Enforcement of antibribery statutes is increasing around the world in a trend important to the oil and gas industry for two big reasons. One reason is the corrosive effect bribery has on the wealth generation that legitimizes work by oil and gas companies outside their home countries. The other is that the industry belongs to the business category in which enforcement is most active.
Both trends—growing antibribery enforcement and the large share of enforcement actions falling on extractive industries—appear clearly in a new report by Trace International, a nonprofit Annapolis, Md., firm that maintains a database on antibribery cases and advises companies on compliance issues. Trace said it will publish its Global Enforcement Report annually, using this year's inaugural version as a benchmark.
The findings
According to the report, 22 countries took 515 foreign-bribery enforcement actions between 1977—the year the US passed the Foreign Corrupt Practices Act—and June 2010. Foreign, or outbound, bribery involves illicit payments by representatives of companies based in the enforcing country to officials in other countries. The US dominates those enforcement actions, which include known cases still in the investigation stage, with 390. The runner-up in total enforcement during 1977-June 2010 is the UK, with 22. Others in the top 10 are Denmark, 15; Germany, 12, Italy, 11; Japan, 10; Sweden, Norway, and the Netherlands, 7 each; and France, 6.
Leaders of enforcement against inbound bribery—payments made by outsiders to officials of the enforcing countries, are South Korea, with 12 cases between 1977 and June 2010; Italy, 9, Argentina, 6; and South Africa, Lesotho, India, and Canada, 5 each. Russia, Norway, Brazil, and Bangladesh had four such cases each during the period.
Iraq dominates the Global Enforcement Report's country ranking of countries in which bribes are alleged to have been made, with 31 such cases. Of those, 28 cases involved the United Nations Oil for Food program in place while the country was subject to sanctions imposed after its invasion of Kuwait. Behind Iraq on this list are Nigeria, 29 cases; China, 25, Indonesia, 15; Brazil, 12; Mexico, 11; and Argentina, India, Italy, and Kazakhstan, 10 each. The report cites 33 cases during the period in which countries are not specified.
The increase in antibribery enforcement is evident in data covering formal foreign-bribery enforcement actions but not investigations during 2000-09. It was during this period that most countries became obligated under international conventions to make foreign bribery a crime. About half of the formal cases pursued during 1977-09 occurred in 2000 or later.
Of 222 formal outbound bribery cases in the most recent decade, 168 were initiated in the US. There, the case number has generally increased, starting the period at 2 and peaking at 39 in 2007, with 31 such cases in 2008 and 34 in 2009. For other countries, Trace identifies the start of no formal outbound bribery cases until 2004, when there were three. The non-US total jumped to double digits in 2008, at 13, and rose to 23 in 2009.
Slightly less than 20% of known international bribery enforcement activity, foreign and domestic, involved extractive industries during 1977-June 2010. Other industries and their shares of the total are aerospace/defense/security 14.3%, manufacturer/service provider 12.1%, health care 11.1%, engineering/construction 10.7%, transportation/communications and nonprofit/education/consulting/other 7.8% each, technology/software 5.5%, agriculture/food 5.2%, financial services 3.6%, property development 1.3%, and retail and entertainment/film 0.3% each. Numbers in this analysis come from summaries in the Trace Compendium database and may include more than one enforcement action.
Enforcement increasing
"By any calculation, international antibribery enforcement is increasing worldwide as more countries move slowly from enacting antibribery laws to initiating actions to identify and prosecute the individuals and companies who break them," Trace says in a summary of its findings.
A strongly international orientation will keep the oil and gas industry high on any such accounting of antibribery enforcement until corruption is no longer an unwelcome but expected undercurrent of cross-border business. The industry has strong reason to welcome new enforcement as a step toward that ideal.
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