
their efforts against corruption. The Code of Conduct also adopts the principle that a public
office is a position of trust, which implies a duty to act in the public interest: the “ultimate
loyalty of public officials should be to the public interests of their country as expressed through
democratic institutions of government.” Under the Code, furthermore, public officials may not
use their official capacities for improper advancement of their family’s personal or financial
interests, nor may they improperly use public monies, services, or property.

From July 30 to August 3, 2001, the Intergovernmental Open-Ended Expert Group to Prepare
Draft Terms of Reference for the Negotiation of an International Legal Instrument against
Corruption (the Inter-Governmental Expert Group), comprising 95 Member States met in
Vienna and agreed to the Terms of Reference for a United Nations Convention Against
Corruption (the UN Convention). The Inter-Governmental Expert Group set up a committee to
draft a convention by the end of 2003. The Report indicates that the participants hope that the
U.N. Convention addresses the issue of prevention, including the necessity of dealing with the
“economic and social” factors associated with corruption.

3.2.4. Initiatives by the Council of Europe

In 1994, European Ministers of Justice called upon the Council to address the threat of
corruption. The Council immediately set up a Multi-disciplinary Group on Corruption (GMC)
and instructed it to examine potential measures for an international program against corruption.
The GMC submitted a draft Program of Action against Corruption to the Council of Europe
(COE) Committee of Ministers, which approved the program and instructed the GMC to
implement it before December 31, 2000.

On November 6, 1997, the COE adopted Resolution (97)21 on 20 guiding principles for the fight
against corruption (Guiding Principles). On May 5, 1998, the COE adopted Resolution (98)7,
which established the Group of States against Corruption (GRECO). GRECO was initially
established set up by 17 states; since 1998 its membership has grown to 34 member states.
GRECO functions as a monitoring mechanism that aims to improve the capacity of its members
to fight corruption by following up on their activities through a dynamic process of mutual
evaluation and peer pressure. GRECO is responsible for monitoring observance of the Guiding
Principles and implementation of international legal instruments. To date, three instruments
have been adopted: (1) the Criminal Law Convention on Corruption (Criminal Law Convention),
opened for signature on January 27 1999; (2) the Civil Law Convention on Corruption (Civil
Law Convention), adopted in September 1999 and opened for signature on November 4, 1999;
and (3) the Recommendation on Codes of Conduct for Public Officials (Recommendation),
adopted on May 11, 2000. The Criminal Law Convention is an “instrument aimed at the
coordinated criminalization of a large number of corrupt practices.” It deals with both active and
passive bribery of foreign and domestic officials, in both the private and public sector. Under the
Criminal Law Convention signatory states are required to provide sanctions for violations of the
anti-bribery provisions and allow for extradition. The Civil Law Convention requires that States
provide “for effective remedies for persons who have suffered damage as a result of acts of
corruption, to enable them to defend their rights and interests, including the possibility of

10
obtaining compensation for damage.” It also provides protection for whistle blowers. The
Recommendation sets out a Model Code of Conduct for Public Officials in the Appendix. The
Model Code of Conduct recommends how to deal with real situations frequently faced by public
officials, such as, the receipt of gifts.

3.2.5. Initiatives by the Business Sector: International Chamber of Commerce and

Corporate Codes of Conduct

The International Chamber of Commerce (ICC), as a world business organization with national
associations in more than 130 countries, has also been active in developing “soft law” on the
subject of corruption and bribery. The ICC’s focus has been on “extortion” of bribes by “foreign
public officials.” In 1977 the ICC issued the Report on Extortion and Bribery in business
transactions that included Model Rules of Conduct for business enterprises. In the 1990s, the
ICC position was that extortion and bribery “could undermine the most promising development
in the post Cold-War era, i.e., the spread of democratic governments and of market economies
worldwide.” The ICC has also strongly advocated including corruption on the list of non-tariff
barriers that are prohibited under the international trading rules enforced by the World Trade
Organization (WTO). According to the ICC, offering or giving a bribe, in addition to being a
crime, constitutes an act of unfair competition that could give rise to actions for damages.

On March 26, 1996, the ICC executive board adopted a revised version of the ICC “Rules of
Conduct to Combat Extortion and Bribery” (ICC Rules). The ICC Rules are intended to help
enterprises develop corporate compliance programs that are tailored to their own circumstances.
Generally, the ICC Rules condemn private-public bribery as well as private-private bribery by
prohibiting extortion (which is defined by the ICC as direct or indirect demand or acceptance of
a bribe), bribery, and kickbacks. They also require enterprises to take reasonable measures to
make sure that their agents do not pay bribes by maintaining records and ensure that the amounts
of commission are commensurate with the work done by each agent. The ICC Rules also
recommend that enterprises avoid “off the books” transactions and that all accounts should be
audited by independent auditors. In 1996, the ICC set up a Standing Committee on Extortion
and Bribery whose primary tasks include urging ICC National Committees to strongly support
the ICC Rules and encourage enterprises to adopt them while coordinating with domestic efforts
to combat corruption.

Notwithstanding the foregoing, far too few companies have adopted an official “no-bribery”
policy. In many cases, the companies deny paying “bribes,” but admit to paying “facilitation
payments.” According to recent business ethics scholarship, even if corporate codes of conduct
are adopted by enterprises, they will not be successful if they are not based on values that “come
from within the enterprise”, i.e., if they are not based on a “firm culture of integrity.” This view
has led to the development of the “Combating Corruption Principles”, which are based on the
belief that a “virtue” approach inside an enterprise or a melding of virtue ethics in a corporate
culture will be far more successful in stopping the payment of bribes and kickbacks than the
imposition of highly detailed, inflexible corporate codes. According to the proponents of the
“virtues approach,” bribery and corruption are “hard to define and delineate across subtle

11
cultural lines” and can only be accommodated within the virtue ethics framework which, in
contrast to rigid rules and regulations, can account for cultural differences.

3.2.6. Initiatives by Civil Society: Transparency International and Integrity Pacts

Over the years, TI’s primary focus has been to help overcome the resistance of entities with a
stake in the status quo; mobilize people and expertise behind anti-corruption initiatives; and
improve the interface between governments, businesses, and civil society for effective
governance. TI’s most influential publication is its Annual Corruption Perception Index (CPI).
CPI is becoming increasingly important as countries struggle to move up from a low rank; which
may lead to increased scrutiny by IFIs and aid agencies. In addition, TI has also published a
Bribe Payers Survey and a Corporate Best Practices Survey.

TI has been an effective proponent of the view that corruption, defined as “misuse of public
office for private profit,” is always bad. In coming to this conclusion, TI concentrates on the
economic costs of corruption to the general welfare of the population. TI has rejected the
argument that poverty or lack of development leads to corruption. It maintains that abundance of
wealth, as well as poverty, can cause corruption, but poverty is almost always the result of
corruption. TI categorically rejects the argument that corruption is part of some cultures by
stating that although differences in practices exist among various cultures in how business is
conducted, e.g., the extent of gift-giving, no culture accepts blatant attempts to “buy” favorable
decisions. TI’s rejects cultural relativism, but it does admit that for anti-corruption efforts to be
successful, they must be “tailor-made” to address local institutional and cultural concerns.

The solutions proposed by TI to combat corruption include the development of “integrity”

systems at the national level, through TI National Chapters, and at the international level, by
creating “Islands of Integrity” and encouraging the use of “Integrity Pacts” (IPs). The aims of
the IPs are: (1) to enable companies to abstain from bribing by providing assurances that their
competitors will also refrain from bribing and (2) to force government procurement agencies to
prevent any form of corruption, including extortion, and to follow transparent procedures. A
government may choose to have an IP for all of its projects, for some in a particular sector, or for
only one contract. The requirement of entering into an integrity agreement is mentioned in the
government’s Invitation to Tender as well as the Procedures for Bidding for Public Sector
Contracts. Under these procedures, TI recommends that bidders who fail to comply with the
terms of the IP will be subject to significant sanctions, such as loss of contract, liability for
damages, and forfeiture of the bid security. Bidding companies are required to provide the
government with a no-bribery policy and compliance program that can be specific to the contract
at issue or general policy of the corporation. The IP as envisioned by TI also requires
companies to disclose all past and intended future payments to third parties at the bidding stage
and then be formally recorded and reported during the execution stage by the successful bidder.
To date, the IP’s has been used in a variety of projects, including a refinery rehabilitation project
in Ecuador and the privatization of telecommunications in Panama.

3.3. International Financial Institution’ Efforts against Corruption and Bribery

12
The International Financial Institutions (IFIs) have recently instituted official anti-corruption
policies. In 1997, the International Monetary Fund (IMF) and the World Bank suspended all aid
to Kenya, totaling $210 million, and conditioned the resumption of the aid on the passage of
anti-corruption legislation, among other things, which subsequently led to the creation of the
Kenya Anti-Corruption Authority (KACA). The IMF involvement in Kenya has been sharply
criticized by Third World scholars, who have claimed that the IMF and the World Bank are
forcing the passage of “bank-sponsored laws” that will in the end not solve the corruption
problem. According to this view, to fight the problem of corruption, there is a need to look at the
local conditions that make corruption desirable, e.g., low salaries and underdevelopment. The
IFIs, however, insist that reducing corruption is a precondition for development.

In February 1998, the World Bank met with representatives of regional development banks, the
European Commission, and the United Nations Development Program at the Asian Development
Bank headquarters in Manila to discuss harmonization of procurement rules. As a result, the
Multilateral Development Bank Coordinating Committee on Governance, Corruption and
Capacity Building (the MDB Working Group) was formed. The MDB Working Group has
adopted a MDB Master Bidding Document for Procurement of Goods and is working on other
project-related issues, such as pre-qualification of civil work contractors and recruitment of
consultants.

3.3.1. World Bank

The World Bank’s anti-corruption policy is outlined in a 1997 report entitled: Helping Countries
Combat Corruption: The Role of the World Bank. The Bank’s anti-corruption strategy has four
main themes: (1) preventing corruption in Bank projects, (2) helping countries reduce corruption
(3) mainstreaming anti-corruption in Bank projects, and (4) supporting international anti-
corruption efforts. Central to the World Bank’s goal of prevention of fraud and corruption in
Bank -financed projects is the World Bank’s Procurement Guidelines and the World Bank’s loan
disbursement procedures. Specifically, the World Bank has in place two guidelines:
Procurement Under IBRD Loans and IDA Credits (Procurement Guidelines) and Selection and
Employment of Consultants by World Bank Borrowers (Consultant Guidelines), both of which
were amended to include a section specifically addressing fraud and corruption. Both Guidelines
provide that bidders, suppliers, and contractors observe the highest standard of ethics during
procurement. The World Bank will cancel any portion of a loan that it determines to have been
allocated to a contract that involved corrupt or fraudulent practices. Under the new guidelines,
procurement contracts must now include provisions allowing the Bank to inspect accounts and
records or have them audited by Bank-appointed auditors. The Bank also allows a “no bribery
pledge” in bid forms, but only at the borrowing country’s request. Such a pledge would obligate
parties to abide by national fraud and corruption laws in bidding and executing contracts.
Finally, the most recent Procurement Guidelines require the use of Standard Bidding Documents
which, in turn, require disclosure of any commissions or gratuities paid in association with a bid
or contract. In May 1998, the Bank established an Oversight Committee on Fraud and
Corruption, which is responsible for supervising all investigations into allegations of fraud or
corruption—including those involving World Bank Group staff—and for ensuring that

13
investigations are thorough and prompt. As of July 6, 2001, sixty-one firms had been declared
ineligible for World Bank-financed contracts as a result of anti-corruption investigations.

The Bank’s position is that it can help countries combat corruption by helping them deregulate
and expand their markets. This approach is based on the belief that markets discipline
participants more effectively than the public sector dues. The work of the Bank that is intended
to help reduce corruption includes: macroeconomic and sector policy reform, including
eliminating price controls and reducing regulations, licensing requirements and other barriers to
entry for new firms, and cutting subsidies to enterprises. Countries are encouraged to build
strong institutions, including well-functioning public management systems, accountable
organizations, a strong legal framework and independent judiciary, and a vigilant civil society.
The Bank is attempting to mainstream anti-corruption by incorporating it into country strategy
formulation and its support of international efforts to combat corruption.

3.3.2. International Monetary Fund

The International Monetary Fund’s limited anti-corruption policy is set out in its publication
entitled Good Governance: the IMF’s Role. The IMF has focused on three areas in order to help
countries improve governance and thus reduce the likelihood of corruption: (1) assisting member
countries in creating systems that limit the scope for ad hoc decision making; (2) enhancing a
country’s capacity to design and implement economic policies, build effective policy making
institutions, and improve public sector accountability; and (3) promoting transparency in
financial transactions. The IMF will take authoritative action against corruption only if such
corruption will have significant macroeconomic implications, even if such instances are not
precisely calculable. Should an instance of corruption rise to the level of significant
macroeconomic implications, financial assistance from the IMF could be suspended or delayed
on account of poor governance; resumption of IMF support is only permitted after corrected
efforts have addresses the issues of poor governance that led to suspension of IMF programs.

3.3.3. Asian Development Bank

In 1995, the Asian Development Bank (ADB) adopted a formal Good Governance Policy, which
represented an institutional commitment to making governance a focus of the ADB operations.
The Good Governance Policy has four principles of good governance: accountability,
transparency, predictability, and participation. In 1998, the ADB adopted an official Anti-
Corruption Policy that address: (1) the design or selection of uneconomical projects because of
opportunities for financial kickbacks and political patronage; (2) illicit payments of “speed
money” to government officials to facilitate the timely delivery of goods and services to which
the public is rightfully entitled, such as permits and licenses; and (3) extortion and abuse of
public office, such as using the threat of a tax audit or legal sanctions to extract personal favors.
The ADB rules require borrowers to observe the highest standards of ethics in contract
procurement and execution. The amended Procurement Guidelines require the ADB to cancel
the remaining portion of any loan if it determines that the borrower engaged in corrupt practices
in contract procurement and to disqualify a firm from participating in ADB-financed projects,
14
either indefinitely or for a stated amount of time. The Procurement Guidelines authorize the
ADB to inspect the accounts and records of suppliers and contractors relating to performance of
the contracts and to have such accounts audited. The 1998-1999 amendment to the ADB
procurement rules require that contract documents include a commitment by the contractor and
that no fees, gratuities, rebates, gifts, commissions, or other payments, other than those shown in
the bid, have been given or received in connection with the procurement process or in the
contract execution.

ADB staff are required to report any allegations or evidence of corruption that they receive
regarding lending or technical assistance to the Office of General Auditor (OGA). The Anti-
Corruption Unit of the OGA screens this information, if a decision is made to proceed with the
investigation, the OGA convenes an Oversight Committee in order to outline further procedures
for a detailed investigation. Any sanctions or remedial action imposed by the Oversight
Committee may be appealed to the Review Committee.

The ADB participates with the World Bank and other regional development banks in the MDB
Working Group. As of September 7, 2000, allocation of resources by the ADB must be made on
a performance based allocation system, which includes a 30 percent weighting for “governance.”

3.3.4. North American Development Bank

The North American Development Bank (NADB) requires anti-bribery certifications from all
applicants on projects in which it lends. NADB will decline or cancel financing if a project
sponsor has engaged in corrupt activity in the bidding process.

3.3.5. European Bank for Reconstruction and Development

Unlike the other IFIs, the European Bank for Reconstruction and Development’s (EBRD)
Charter does not prohibit the bank from interfering in internal political affairs of the borrowing
states. Like the other IFIs, the EBRD has amended its procurement guidelines to include fraud
and anti-corruption language, and the EBRD actively participates in the MDB Working Group,
which has produced the Master Bidding Document for the Procurement of Goods. In addition,
the EBRD has also explicitly addressed the problem of corruption by developing draft
Guidelines for Sound Business Standards and Corporate Practices for use by companies in the
EBRD’s region. According to EBRD sources, the EBRD performs routine due diligence on
prospective private and public sector clients. The due diligence process verifies, amongst other
things, that the procurement and contracting is carried out at arms length and with no conflict of
interest.

3.3.6. African Development Bank

In 1999, the African Development Bank (AFDB) approved a formal policy on “good
governance.” The new policy focuses on accountability, transparency, and participation, as well
15
as legal and judicial reform, and gives increased attention to the roles of the productive private
sector and of NGOs, particularly TI and the Global Coalition for Africa. The AFDB also
participates with the World Bank and the other regional development banks in the MDB
Working Group and now requires the use of Standard Bidding Documentation for international
competitive bidding. In 1999, the AFDB board of directors approved explicit anti-fraud and
anti-corruption amendments to the AFDB procurement rules. Borrowers are required to include
provisions against corrupt practices in the bidding documents. Under the new procurement
rules, the AFDB can reject award proposals if it is determined that the bidder engaged in corrupt
practices, and the bank can cancel the portion of the loan allocated to a contract that was
involved in corrupt or fraudulent practices. An explicit no-bribery undertaking can also be
included on certain AFDB-financed contracts, but only at the request of the borrowing country
and in conjunction with that country’s anti-corruption program.

AFDB shareholders have also recently agreed to take governance and corruption issues into
account as a basis for lending through the country performance assessment process. The new
policy emphasis on governance is expected to link lending programs directly to borrowing
countries’ commitments to reform their governance system. The focus of the AFDB has been on
support of civil service, specifically legal and judicial reform, to raise the level of human
resources and technical know-how of procurement and law enforcement officials with the aim of
improving detection and punishment of corrupt practices. Much of this work is still in the
planning stages, and it remains to be seen how effectively the AFDB can link improvements in
governance, i.e., success in fighting corruption, with its lending programs.

3.3.7. Inter-American Development Bank

The Inter-American Development Bank (IDB) program is identical to those adopted by the
World Bank and other regional development banks. In January 1998, the IDB amended its
procurement policies and procedures by adding specific anti-corruption language. The changes
allow IDB to reject proposals and declare a firm ineligible for future contracts under IDB-
financed projects and cancel a portion or all of a loan or grant in cases in which fraud and
corruption are demonstrated. Similarly, the IDB can require that bid documents include
provisions that allow the IDB to audit suppliers’ and contractors’ accounting records and
financial statements pertaining to the execution of the contract. In 2001, the IDB’s executive
directors adopted an explicit strategy entitled Strengthening a Systemic Framework Against
Corruption for the IDB.

3.4. Challenges faced by the Second International Anti-Corruption Movement

3.4.1. The Limitations of the Economic Approach

Anti-corruption activists and supporters acknowledge that one of the distinguishing features of
the international anti-corruption movement has been its emphasis on the economic costs of
corruption. In fact, some analysts have argued that economics should continue to be the focus of
16
the anti-corruption movement because the objectivity of the market can overcome the charges of
moral or cultural imperialism that plague non-economic and rights-based initiatives. The
emphasis on economic costs of corruption has been strategically useful, given the failure of the
First International Anti-Corruption Movement, the prohibition against political interference
contained in the IFI Charters, and the hostility of many in the developing world to the imposition
of non-economic agendas on the IFIs and the WTO. However, there are limitations to this
economic approach. Although early British economists, such as Adam Smith, emphasized the
historical and humanistic component of economics, the movement of economics has been toward
the sciences. The science that has been specifically emulated by the economists has been
physics and not evolutionary biology. As a result, an economic approach is less flexible or
accommodating of the diversity of human relationships. This limitation of economics has led to
the re-emergence of the moral or ethical dimension of corruption. The proponents of the current
anti-corruption movement have recently acknowledged the need for anti-corruption initiatives
that accommodate cultural and societal diversity and emphasize ethical training through ethics
workshops and the virtues approach to controlling corporate corruption. Indeed, as the critics of
the anti-corruption movement have noted, the moral and ethical dimension of corruption give the
movement its strength by making a corrupt act by definition a morally indefensible act.
Notwithstanding its economic packaging, therefore, the current anti-corruption movement is also
a moral crusade.

In addition, the emphasis on the economic dimension of corruption may result in a backlash
against the anti-corruption movement should the market reforms advocated by the IFIs fail to
bridge the North–South economic divide. At the same time, the failure of the anti-corruption
movement to reduce incidences of corruption may contribute to the de-legitimization of the
science of economics and its market principles.

3.4.2. The Problem of Gifts, Facilitating Payments, and Bribes

A fundamental problem faced by the current anti-corruption movement has been the difficulty in
distinguishing between bribes, which are illegal, gifts, which may or may not be illegal; and
facilitation payments, which are legal under the emerging international legal framework. As a
result, corporations readily admit to making “facilitation payments” while insisting that they do
not bribe.

The distinction between bribes, gifts, and facilitation payments was explored by the U.N.
Working Group on Illicit Payments in its work from 1977 to 1980. The U.N. Working Group
used the words “illicit payment” instead of “bribe” because the latter requires a “corrupt intent.”
The U.N. Working Group identified three types of payment: (1) expediting payment, (2)
maintaining a favorable business climate payment, and (3) altering a decision payment. The
third type of illicit payment is clearly prohibited and subject to criminal sanctions under the
OECD Convention. The U.N. Working Group also concluded that the altering a decision
payment “was a more serious problem than the expediting payment.” However, the U.N.
Working Group admitted that “expediting payments” are “far from harmless” if made by
multinational corporations with deep pockets that are willing to pay far above what local

17
competitors can handle. Finally, the problem of “maintaining a favorable business climate
payment” was not adequately addressed by the U.N. Working Group and continues to raise
serious issues in gift-giving cultures. For example, the Chinese word “guanxi” translates as
“interpersonal linkages with the implication of continued exchange of favors” and expresses a
concept that is an integral part of all relationships (including business relationships) in Chinese
society.

The allowance for facilitating or expediting payments under the OECD Convention, as well as
the difficulty of distinguishing between the different types of illicit payments in concrete cases,
poses serious practical problems for the anti-bribery legal framework and has led many analysts
to conclude that the current international legal framework against bribery in international
business will not end payments of bribes. Rather, the framework will only force companies to
change the manner in which the bribes are paid.

3.4.3. Corruption, Anti-Corruption, the Rule of Geographical Morality, and Colonialism

The Second International Anti-Corruption Movement cannot escape the historical context within
which it is placed. In the developed world, the challenge is to overcome the rule of geographical
morality that has long been adhered to: the norm by which respectable citizens and corporations
from the West have engaged in acts of corruption, including bribery and extortion, without
attachment of any moral condemnation to those acts. In the developing world, the challenge is to
overcome the legacy of the rule of geographical morality, the distrust it has engendered, and the
linkage of anti-corruption with Westernization.

During the colonial period, it was common to equate corruption with the east or the orient and
anti-corruption with the west or the occident. This view provided a moral justification for
colonial rule and the rule of geographical morality. In the de-colonization period, reacting to the
imposition of western values in the name of anti-corruption, a cultural relativist approach to
corruption was adopted. This cultural approach ironically perpetuated the rule of geographical
morality and allowed the TNCs to engage in acts of corruption, including bribery and kickbacks,
by stating that they were merely respecting local business culture. The OECD Convention
attempts to reject the legacy of the rule of geographical morality by requiring transnational
corporations to adhere to the same codes of conduct in foreign countries as they do in their home
countries. However, it is unclear to what extent OECD countries are willing to prosecute their
highly respected local companies.

From a developing country perspective, the anti-corruption movement remains fundamentally

suspect, even though few may dare to openly criticize it. Once again, the current anti-corruption
movement is in danger of equating anti-corruption with Westernization. As part of their anti-
corruption mandates, the IFIs are requiring political, legal, and economic reforms, all based on
the western model of governance. Given the developing states’ historical distrust of anti-
corruption efforts, the IFI’s efforts to force such reforms under the banner of anti-corruption may
ultimately lead to the failure of the current movement.

18
4. Conclusion

An international legal framework to combat transnational corruption is emerging. It is still in its

infancy, and much of it is still soft law. The emphasis of the current anti-corruption movement
on the economic costs of corruption has been instrumental to its success. Important limitations to
this approach exist, however, given the limitations of the science of economics and the fact that,
at its core, any anti-corruption movement is a moral crusade. Finally, IFIs that have made
corruption an economic problem are in danger of perpetuating a new rule of geographical
morality under the banner of anti-corruption.

Acknowledgment

The author wishes to thank Dr. Maniruzzaman for his patience. This article would not have been
possible without the assistance of: Maki Tanaka, Ramin Pejan, and Kevin Fandl.

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socioeconomic needs and transnational corporations’ concerns about profitability]

Hustead, B. (1999). Wealth, Culture, and Corruption. Journal of International Business Studies
Vol. 30. 339-359. [This article examines a statistical study conducted linking corruption to
wealth, culture, income distribution, and government size]

Institute for International Economics. (1997). Corruption and the Global Economy, (Kimberly
Ann Elliot, ed.). [This book is a collection of articles that reflects current anti-corruption
discourse and puts emphasis on economic consequences of corruption and international
cooperation to combat corruption]

Inter-American Juridical Committee (1998). Model Legislation on Illicit Enrichment and

Transnational Bribery. [This legislation was prepared in order to help member States to
implement the OAS Convention]

International Chamber of Commerce - Rules of Conduct (1998). Extortion and Bribery in

International Business Transactions. USIA Electronic Journal Vol. 3 No. 5. [These rules provide
recommendations to governments and international organization, rules of conduct to combat
extortion and bribery, and ICC follow-up and promotion of the rules]

International Chamber of Commerce (2000). Fighting Bribery: A Corporate Practice Manual,

23
ICC Publishing. [This manual provides guidance to corporations in order to better deal with
corruption]

International Monetary Fund (1997). Good Governance: The IMF’s Role, http://www.imf.org.
[This web site article describes how the IMF established policies in order to promote public
sector transparency and accountability in the service of creating a framework for sustained
growth]

International Monetary Fund (1999). Code of Good Practices on Transparency in Monetary and
Financial Policies: Declaration of Principles, http://www.imf.org. [This web site article
describes the Code advocates fiscal transparency as a means of reaching good governance,
including efficient government activity and sound public finances]

International Monetary Fund (2001). Code of Good Practices on Fiscal Transparency,

http://www.imf.org. [This web site article advocates fiscal transparency as a means of reaching
good governance]

Jin-Wei, S. (1997). How Taxing is Corruption on International Investors. National Bureau of

Economic Research Working Paper No. 6030. 22-23. [This article notes that corruption
discourages foreign direct investment and imposes 20% “tax” on firms investing in countries
with high corruption]

Johnston, M. (1998). Cross-Border Corruption: Points of Vulnerability and Challenges for

Reform, in Corruption and Integrity Improvement Initiatives in Developing Countries, http://
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developing countries]

Kaufman D. (1997). Corruption: The Facts. Foreign Policy No. 116. [This paper discusses the
future of dealing with corruption on various levels]

Kennedy, D. (1999). The International Anti-Corruption Campaign. Connecticut Journal of

International Law Vol. 14. 455-465. [This article argues that the anti-corruption movement is
flawed in its systematic application of laws without regard to cultural differences and economic
variances]

Keobane, R. and Nye, J. (1998). Power and Interdependence in the Information Age. Foreign
Affairs. Oct. 81-95. [This article discusses the use and manipulation of information in various
sectors of the global economy]

Klitgaard, R. (1998). Controlling Corruption, 220 pp, Berkeley, University of California Press.
[This book rejects cultural relativism and explores an economic model of corruption from case
studies of corruption involving public officers in Asian developing countries]

Leff, N. (1964). Economic Development Through Bureaucratic Corruption. American

Behavioral Science No. 8. [This article advocates the amoral Economic-Market Revisionist
approach which argues that corruption may introduce efficiency into a system where there is

24
none]

Luo, Y. (2000). Guanxi and Business, 341 pp. World Scientific [This book distinguishes practice
of guanxi from corruption from the Chinese business perspective]

Mauro, P. (1995). Corruption and Growth. Quarterly Journal of Economics Vol. 110. 681-712.
[This article discusses the downturn that investment takes as corruption rises]

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Academic Publishers. [This book examines the role that businesses and governments can jointly
play in fighting corruption]

Moody-Stuart, G. (1997). The Costs of Grand Corruption: How Business Bribes Damage
Developing Countries, http://www.cipe.org/ert/e22/mooE22.php3. [This web site article
examines grand corruption and the manner in which it affects Third World Development]

Multinational Development Bank Coordinating Committee on Governance, Corruption and

Capacity Building, Master Bidding Documents: Procurement of Goods and User’s Guide,
Revised July 2002. 151 pp. [This document offers a master bidding documents that can be used
as a model by multinational development banks and the UNDP]

Nichols, P. (1999). Regulating Transnational Bribery in Times of Globalization and

Fragmentation. Yale Journal of International Law Vol. 24. 257-303. [This article analyzes
transnational bribery in the context of current global conditions and concludes that practical and
moral considerations require prohibition of transnational bribery]

Noonan, J. (1984). Bribes, 839 pp, New York, Macmillan. [This book is an excellent chronicle
of corruption from ancient Egypt to contemporary America, including a detailed description of
the impeachment of Warren Hastings]

Nye, J. (1967). Corruption and Political Development: A Cost-Benefit Analysis. American

Political Science Review Vol. 16. 417-427. [This article advocates the amoral Economic-Market
Revisionist approach to corruption]

Ohnesorge, J. (1999). “Ratch”Eting up the Anti-Corruption Drive: Could a Look at Recent

History Cure a Case of Theory Determinism? Connecticut Journal of International Law Vol. 14
Fall. 393-405. [This article examines the interaction between corruption, governance, and
economic growth in Northeast Asia and points out the inadequacy of “arms-length” principle
definition of corruption espoused in international financial institutions]

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Convention on Combating Bribery of Officials in International Business Transactions Adopted
by the Negotiating Conference on 21 November 1997, http://www.oecd.org/oe
cd/pages/home/displaygeneral/0,3380,EN-document-88-3-no-no-7441-88,00.html. [This
interpretative notes include the definitions of “active bribery,” “passive bribery,” and
25
“facilitating payments” under the OECD Convention]

Organisation of Economic Cooperation and Development. (1998). Principles for Managing

Ethics in the Public Service: OECD Recommendation, PUMA Policy Brief No. 4. pp. 6,
http://www.oecd.org/pdf/M00003000/M00003726.pdf. [This Recommendation calls for the
promotion of government action to support high standards of conduct and combat corruption in
the public sector]

Organisation of Economic Cooperation and Development (1999). Fighting Corruption in

Developing Countries and Emerging Economies: The Role of the Private Sector, 7 pp,
Washington. [A briefing paper from a conference held in conjunction with the United States
Agency for International Development]

Organization of American States (1996). Inter-American Convention Against Corruption.

International Legal Materials Vol. 35. 724-734. [This multi-lateral agreement is aimed at
eliminating bribery and corruption in public officials]

Organization of American States (2001). Resolution: Enhancement of Probity in the Hemisphere

and Follow-up on the Inter-American Program for Cooperation in the Fight Against Corruption,
http://www.oas.org. [This web site article resolves to continue to urge member states of the OAS
to ratify the OAS Convention]

Organization of Economic Cooperation and Development. (1997). Convention on Combating

Bribery of Foreign Public Officials in International Business Transactions, http://www.oas.org.
[This web site article explains the extensive multi-lateral agreement on corruption that provides
countries with guidelines for implementing legislation]

Organization of Economic Cooperation and Development (2000) No Longer Business as Usual:

Fighting Bribery and Corruption, http://www.oas.org. [This web site article provides the key
elements needed to build and preserve corruption-free institutes, systems, and private
enterprises]

Organization of Economic Cooperation and Development (2000). Anti-Corruption Web Online,

http://www.oecd.org//daf/nocorruptionweb/Corruption/prev_ini.htm. [This web site provides
governments, businesses, civil society, international organizations, and individuals with
information they need to implement better policies and actions to fight corruption]

Organization of Economic Cooperation and Development (2000). Guidelines for Multinational

Enterprises, http://www.oas.org. [This web site article provides recommendations addressed
from governments to multinational enterprises]

Pink, D. (1990). The Valdez Principles: Is What’s Good for American Good for General Motors?
Yale Law and Policy Review Vol. 8. 180-195.[This article explains the use of corporate codes of
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Posadas, A. (2000). Combating Corruption Under International Law. Duke Journal of

26
Comparative and International Law Vol. 10. 345-414. [This article revisits the history of
international law’s anti-corruption efforts in order to generate questions about the current status
and future direction of the fight against corruption under international law]

Rajagopal, B. (1999). Corruption, Legitimacy and Human Rights: The Dialectic of the
Relationship. Connecticut Journal of International Law Vol. 14. 495-507. [This article looks at
the process of development and democratization and the consequent effects on government
legitimacy with respect to corruption]

Rakesh, M. and Goswami, O. (1996). Policy Reform in India, Paris, France, OECD Development
Centre Seminars. [These papers provide particular insight into external liberalization, public-
sector restructuring and legal reform]

Rider, B. (1997). Corruption: The Enemy Within, 363 pp., Boston, Kluwer Law International,
The Hague. [This book is a compilation of articles regarding corruption]

Rose-Ackerman, S. (1999). Political Corruption and Democracy, Connecticut Journal of

International Law Vol. 14 Fall. 363-378. [This article asserts that democratic forms of
government do not necessarily succeed in preventing corruption]

Salbu S. (1999). The Foreign Corrupt Practices Act as a Threat to Global Harmony. Michigan
Journal of International Law Vol. 20. 419-449. [This article argues that unilateral application of
FCPA causes greater problems than benefits because it will be perceived as a new form of
imperialism given considerable diversity across nations with regard to local and national cultural
elements in corruption]

Salbu, S. (2000). A Delicate Balance: Legislation, Institutional Change, and Transnational

Bribery. Cornell International Law Journal Vol. 33. 657-688 . [This article distinguishes anti-
corruption efforts that focus on large-scale from those that focus on small-scale bribes and
finding that the latter raise problems of cultural relativism]

Salbu, S. (2001). Information Technology in the War Against International Bribery and
Corruption: The Next Frontier of Institutional Reform. Harvard Journal of Legislation Vol. 38.
67-102. [This article explains the value of increasing transparency through the use of expanded
information technology access in the developing world]

Schloss M. (2000). Symposium Fighting International Corruption and Bribery in the 21st
Century, Luncheon Address. Cornell International Law Journal. Vol. 33, 469-X [This article
argues that effective anti-corruption initiatives require the involvement of all parties concerned
and “home-grown and tailor-made solutions”]

Scott J. (1969). The Analysis of Corruption in Developing Nations. Comparative Studies of

Society and History Vol. 11. 315-341. [This article advocates the revisionist view of corruption]

Scott J. (1972). Comparative Political Corruption, 166 pp, Englewood Cliffs, NJ, Prentice Hall.
[This book introduces the key theories and concepts of political corruption in the functional-
27
integrationist revisionist approach].

Seita, A. (1997). Globalization and the Convergence of Values. Cornell Journal of International
Law Vol. 30. 429-491. [This article discusses the need for a leading role by the developed world
in managing globalization efforts around the world]

Sethi, S. and Williams, O. (2000). Creating and Implementing Global Codes of Conduct: An
Assessment of the Sullivan Principles as a Role Model for Developing International Codes of
Conduct – Lessons Learned and Unlearned. Business and Society Review Vol. 105. 169-200
[This article examines the Sullivan Principles in detail and suggesting practical monitoring tools
for implementing the principles in modern corporate codes of conduct]

Shaw, B. The Foreign Corrupt Practices Act and Progeny: Morally Unassailable. Cornell
International Law Journal Vol. 33. 689-709. [This article looks at the business benefits of
implementation of the FCPA and arguing that a less corrupt trading environment would benefit
businesses generally]

Shliefer, A. and Vishny, R. (1993). Corruption. Quarterly Journal of Economics Vol. 108. 599-
617 [This article considers the structure of government institutions and the political processes
significant in accounting for the level of corruption and explains that the distortionary effect of
corruption deters development in less developed countries].

Surjuadinata, K. (1998). Revisiting Corrupt Practices from a Market Perspective. Emory

International Law Review Vol. 12. 1021-1090. [This article describes the negative effects that
corruption has on international investment and financial development]

Transparency International. (1999). Bribe Payers Survey 1999. [This bribe payers survey include
the results from fourteen emerging market economies, that together account for more than three
fifths of imports of all emerging market economies]

Transparency International. (2001). The Integrity Pact Status Report, 208 pp. Berlin. [This report
applies anti-corruption agreements between States and corporations around the developing world
and implementing monitoring and evaluation systems]

Transparency International. (2002). Bribe Payers Index 2002. [This bribe payers index
summarizes results of surveys conducted in fifteen large emerging market countries engaged in
trade and investment with multinational corporations]

Transparency International and Economic Development Institute of the World Bank. (1998).
New Perspectives on Combating Corruption, Kuala Lumpur, Malaysia. [This book is a
compilation of articles that reflect the recent international anti-corruption discourse with an
emphasis on the impact of corruption on economic development]

Tronnes, R. (2000). Note: Ensuring Uniformity in the Implementation of the 1997 OECD
Convention on Combating Bribery of Foreign Public Officials in International Business
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28
explains the “functional equivalence” standard by examining individual State application of anti-
corruption rules]

United Nations. (1975). Measures Against Corrupt Practices of Transnational and Other
Corporations, Their Intermediaries and Others Involved. G.A. Res. 3514, U.N. GAOR, 13th
Session, Supplement No. 34, U.N. Doc. A/RES/3514. [This resolution condemns “all corrupt
practices” by transnational corporations and calls for the adoption of domestic legislation against
corrupt practices by host and home states within their own jurisdiction]

United Nations. (1976). Corrupt Practices, Particularly Illicit Payments, in International

Commercial Transactions. U.N. Doc. E/RES/2041. [This resolution decides to create an Ad Hoc
Intergovernmental Working Group on the issue of corrupt practices]

United Nations. (1977). Corrupt Practices, Particularly Illicit Payments, in International

Commercial Transactions, U.N. ESCOR, 63rd Session, U.N. Doc. E/RES/2122 (LXIII). [This
resolution reaffirms the highest priority assigned to the formulation of a code of conduct on
transnational corporations and requires the Ad Hoc Intergovernmental Working Group on the
Problem of Corrupt Practices to submit its report on a draft international agreement for
corruption prevention to the UNCTC as well as the ECOSOC]

United Nations. (1995). Action Against Corruption. U.N. ESCOR, 49th Plenary. meeting, U.N.
Doc. E/1995/14. [This resolution urges states to take comprehensive anti corruption measures
and to promote international cooperation for corruption prevention]

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Commercial Transactions, 51st Session, 86th plenary meeting. [This report presents a basic
model definition of the elements of bribery, in both its “passive” and “active” form]

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plenary meeting. [This report sets standards for public officials so they will not take advantage of
their positions in order to make private profit]

United Nations. (1998). International Cooperation against Corruption and Bribery in

International Commercial Transactions, 52nd session, 70th plenary meeting. [This report urges
member states to adopt the 1996 Declaration, particularly the portions that deal with the
criminalization of bribery practices]

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34pp. [Online] Available http://www.uncjn.org/Documents/Coventions/dcatoc/ final
documents_2/convention_eng.pdf. [This convention includes provision that calls for the
criminalization of corruption and the adoption of measures against corruption]

United Nations. (2001). An Effective International Legal Instrument Against Corruption, 55th
Session, 81st plenary meeting. [This resolution reiterates the request to establish an
intergovernmental expert group for a draft terms of reference for the negotiation of an

29
international convention against corruption and requests the Secretary-General to conduct an
analysis of progress in national and international efforts to combat corruption]

United Nations. (2001). Preventing and Combating Corrupt Practices and Illegal Transfer of
funds and Repatriation of Such Funds to the Countries of Origin, 55th Session, 87th plenary
meeting. [This resolution seeks to establish an intergovernmental expert group to draft the terms
of reference for the negotiation of a future international convention against corruption and has an
attachment including a useful list of international legal instruments, documents, and
recommendation against corruption]

United Nations Commission on Transnational Corporations. (1976). Report on the Second

Session. ESCOR, 61st Session, Supplement No. 5, U.N. Doc. E/5782 & E/C.10/16 [This Report
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priority basis”]

United Nations Conference on Trade and Development: Division on Transnational Corporations

and Investment (1996). Transnational Corporations and World Development, ITB Business
Press. [This volume brings together the introductions from the twenty-volume “United Nations
Library on Transnational Corporations” in order to provide a state-of –the-art overview of the
whole range of issues related to transnational corporations, especially in developing countries]

United Nations Development Programme. (1997). Corruption and Good Governance. Discussion
Paper No. 3. [This paper studies corruption, isolating its underlying economic causes in the
industrial and developing world, and assesses options for combating corruption]

United Nations Development Programme. (1997). Corruption and Integrity Improvement

Initiatives in Developing Countries, New York. [This report describes methods by which
corruption can be addressed other than through democratic strengthening]

United Nations Development Programme. (1999). Fighting Corruption to Improve Governance,

New York. [This paper defines corruption as the misuse of public power and links corruption to
poor governance and weak institutions]

United Nations Economic and Social Council. (1980). Transnational Corporations, India: draft
Decision. 2nd Session, Agenda Item 12, U.N. Doc. E/1980/C.1/L.22 [This draft decision calls for
the adoption of a code of conduct on transnational corporations before concluding an
international agreement on illicit payments]

United Nations Economic and Social Council. (1997). Corrupt Practices, Particularly illicit
Payments in International Commercial Transactions: Concepts and Issues Related to the
Formulation of an International Agreement. Ad Hoc Intergovernmental Working Group on
Corrupt Practices 2nd Session. U.N. Doc. E/AC.64/3. [This document discusses the following
three types of illicit payment, (1) expediting payments (2) payment to alter decision-making, and
(3) payments to maintaining a favorable climate]

30
United Nations Economic and Social Council. (1998). Action Against Corruption, Economic and
Social Council 44th plenary meeting. [The resolution updates the U.N. International Review of
Criminal law to include recent multilateral anti-corruption initiatives, particularly, the practical
impact of recent international initiatives and decides to convene a meeting of governmental
experts to examine the appropriateness and effectiveness of the international strategies to combat
corruption]

United Nations Economic and Social Council Commission on Crime Prevention and Criminal
Justice. (2001). Existing International Legal Instruments, recommendations and Other
Documents Addressing Corruption: Report of the Secretary General, 10th Session Agenda Item
4. [This report analyzes the current state of international anti-corruption laws]

United Nations Interregional Crime and Justice Research Institute. (2000). Responding to the
Challenges of Corruption: Act of the International Conference, No. 63, Rome/Milan. [This
Conference addressed the relationship between the business world and corruption, as well as its
distorting effects on competition]

United Nations Interregional Crime and Justice Research Institute. (2000).

http://www.unicri.it/index.htm. [This web site provides a report of the Conference on
Responding to the Challenges of Corruption in November 1999, including articles that discuss
anti-corruption initiatives in various nations and in international organizations]

United States Department of Commerce. (2000) Addressing the Challenge of International

Bribery and Fair Competition, July 2000 (Second Annual Report to Congress on the OECD
Convention). 136 pp, http://www.mac.doc.gov/tcc/anti_b/oecd20 00/ [This report includes the
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Lawer Vol. 30. 193. [This article provides the recommendations and report of the American Bar
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initiatives of anti-corruption efforts and recommends the creation of a mechanism for the
effective enforcement of these efforts both at the international and the national levels]

Williamson, O. (1997) The Economic Institutions of Capitalism, 450 pp, New York, Collier
Macmillan Publishers, London. [This book explains the psychological analysis of “contractual
man” and the inherent desire to seek opportunity]

Windsor, D. and Getz, K. (2000). Symposium: Fighting International Corruption & Bribery in
the 21st Century: Multilateral Cooperation to Combat Corruption: Normative Regimes Despite
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article discusses the value of using a “normative regime” to fight corruption]

World Bank. (1995). Guidelines: Procurement Under International Bank for Reconstruction and
Development Loans and International Development Association Credits,
http://www.worldbank.org. [This web site article provides the guidelines that inform those
carrying out a project that is financed in whole or in part by a loan from the IBRD or credit from
31
the IDA of the arrangements to be made for procuring the goods and works required for the
project]

World Bank. (1997).Guidelines: Selection and Employment of Consultants by World Bank

Borrowers, http://www.worldbank.org/html/opr/consult/contents.html. [This guideline include
provision prohibiting fraudulent practices and corrupt practices in the use of consultants]

World Bank. (1997). Helping Countries Combat Corruption: The Role of the World Bank,
Poverty Reduction and economic Management, New York: Oxford University Press. [This report
purport to establish a framework to combat corruption in Bank-financed project and to assist
developing countries and the international community to curtail corruption]

g://wp/unpap/ELOSS final draft/6.67.3.7.text.doc.

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