For 10th Anniversary Of OECD Anti-Bribery Convention, Time To Close The Loopholes

On November 21, 2007, the Organization for Economic Cooperation and Development (OECD) will celebrate the 10th anniversary of the Anti-Bribery Convention. According to the OECD Web site, the celebration, organized by the Italian government and the OECD Working Group on Bribery, will:

provide an important and timely opportunity to foster broader public understanding and support of the Convention. It will also raise awareness about the important progress and changes over the last decade and countries' commitment to continued joint action. This celebration will be a unique occasion to show that State Parties have strengthened their anti-bribery legislation and systems to level the playing field for international business, and how recent increases in foreign bribery investigations and prosecutions testify to a new business environment where unfair, unethical and unlawful behaviour is no longer tolerated.

Is it indeed true that unethical behavior by foreign investors is no longer tolerated? My research for CGD (see How Multinational Investors Evade Developed Country Laws) has uncovered loopholes in current laws and agreements through which US, European, and Japanese firms can use partnerships with family members, business associates, and cronies of developing country leaders to obtain investment concessions and favorable treatment. Basically, foreign firms can loan these insiders the money to finance an equity interest in the partnership and then pay them a dividend large enough to service the loan, plus extra payoffs besides and still remain within the letter of the Foreign Corrupt Practices Act (FCPA) and the OECD Bribery Convention.
My current work for CGD will show how the US FCPA and the OECD Bribery Convention need to be changed to close this loophole. It also investigates ways in which emerging market international investors, such as those from China, India and Russia, can be prevented from using corrupt payments to gain special treatment in the developing world. The report is planned for release early in 2008.
For now, here's hoping that, in addition to celebrations, the three events planned for the 10th anniversary of the Anti-Bribery Convention will include some thoughtful assessment of whether or not the Convention is doing what it set out to do, or could use some updating. Meanwhile, if you know of instances where the Convention has been evaded because of the loopholes I describe, I invite you to contact me.