WASHINGTON-A new treaty to curb bribery of public officials should help U.S. wireless firms become more competitive in the emerging global telecom marketplace.
The accord, signed by the United States and 28 other members of the Paris-based Organization for Economic Cooperation and Development and by Argentina, Brazil, Chile, Slovakia and Bulgaria, went into effect Feb. 15. It requires signatories to implement national legislation making international commerce bribery illegal and to impose penalties for violations.
Congress passed implementing OECD anti-bribery legislation last year.
The bribery problem recently received worldwide attention as a result of the scandal involving Salt Lake City’s winning bid to host the 2002 Olympics.
“What you have known about bribery in the business community for years, I think the public is waking up to,” said Commerce Secretary William Daley earlier this year in New York. “If there is a positive coming out of Salt Lake City, or the cronyism in Asia, it is that costs have been attached to corrupt acts. A political price has been paid-people are out.”
For years, U.S. firms have lost billions of dollars in contracts to foreign competitors because of under-the-table deals. The Foreign Corrupt Practices Act, passed by Congress in 1977, forbids American firms from bribing public officials in international transactions. Out of frustration, there had been some talk of relaxing the FCPA but that talk did not go anywhere. The OECD convention was modeled after the FCPA.
The OECD treaty takes on added significance for the wireless industry in view of recent global agreements to liberalize trade in telecom services and equipment markets around the world.
“For a business, the great effect should be to finally level the playing field so that European and Asian competitors have to play by the same rules as Americans have been playing by for 20 years,” said Stephen F. Black, an expert on the FCPA at the law firm of Wilmer, Cutler & Pickering.
Indonesia, China, Pakistan and India are said to be among the biggest offenders. But even Western industrialized countries are in on the act. Until recently, Germany, France and others allowed their firms to take a tax deduction for foreign bribes.
For more than 20 years, according to anti-bribery law specialist John A. Detzner, U.S. firms have operated in an environment where “we cannot bribe but our competitors can.”
Detzner, counsel in the Washington, D.C., law firm of Neville, Peterson & Williams, said the next step is for OECD signatories to review each other’s proposed implementing legislation.
“It’s (the treaty) potentially significant although it’s not a silver bullet that will change things tomorrow,” said Lucinda Low, a specialist in international business matters and partner at the Miller & Chevalier law firm. “It will take time…It’s a step in the right direction.”
Indeed, big OECD members like Germany, Japan, the United Kingdom and France have not ratified the treaty yet.
Moreover, there are gray areas that could be fertile ground for mischief.
For example, the OECD treaty (like the FCPA) prohibits payments to government officials-such as ministers of telecommunications. But where is the line drawn when a foreign telecommunications company is either transitioning from being government owned to privately held or when public officials retain indirect ties to telecom firms after they are privatized?
Low said the OECD convention does not go as far as the FCPA insofar as banning payments to political parties, party officials and candidates for offices. The OECD accord only covers government officials.
“That’s a pretty big gap and it may not be closed tomorrow,” stated Low.
Because of what she called a “race to the bottom quality” to anti-bribery compliance, Low said it will be important for the OECD to have strong monitoring and enforcement mechanisms in place to ensure that signatories are enforcing laws they’ve passed.
