Rule-making in the WTO: Lessons from the case of bribery and corruption

Journal of International Economic Law

Volumn 4, Issue 2, 2001, Pages 275-296

  Abbott, Kenneth W ^a  

^a NORTHWESTERN UNIVERSITY   (United States)

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EID: 0035607979     PISSN: 13693034     EISSN: None     Source Type: Journal    
DOI: 10.1093/jiel/4.2.275     Document Type: Article

References (62)

1. Pub L. No 95-213, 91 Stat. 1494, codified as amended in scattered sections of 15 U.S.C. §78. For a summary of the background, provisions and application of the Act, see C. F. Corr and J. Lawler, 'Damned If You Do, Damned If You Don't? The OECD Convention and the Globalization of Anti-Bribery Measures', 32 Vand J Transnat'l L 1249 (1999), at 1255-95. The Act has been criticized both by business representatives and by scholars. See, e.g., S. R. Salbu, 'Bribery in the Global Market: A Critical Analysis of the Foreign Corrupt Practices Act', 54 Wash & Lee L Rev 229 (1997).
2. Pub L. No 95-213, 91 Stat. 1494, codified as amended in scattered sections of 15 U.S.C. §78. For a summary of the background, provisions and application of the Act, see C. F. Corr and J. Lawler, 'Damned If You Do, Damned If You Don't? The OECD Convention and the Globalization of Anti-Bribery Measures', 32 Vand J Transnat'l L 1249 (1999), at 1255-95. The Act has been criticized both by business representatives and by scholars. See, e.g., S. R. Salbu, 'Bribery in the Global Market: A Critical Analysis of the Foreign Corrupt Practices Act', 54 Wash & Lee L Rev 229 (1997).
3. The US Department of Commerce maintains on its website an extensive summary of actions against bribery and corruption taken by agencies of the US government and by international organizations. See Office of the Chief Counsel for International Commerce, The Anti-Corruption Review, www.ita.doc.gov/legal/master.html (hereinafter Anti-Corruption Review), visited 3 February 2001.
4. The most recent recommendation supersedes the 1994 instrument. It provides the framework for implementing the actions of the OECD on transnational bribery and corruption and for further negotiations in this field. It also urges the prompt implementation of the 1996 recommendation, which addresses tax deductions for foreign bribes. See Revised Recommendation of the Council on Combating Bribery in International Business Transactions, OECD/C(97)123/FINAL (23 May 1997)), 36 ILM 1016 (1997).
5. Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (hereinafter OECD Convention), OECD/DAFFE/IME/BR(97)16/FINAL (18 December 1997), 37 ILM 1.The OECD Convention entered into force on 15 February 1999, after five of the ten member nations with the largest export shares had deposited their instruments of ratification. The Convention has been signed by all 29 member states of the OECD and by five non-members: Argentina, Brazil, Bulgaria, Chile and the Slovak Republic. As of January 2001, 29 of the 34 signatories had ratified the OECD Convention. See Anti-Corruption Review, above n 2, at Section IV:OECD. For an analysis of the provisions and implementation of the Convention, see Corr and Lawler, above n 1, at 1295-1323.
6. Convention on the Protection of the European Communities' Financial Interests, adopted by the Council on 26 July 1995, OJ No C916, 27 November 1995, and the First Protocol to the Convention, adopted by the Council on 27 September 1996, OJ No C313, 23 October 1996, which would make active or passive corruption involving either an EU official or an official of a member state a criminal offense in every member state if the corruption would affect the financial interests of the EU. Neither the Convention nor the Protocol has been ratified by a sufficient number of member states to enter into force. See Anti-Corruption Review, above n 2, at Section III: European Union.
7. Convention on the Fight Against Corruption Involving Officials of the European Communities or Officials of the Member States of the European Union, adopted by the Council on 26 May 1997, OJ No C195, 25 June 1997. This treaty has also not yet received sufficient ratifications to enter into force. However, the OECD Convention applies to many of the situations covered by this agreement, and the EU has formally supported adherence to the OECD instrument.
8. Inter-American Convention Against Corruption, OEA/Ser.K/XXXIV.1, CICOR/doc. 14/96 rev. 2 (29 March 1996), 35 ILM 724. The OAS Convention entered into force 6 March 1997. As of February 2001, the Convention has been signed by 26 and ratified by 20 of the 35 members of the OAS.
9. Council of Europe Criminal Law Convention, opened for signature 27 January 1999. Among other things, the Convention calls on parties to criminalize the paying of bribes to domestic, foreign and international officials as well as to private parties in commercial transactions. As of February 2001, only eight countries had ratified the Convention. See http://conventions.coe.int/treaty/EN/cadreprincipal.htm, visited 3 February 2001.
10. In 1997 the IMF Executive Board adopted guidelines outlining an increased role for the organization in addressing governance problems in borrower countries - including policies and administrative systems that encourage corruption and rent seeking - when those problems threaten macroeconomic stability and growth. See IMF News Brief No 97/15, 4 August 1997, http://www.imf.org/external/ np/sec/nb/1997/nb9715.htm, visited 3 February 2001.
11. In 1997, the Bank adopted a comprehensive policy for addressing corruption as an international development issue. The policy calls for policing fraud and corruption in Bank-financed projects, providing assistance in combating corruption to borrower governments that request it, and taking corruption into account in other Bank programs. See World Bank, 'Helping Countries Combat Corruption, The Role of the World Bank (1997)', www1.worldbank.org/publicsector/anticorrupt, visited 25 October 2000; Anti-Corruption Review, above n 2, at Section VI: World Bank.
12. United Nations Declaration Against Corruption and Bribery in International Commercial Transactions, G.A. Res. 51/191, UN GAOR, 51st Sess, Agenda Item 12, Annex, UN Doc A/RES/51/191 (1996); International Cooperation Against Corruption and Bribery in International Commercial Transactions, G.A. Res. 52/87, UN GAOR, 52d Sess, 70th Meeting, Agenda Item 103, UN Doc A/RES/52/87 (1997); Action Against Corruption and Bribery in International Commercial Transactions, G.A. Res. 53/176, UN GAOR, 53d Sess, 91st Meeting, Agenda Item 92, UN Doc A/ RES/53/176 (1998).
13. For information on recent conferences, see www.transparency.org/iacc/index.html, visited 25 October 2000.
14. The term 'norm cascade' refers to a process of broad and rapid international acceptance of new norms. For an analysis of the phenomenon from the perspective of political science, see M. Finnemore and K. Sikkink, 'International Norm Dynamics and Political Change', 52 Int'l Org 887-917 (1998).
15. The WTO website notes that the trade law system 'encourages good government', by restricting quotas and other measures that 'provide opportunities for corruption' and by requiring transparency. See WTO Secretariat, '10 Benefits of the WTO Trading System', http://www.wto.org/english/ thewto_e/whatis_e/10ben_e/10b10_e.htm, visited 25 October 2000. A recent study by the OECD Trade Committee confirms that many WTO principles and rules may have beneficial incidental impacts on corruption. Potential Anti-Corruption Effects of WTO Disciplines, TD/TC(2000)3/ REV3, 28 June 2000. Yet this study also notes that no WTO agreement specifically addresses bribery or corruption, and that most WTO rules were drafted without specific consideration of these issues, making it difficult to apply them by interpretation. Given both these facts, the study concludes that it would be extremely difficult to bring a legal proceeding in the WTO based on bribery or corruption.
16. At the Singapore meeting, WTO trade ministers agreed to establish a working group to study transparency in government procurement, 'taking into account national policies', and on the basis of this study to 'develop elements for inclusion in an appropriate agreement'. Singapore Ministerial Declaration, WT/MIN(96)/DEC, 18 December 1996, para 21. The Working Group on Transparency in Government Procurement began meeting in May 1997. It has submitted three annual reports to the WTO General Council: WT/WGTGP/1, 19 November 1997; WT/WGTGP/2, 17 November 1998; and WT/WGTGP/3, 12 October 1999. All three reports are available at http://www.wto.org/ english/tratop_e/gproc_e/gptran_e.htm, visited 25 October 2000.
17. By using the term 'success' I do not mean to imply that every GATT/WTO agreement or decision necessarily embodies wise or beneficial policies, or that every such action is effective in modifying undesirable behavior by states or private actors. I merely mean that such actions are the result of political and institutional strategies and processes that have successfully overcome the many impediments to collective action at the international level.
18. A number of scholarly articles address the normative question whether any legal action against bribery and corruption, and specifically action by the WTO, is appropriate. See, e.g., S. R. Salbu, 'Extraterritorial Restriction of Bribery: A Premature Evocation of the Normative Global Village', 24 Yale J Int'l L 223-56 (1999); P. M. Nichols, 'Regulating Transnational Bribery in Times of Globalization and Fragmentation', ibid at 257; P. M. Nichols, 'Outlawing Transnational Bribery Through the World Trade Organization', 28 Law & Pol'y Int'l Bus 305-81 (1997).
19. A number of scholarly articles address the normative question whether any legal action against bribery and corruption, and specifically action by the WTO, is appropriate. See, e.g., S. R. Salbu, 'Extraterritorial Restriction of Bribery: A Premature Evocation of the Normative Global Village', 24 Yale J Int'l L 223-56 (1999); P. M. Nichols, 'Regulating Transnational Bribery in Times of Globalization and Fragmentation', ibid at 257; P. M. Nichols, 'Outlawing Transnational Bribery Through the World Trade Organization', 28 Law & Pol'y Int'l Bus 305-81 (1997).
20. A number of scholarly articles address the normative question whether any legal action against bribery and corruption, and specifically action by the WTO, is appropriate. See, e.g., S. R. Salbu, 'Extraterritorial Restriction of Bribery: A Premature Evocation of the Normative Global Village', 24 Yale J Int'l L 223-56 (1999); P. M. Nichols, 'Regulating Transnational Bribery in Times of Globalization and Fragmentation', ibid at 257; P. M. Nichols, 'Outlawing Transnational Bribery Through the World Trade Organization', 28 Law & Pol'y Int'l Bus 305-81 (1997).
21. For an early version of our analysis of the OECD process, see K. W. Abbott and D. Snidal, 'Values and Interests in the Legalization of the OECD Anti-Bribery Convention' (paper presented at the Program on International Politics, Economics and Security, University of Chicago, February 2000, on file with the authors).
22. See S. K. Sell, 'Multinational Corporations as Agents of Change: The Globalization of Intellectual Property Rights' in A. C. Cutler, V. Haufler and A. Porter, eds., Private Authority and International Affairs (Albany: State University of New York Press 1999) 169-197.
23. For a recent discussion of soft and hard legalization as political strategies, see K. W. Abbott and D. Snidal, 'Hard and Soft Law in International Governance', 54 Int'l Org 421 (2000).
24. 21 Recommendation of the Council on Bribery in International Business Transactions, 27 May 1994, OECD Doc No C(94)75/Final, 33 ILM 1389 (1994).
25. Recommendation of the Council on the Tax Deductibility of Bribes to Foreign Public Officials, 11 April 1996, OECD Doc No C(96)271/Final, 35 ILM 1311 (1996).
26. See Revised Recommendation of the Council on Combating Bribery in International Business Transactions, above n 3, at Section III.
27. For an application of state-centric realist approaches to rule-making in the WTO and other economic organizations, see R. H. Steinberg, 'Trade-Environment Negotiations in the EU, NAFTA, and WTO: Regional Trajectories of Rule Development', 91 Am J Int'l L 231 (1997).
28. See Sell, above n 19.
29. See, e.g., J. Zaracostas, 'Trade Superpowers Debate Top Issues for WTO Summit', J Comm (14 December 1995), at 3A (quoting deputy US Trade Representative Jeff Lang); 'US Pushes WTO on Bribery, Labor Standards Issues', J Comm (19 March 1996) (quoting Andrew Stoler, deputy of US mission to WTO).
30. See, e.g., J. Zaracostas, 'Trade Superpowers Debate Top Issues for WTO Summit', J Comm (14 December 1995), at 3A (quoting deputy US Trade Representative Jeff Lang); 'US Pushes WTO on Bribery, Labor Standards Issues', J Comm (19 March 1996) (quoting Andrew Stoler, deputy of US mission to WTO).
31. This characterization appears in the title of International Chamber of Commerce, Rules of Conduct to Combat Extortion and Bribery in International Business Transactions (1996). See http:// www.iccwbo.org/home/statements_rules/rules/1999/briberydoc99.asp (visited 2 February 2001). The original version of these rules was adopted in 1977. See Extortion and Bribery in Business Transactions, Report Adopted by the 131st Session of the Council of the International Chamber of Commerce, 29 November 1977, 17 ILM 417 (1978).
32. See, e.g., OECD Business and Industry Advisory Committee, Assistance Against Solicitation of Bribes: A Possible Answer to the Problem of Extortion in International Business Transactions (1998).
33. Measures to combat transnational bribery, in contrast, must typically be adopted by governments in a coordinated fashion, since unilateral measures would create competitive disadvantages for exporting firms and thus generate strong political resistance. The US did adopt the FCPA unilaterally, but no other government followed suit until coordinated action was possible through the OECD.
34. The most direct attempt to focus discussions in the TGP Working Group on issues of corruption was a 'non-paper' submitted by Venezuela in February 1999. For a description of this document see WT/WGTGP/3, above n 15, at para 3.
35. See C. Hwa Loon, 'WTO Should Focus on Concrete Trade Issues, Says Suharto', The Straits Times (13 September 1996) 1.
36. Even governments like Hong Kong, China that have successfully controlled corruption at home have resisted discussion of the issue at the WTO.
37. See Abbott and Snidal, 'Hard and Soft Law', above n 20, at 436-41.
38. For a reflection of this position in the opinion of an influential Southeast Asian journal, see Comment, 'Don't Distract WTO from Its Job', The Straits Times (27 April 1996) 34.
39. The USTR may have reinforced this tradition by its public statements casting corruption as a non-tariff barrier to trade, rather than as an issue of mutual interest. See statements cited above n 26.
40. Uruguay Round Trade Agreements, Texts of Agreements, Implementing Bill, Statement of Administrative Action, and Required Supporting Statements: Message from the President of the United States, House Doc 103-316, vol 1, 103d Cong, 2d Sess (Washington: US Government Printing Office 1994), 1735. For a thorough introduction to the GPA, see B. M. Hoekman and P. C. Mavroidis (eds), Law and Policy in Public Purchasing (Ann Arbor: University of Michigan Press 1997).
41. For an academic analysis of the TGP process which assumes that the goal of such an agreement, like that of the GPA, is (and should be) to facilitate market access, see S. Arrowsmith, 'Towards a Multilateral Agreement on Transparency in Government Procurement', 47 Int'l & Comp. LQ 793 (1998).
42. India, like the Southeast Asian nations in ASEAN, has been a consistent opponent of behind-theborder measures in GATT and the WTO. See S. Ostry, 'The Uruguay Round North-South Grand Bargain: Implications for Future Negotiations', paper prepared for Conference on the Political Economy of International Trade Law, University of Minnesota, 15-16 September 2000, forthcoming in The Political Economy of International Trade Law, above n *.
43. Indeed, developing countries had already begun to argue that the results of the Uruguay Round should be rebalanced and problems of implementation dealt with before any new WTO negotiations were initiated. Ibid.
44. See List of the Issues Raised and Points Made, Informal Note by the Chair, Sixth Revision, 12 November 1999, JOB(99)/6782.
45. See above n 30.
46. Perhaps the best-known example is the OECD Declaration on International Investment and Multinational Enterprises, which recommends to multinational enterprises operating in or from the territory of member states that they observe the annexed Guidelines for Multinational Enterprises. The Guidelines were thoroughly revised in 2000. The Declaration is supplemented by legally binding Decisions setting forth procedures for implementation. The OECD Declaration and Decisions on International Investment and Multinational Enterprises: Basic Texts, 8 November 2000, OECD Doc No DAFFE/IME(2000)20. For an example of a Recommendation addressed to governments, see Revised Recommendation of the Council Concerning Co-Operation Between Member Countries on Anticompetitive Practices Affecting International Trade, 27-28 July 1995, OECD Doc No C(95)130/Final, 35 ILM 1313 (1995).
47. An important example is the Code of Liberalization of Capital Movements, which has the status of a legally binding decision. First adopted in 1961, the Code has been expanded several times; since the 1989 amendment it covers virtually all capital movements, short- and long-term. See OECD, Code of Liberalization of Capital Movements (Paris: OECD 1997). The text of the Code is also available on the OECD website at http://www.oecd.org/daf/investment/legal-instruments/clcmart.htm (visited 7 February 2001). A companion document, the Code of Liberalization of Current Invisible Operations, has the same legal status.
48. See, e.g., OECD, Model Tax Convention on Income and on Capital (Paris: OECD 2000). The articles of the Model Convention are also available on the OECD website at http://www.oecd.org/daf/fa/ treaties/articles.pdf (visited 7 February 2001). The proposed OECD Multilateral Agreement on Investment (MAI) was intended to be a legally binding treaty with effective dispute resolution procedures, open to non-members of the OECD. Negotiations on the MAI were suspended in 1998. See Ministerial Statement on the Multilateral Agreement on Investment (MAI), 28 April 1998, http://www.oecd.org/media/release/nw98-50a.htm (visited 8 February 2001).
49. See, e.g., OECD, Model Tax Convention on Income and on Capital (Paris: OECD 2000). The articles of the Model Convention are also available on the OECD website at http://www.oecd.org/daf/fa/ treaties/articles.pdf (visited 7 February 2001). The proposed OECD Multilateral Agreement on Investment (MAI) was intended to be a legally binding treaty with effective dispute resolution procedures, open to non-members of the OECD. Negotiations on the MAI were suspended in 1998. See Ministerial Statement on the Multilateral Agreement on Investment (MAI), 28 April 1998, http://www.oecd.org/media/release/nw98-50a.htm (visited 8 February 2001).
50. See OECD Convention, above n 4, Art 12; 1997 OECD Recommendation, above n 3, Section VIII.
51. The Singapore Ministerial Declaration and discussions in the TGP Working Group were of course legally 'soft', but the former did little more than create the Group, and the latter never passed beyond discussion to the formulation of commitments.
52. For a critique of these alternate strategies, see G. W. Downs, K. W. Danish, and P. N. Barsoom, 'The Transformational Model of International Regime Design: Triumph of Hope or Experience?', 38 Colum J Transnat'l L 465 (2000).
53. One could say that the TGP negotiations reflected a gradualist strategy in terms of substantive scope: by beginning with commitments limited to transparency, the US and EU hoped to enlarge the scope of the agreement over time to include commitments on market access.
54. This paper follows K. W. Abbott, R. O. Keohane et al., 'The Concept of Legalization', 54 Int'l Org 401 (2000), in envisioning the 'hardness' or 'softness' of international legal commitments as turning not solely on the existence of a binding legal commitment, but on three elements - legal obligation, precision of commitments, and delegation to third-party institutions - each of which can be varied independently. Under this formulation, a decision to exempt commitments from WTO dispute settlement procedures would constitute a soft law strategy.
55. The US argues that it should not be necessary to offer concessions in exchange for commitments on transparency so long as these are divorced from explicit commitments on market access. Based on this position the US pressed at Seattle for a free-standing TGP agreement, or at least a commitment to negotiate such an agreement by the next Ministerial as an 'early harvest'.
56. The inability of member governments to narrow their differences on numerous issues in advance of the Ministerial contributed significantly to the collapse at Seattle. See J. S. Odell, 'The Seattle Impasse and Its Implications for the World Trade Organization', paper prepared for Conference on the Political Economy of International Trade Law, 15-16 September 2000, forthcoming in The Political Economy of International Trade Law, above note *.
57. Ibid., citing World Trade Agenda, December 1999, at p 8.
58. For a detailed analysis of the collapse, see ibid.
59. The final communique of the 2000 G8 meeting in Okinawa speaks of preparing for negotiations on a new instrument against corruption within the UN, but few concrete steps appear to have been taken. See G8 Communique, Okinawa, 23 July 2000, para. 47, text available at http://www.g8kyushu-okinawa.go.jp/e/documents/commu.html, visited 25 October 2000.
60. Some soft law pathways do exist in the WTO - member governments can address new issues in ministerial declarations, for example - but they are less well developed than in OECD practice.
61. Some provisions of GATT 1994 - notably those dealing with developing countries - although technically legally binding, contain hortatory language that softens the obligations considerably. This represents a form of soft law that could be duplicated in other contexts, though most of the Uruguay Round agreements were intentionally drafted in more rigid terms. Another possible form of action that stops short of the multilateral, hard law rule-making characteristic of the WTO is the conclusion of additional plurilateral agreements under the Marrakesh Agreement Establishing the World Trade Organization, reprinted in GATT Secretariat, The Results of the Uruguay Round of Multilateral Trade Negotiations, the Legal Texts (Geneva 1994) 6. Article X:9 of the WTO Agreement, though, imposes some procedural barriers even to this approach.
62. For a discussion of the value of independence in international organizations, see K. W. Abbott and D. Snidal, 'Why States Use Formal International Organizations', 42 J Conflict Res 3 (1998).