Cablegate: Oecd/Export Credit: Strengthened Anti-Bribery
This record is a partial extract of the original cable. The full text of the original cable is not available.
271311Z Oct 05
UNCLAS SECTION 01 OF 04 PARIS 007355
SIPDIS
FROM USOECD
STATE FOR EUR/ERA, EB/IFD/ODF-LFCONNELL,
EB/IFD/OIA-PBROWN
DOC FOR ELENZ
DOJ FOR MMENDELSOHN
TREASURY FOR STVARDEK AND DDRYSDALE
PASS TO EX-IM CFIRESTONE
SENSITIVE
E.O. 12958:N/A
TAGS: EFIN EINV ETRD EXIM OECD
SUBJECT: OECD/EXPORT CREDIT: STRENGTHENED ANTI-BRIBERY
ACTION STATEMENT FACES DIVERGENT VIEWS
(U) SENSITIVE BUT UNCLASSIFIED-- PROTECT ACCORDINGLY.
Not for Internet distribution.
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SUMMARY
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1. (SBU) Summary: Members of the Organization for
Economic Cooperation and Development (OECD) working
group on export credits and credit guarantees (ECG) met
October 10 and 11 in Paris to consider proposals to
enhance the November 2000 Action Statement on Bribery
and Officially Supported Export Credits. The Chairman
of the OECD Working Group on Bribery (WGB) and several
members of the WGB management group (US, France,
Sweden) also attended. ECG members, who expressed
divergent views on key aspects of the Statement, agreed
to the OECD Secretariat's offer to prepare a draft
reflecting the information and views expressed in the
talks. Germany, Belgium, Czech Republic, and Japan were
among those least interested in a robust new Action
Statement. The Secretariat's strong draft statement
(attached at para. 6), distributed October 21, provides
a favourable starting point for further negotiations,
which will culminate in the ECG's semi-annual plenary
session November 14-18. End summary.
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TI Presents a Strong Proposal
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2. (U) Representatives from Transparency International
(TI), who joined ECG members the morning of October 10,
made a strong presentation on the need for export
credit agencies (ECAs) to take active antibribery
measures, outlining a broad range of steps which built
on those offered in the U.S. proposal circulated to the
ECG via the OECD on September 2. Specifically, TI
proposed strengthening the U.S. proposal by including a
requirement that exporters and applicants seeking ECA
support disclose agents' names, addresses, commissions,
services performed, bank account receiving the
commission, connections between the agent and public
officials in the buyer's country, and a statement as to
the reasonableness of the amount of commission. [The
U.S. proposal notes that disclosure of agents and their
commissions may be required, but does not set a firm
requirement or further detail further information
required.] TI also proposed that ECG member countries
develop and implement a debarment system for excluding
companies previously engaged in bribery from receiving
export credit agency (ECA) support and that they
encourage ECAs in non-ECG member countries to adopt
measures outlined in the strengthened Action Statement.
---------------------------------------------
New Canadian Proposal Better Than the Germans'
(But Still Not Good)
--------------------------------------------- -
3. (U) A German/Belgian/Czech proposal presented in
2004, which the U.S. had found lacked sufficient
concrete measures, was the least progressive proposal
discussed. A new Canadian proposal took a middle
position between that proposal and the U.S. proposal.
The Canadian proposal had a useful provision on
illustrative requirements of measures that companies
previously debarred for bribery could take to re-gain
eligibility for export credits, including replacing
individuals who had been involved in bribery, adopting
an effective anti-bribery program, and submitting to an
audit and making its results available. However, the
Canadian proposal also omitted some key elements of the
U.S. proposal, such as disclosure of
agents/commissions, and references to applicants.
--------------------------------------------- ----------
Key Issues: Agents, Due Diligence, Reporting, Debarment
--------------------------------------------- ----------
4. (U)Despite helpful explanations from OECD's export
credit and legal staff on the rapid evolution and
strengthening of international anti-bribery law and
practice, comments reflected a wide range of opinion.
An attempt by the OECD Secretariat to base plenary
discussion on the U.S. proposal elicited wide
opposition and was dropped. Given the absence of
consensus, the Chair solicited members' views for
inclusion in an OECD Secretariat draft Action Statement
on four areas:
(1) selection by export credit agency (ECA) clients of
agents and disclosure of agents' commissions;
(2) ECA conditions for applying enhanced due diligence;
(3) ECA reporting to authorities of possible bribery;
and
(4) ECA measures, such as debarment, in event past
bribery by ECA clients.
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Divergent Views Leave Outcome in Doubt
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5. (SBU) Discussion revealed some members strongly
resistant to commit to any concrete measures. This
group included Germany, Belgium, the Czech Republic,
Austria, Poland, Spain, Turkey and especially Japan.
The U.S. consistently presented the practical need for
and benefits from its proposals in each area and found
some support, notably from the Netherlands, the UK,
Switzerland, Sweden, Finland, and Australia. In the
middle were Canada (although closer to the first
group), Denmark, France, and Korea. Italy and Mexico
were silent, while Portugal and Slovakia were absent.
In a meeting between the ECG bureau and the WGB
management group, USDel to the WGB warned that failure
by the ECG to enhance the Action Statement risked work
being transferred to the WGB. Supporting USDel, the
WGB Chairman, Mark Pieth, noted that the WGB is
building up a "case law" type approach through
recommendations in the WGB's peer review process.
Through this process, the WGB has made a series of
specific recommendations for enhancements to specific
members' export credit policies. The WGB's October 18-
20 meeting (septel forthcoming) briefly reviewed work
in the ECG and encouraged delegations to ensure they
coordinate with their ECG counterparts.
6. (SBU) The Secretariat's draft action statement,
distributed October 21, includes key provisions of the
U.S. proposal, along with some positive elements of the
Canadian proposal and suggestions made by other
delegations such as the Swiss. Comment: While it
remains unclear whether a consensus document with
meaningful improvements over the 2000 Statement will
gain approval, the Secretariat's strong draft statement
(para. 7) provides a favourable starting point for
further negotiations. End comment.
7. (U) Following is the Secretariat draft scheduled to
be considered in the ECG plenary meetings the week of
November 14:
Begin quote.
DRAFT 2005 ACTION STATEMENT ON BRIBERY AND OFFICIALLY
SUPPORTED EXPORT CREDITS
In recognition of the Convention on Combating Bribery
of Foreign Public Officials in International Business
Transactions (hereafter the Anti-Bribery Convention)
and the 1997 Revised Recommendation of the Council on
Combating Bribery in International Business
Transactions (hereafter the 1997 Recommendation)(1),
the Members of the OECD Working Party on Export Credits
and Credit Guarantees (ECG) agree:
1) Combating bribery in international business
transactions is a priority issue and the ECG is the
appropriate forum to ensure the implementation of the
Anti-Bribery Convention and the 1997 Recommendation in
respect of international business transactions
benefiting from official export credit support.
2) To take appropriate measures (2) to deter bribery
(3) in international business transactions benefiting
from official export credit support, including:
a) Informing applicants and exporters requesting
support about the legal consequences of bribery in
international business transactions under its national
legal system including its national laws prohibiting
such bribery.
b) Requiring applicants and exporters to provide an
undertaking/declaration that they maintain appropriate
(4) anti-bribery controls and that neither they, nor
anyone acting on their behalf, (e.g. agents) have been
engaged or will engage in bribery in the transaction.
c) Requiring applicants and exporters to disclose
occurrences, within a [xx] year period preceding the
application, of (i) any debarment of the exporter, or
any subsidiary or affiliated entity (5), by the World
Bank or any other multilateral financial institution,
or any government entity, as a result of having been
engaged in bribery, and (ii) any conviction, charge, or
civil or administrative determination, penalty, order
or settlement involving the exporter, or any subsidiary
or affiliated entity, for violations of laws against
bribery of foreign public officials of any country.
d) Requiring that applicants and exporters agree to
disclose, upon demand: (i) the identity of persons
acting on their behalf in connection with the
transaction, and (ii) the amount and purpose of
commissions and fees paid to such persons.
e) Requiring, for medium and long-term transactions (6)
with a total contract value of SDR [xx] million or more
with a public sector buyer in a country where risk of
bribery and corruption is deemed to be relatively high
(7), that applicants and exporters disclose: (i) the
identity of persons acting on their behalf in
connection with the transaction, and (ii) the amount
and purpose of commissions and fees paid to such
persons.
f) Undertaking enhanced due diligence if the Member
becomes aware that the applicant, exporter, or any
subsidiary or affiliated entity of such exporter has,
within a [xx] year period preceding the application,
been: (i) debarred by the World Bank or any other
multilateral financial institution or any government
entity as a result of having been engaged in bribery,
(ii) found guilty in a court, criminally charged, or
the subject of a civil or an administrative
determination, penalty, order or settlement, for
violation of laws against bribery of foreign public
officials of any country; or if they have reason to
believe that bribery may be involved in the
transaction.
g) Developing and implementing procedures to disclose
to their law enforcement authorities instances of
credible evidence of bribery in the case that such
procedures do not already exist.
h) Taking preventive and corrective actions that are
appropriate given the specific circumstances of the
transaction if there is credible evidence that bribery
was involved in the award of the export contract,
including: refusing to approve credit, cover or other
support and, where support has already been provided,
denying payment or indemnification or seeking refund of
sums provided.
i) Developing and implementing procedures to deal with
companies that have been convicted of bribery in order
to ensure that support is not provided to any company
that has not taken appropriate internal corrective
measures (8) to deter further bribery.
3) The application by Members of the measures set out
in Paragraph 2 in no way mitigates the responsibility
of the exporter and other parties in transactions
benefiting from official support to: (i) comply with
all applicable laws and regulations, including national
provisions for combating bribery of foreign public
officials in international business transactions, or
(ii) provide the proper description of the transaction
for which support is sought, including all relevant
payments.
4) To continue to exchange information on how the Anti-
Bribery Convention, the 1997 Recommendation and the
measures listed in Paragraph 2 above are being taken
into account in Members' official export credit
systems.
5) To continue to collate, map and review the
information exchanged with a view to: (i) ensuring that
functional equivalence exists in respect of the
practical application by Members of the measures set
out in Paragraph 2 above, and (ii) considering further
steps to combat bribery in respect of transactions
benefiting from official export credit support.
6) To continue to publish the results of the
information exchange and to consult on a regular basis
with appropriate stakeholders.
Footnotes:
(1) Article 12 of the Anti-Bribery Convention provides
for monitoring and follow-up to promote the full
implementation of this Convention. The OECD Working
Group on Bribery in International Business Transactions
considers that insofar as officially supported export
credits is concerned, the appropriate forum is the OECD
Working Party on Export Credits and Credit Guarantees
(ECG); the ECG reports progress to the Working Group on
Bribery.
(2) These measures would be realized in accordance with
the legal system of each Member country taking into
account its specific judicial instruments and
institutions to implement its penal laws and are not
prejudicial to the rights of any parties not
responsible for the illegal payments.
(3) As defined in the Anti-Bribery Convention.
(4) Some small- and medium-sized enterprises may have
less detailed anti-bribery controls in comparison to
those maintained by e.g. large, multinational
corporations.
(5) For the purposes of this Statement, "affiliated
entity" means (a) any company that holds, directly or
indirectly, a majority of the voting stock of the
company; and (b) any other company the majority
ownership of whose stock is held by the company
described in (a).
(6) For the purposes of this statement, any transaction
with a repayment term of two years or longer.
(7) For the purposes of this Statement, "countries
where the risk of bribery and corruption is deemed to
be high" are countries with a score of three or lower
on Transparency International's Corruption Perception
Index.
(8) Such measures could include: replacing individuals
that have been involved in bribery, adopting an
effective anti-bribery program, submitting to an audit
and making the results of such audit available.
End Quote.
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