Fighting Transnational Bribery in Croatia

2. Introduction

Abstract

This chapter introduces the project under which the report was prepared, as well as the report methodology. It then illustrates the main OECD anti-bribery instruments and the criteria for countries’ accession to the OECD Anti-Bribery Convention.

2.1. Raising awareness and standards of fighting bribery in international business transactions

In the age of a globalised economy, fighting bribery in international business is ever more important to maintain a level playing field and ensure the integrity of international markets. This is especially pertinent to countries in the European single market like Croatia. Foreign bribery raises serious moral and political concerns, undermines good governance and economic development, and distorts international competitive conditions. All countries share a responsibility to combat this crime. The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD, 1997[1]) (Anti-Bribery Convention) is the only international treaty dedicated to fighting transnational bribery in business.

Croatia has expressed an interest in acceding to the Anti-Bribery Convention and joining the international community’s efforts to fight transnational bribery. In this context, the project “Raising Awareness and Standards of Fighting Bribery in International Business Transactions” was jointly conducted by Croatia’s Ministry of Justice and Public Administration, the European Commission, and the Organisation for Economic Co-operation and Development (OECD). The project was financed by the European Union Structural Reform Support Programme.

The purpose of the project is to strengthen Croatia’s anti-corruption framework towards the standards set out in the OECD Anti-Bribery Convention. The project also supports Croatia’s initiatives to develop adequate systemic anti-corruption interventions related to the private sector and combating bribery in international business, making these efforts one of the priority areas in its national anti-corruption strategy. Indeed, Croatia’s Anti-Corruption Strategy for 2021-2030 mentions this project as part of the policy priority of “Strengthening the institutional and normative framework for the fight against corruption”.1 “Improving anti-bribery frameworks in international business transactions” is one of the measures for implementing the strategy.

To accomplish these goals, the project comprises three components. First, Croatia’s legal and policy framework for fighting the bribery of foreign public officials is assessed against OECD standards and areas for improvement are identified. This report is the output of this project component. Second, a one-day event is held to raise awareness of the importance of fighting bribery in international business transactions. The goal is to secure the commitment of key stakeholders in Croatia in this important endeavour. Finally, workshops are held to present the assessment of Croatia’s legal and policy framework, and to mobilise support for implementing the OECD’s recommendations.

2.2. Methodology

The present report assesses Croatia’s legal and policy framework for fighting transnational bribery based on the criteria applied to countries seeking accession to the Anti-Bribery Convention. These criteria have been defined by the OECD Working Group on Bribery in International Business Transactions, which is the Convention’s Conference of Parties.2 The criteria focus on a subset of key requirements of the Anti-Bribery Convention. An assessment based on these criteria is thus more limited than the regular country evaluations conducted by the Working Group, which monitor the implementation of the entire Convention. The present report is prepared by the OECD Secretariat and published under the authority of the OECD Secretary-General. The assessment contained therein reflects the views of the OECD Secretariat and not necessarily the OECD Working Group on Bribery or its member countries. The assessment is without prejudice to any subsequent evaluation of Croatia that may be conducted by the Working Group.

The assessment in the present report relies on multiple sources of information. At the outset, Croatian authorities responded to a questionnaire prepared by the OECD Secretariat. The OECD then conducted a fact-finding mission to gather additional information. The mission comprised panels with relevant Croatian stakeholders including government officials, prosecutors, judges, parliamentarians, private-sector lawyers and academics, private sector and civil society (see Annex A for a list of participants). The mission was conducted virtually via teleconference because of travel restrictions necessitated by the COVID-19 pandemic. After the mission, Croatian authorities provided additional information and commented on a draft of this report. The OECD Secretariat also conducted independent research. The OECD is grateful to Croatian authorities and all participants of the fact-finding mission for their openness and generosity with their time.

2.3. OECD Anti-Bribery Convention

The OECD’s main anti-bribery instruments are the Anti-Bribery Convention and the 2021 Anti-Bribery Recommendation. In 2013, the OECD Working Group on Bribery set out the criteria for countries to accede and adhere to these instruments.

The OECD’s flagship anti-bribery instrument is the Anti-Bribery Convention (OECD, 1997[1]). The Convention was adopted in 1997 and entered into force in 1999. At the time of this report, there are 44 Parties to the Convention, i.e. 38 OECD members and 6 non-members.3 The Convention (Art. 1) requires Parties to criminalise the bribery of foreign public officials (foreign bribery) committed by natural persons. Legal persons must also be made liable for this crime (Art. 2). Natural and legal persons that are culpable must be subject to effective, proportionate and dissuasive sanctions (Art. 3). Parties must seriously investigate foreign bribery allegations implicating their nationals and companies. These enforcement actions must also be independent of executive influence, as well as considerations of national economic interest, the potential effect upon relations with another state or the identity of the natural or legal persons involved (Art. 5). Parties must also provide mutual legal assistance and extradition in foreign bribery cases (Arts. 9 and 10).

2.4. 2021 and 2009 Anti-Bribery Recommendations

The Anti-Bribery Convention is complemented by the 2021 Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions (OECD, 2021[2]). The Recommendation is an update of an earlier version adopted in 2009 (OECD, 2009[3]). Countries that accede to the Anti-Bribery Convention are also required to adhere to the Anti-Bribery Recommendation. The 2021 Recommendation provides additional guidance on implementing the foreign bribery offence and corporate liability for this crime (Annex I). It sets out measures for preventing, detecting and reporting foreign bribery. It also urges countries to fully and promptly implement the 2009 Council Recommendation on Tax Measures for Further Combating Bribery of Foreign Public Officials in International Business Transactions (OECD, 2009[4]). In particular, countries are recommended to “explicitly disallow the tax deductibility of bribes to foreign public officials, for all tax purposes in an effective manner”.

2.5. Criteria for acceding to the Anti-Bribery Convention

In 2013, the OECD Working Group on Bribery adopted the current criteria and procedure for a country to accede to the Anti-Bribery Convention and to become a Working Group Member.4 The criteria fall into three categories: (1) economic factors relevant for assessing “mutual interest”; (2) factors relating to the legal and enforcement framework to fight foreign bribery; and (3) factors relating to the willingness and ability to participate in the Working Group’s work programme.

2.5.1. Criteria relating to economic factors for assessing “mutual interest”

Accession is of “mutual interest” if it assists the OECD Working Group on Bribery in fulfilling its mandate of combating foreign bribery. This mandate includes an objective to “engage with non-Member countries that are major exporters and foreign investors, with a view to their adherence and implementation of [the OECD anti-bribery] instruments”. In assessing “mutual interest”, the Working Group considers the following economic indicators:5

a The size of the accession candidate’s economy as measured by its gross domestic product (GDP);

b The volume of the accession candidate’s trade, including imports and exports, and in goods and services, subject to the availability of data;

c The accession candidate’s stock of outward foreign direct investment (FDI);

d The accession candidate’s level of trade with and FDI stocks in countries with perceived high levels of corruption; and

e The proportion of companies in the accession candidate that operate in sectors shown to be a serious foreign bribery risk, e.g. extractive industries, defence, and infrastructure.

The Working Group applies these economic criteria flexibly. Accordingly, the economic indicators of an accession candidate would not be required to meet particular thresholds, nor would any one or more factors be determinative. Instead, the Working Group considers all relevant factors as a whole to determine whether a country’s accession would be of mutual interest to the candidate and the Working Group.

2.5.2. Criteria relating to the legal and enforcement framework to fight foreign bribery

An adequate legal and enforcement framework is essential for combating foreign bribery effectively. The OECD Working Group on Bribery’s criteria for accession to the Convention thus focus on the following six factors relating to a country’s legal and enforcement framework:6

a Foreign bribery offence: The Working Group considers whether an accession candidate has a criminal offence that specifically and expressly criminalises foreign bribery. The Working Group further assesses an accession candidate’s foreign bribery offence against Art. 1 of the Convention and Annex I of the 2009 Recommendation.7

b Liability of legal persons for foreign bribery: The Working Group considers whether an accession candidate has the ability to impose criminal, civil, and/or administrative liability against legal persons for foreign bribery. A general scheme that allows liability to be imposed for intentional criminal offences would suffice, i.e. the scheme does not have to be specific to foreign bribery. The Working Group further assesses an accession candidate’s scheme for imposing liability against legal persons for foreign bribery against Art. 2 of the Convention and Annex I of the 2009 Recommendation.

c Sanctions for foreign bribery: The Working Group assesses the sanctions available for foreign bribery against Art. 3 of the Convention, and the sanctions imposed in practice for foreign and domestic bribery.

d Enforcement capacity: The capacity to enforce foreign bribery laws is a key indicator of the importance given to tackling foreign bribery. The Working Group therefore considers the following two criteria:

i. Whether an accession candidate has a track record of investigating and prosecuting (domestic and foreign) corruption cases. This could be measured by considering investigations and prosecutions over a previous five-year period. Particular emphasis would be given to foreign bribery cases; politically sensitive cases; cases impacting national economic interests; enforcement actions for active (as opposed to passive) corruption; and enforcement actions against legal persons; and

ii. Any other matter relevant to the candidate’s capacity to enforce its foreign bribery laws that comes to the Working Group’s attention and which raises significant concerns, e.g. well-publicised interference by the executive government in an investigation, or the abolition of an anti-corruption agency.

e International co-operation: The Working Group assesses an accession candidate’s legal and legislative framework for seeking and providing mutual legal assistance (MLA) and extradition against Arts. 9 and 10 of the Convention. The Working Group also considers any other information that comes to its attention and which is relevant to the candidate’s capacity to seek and provide MLA and extradition.

f Explicit non-tax deductibility of bribes: The Working Group considers whether an accession candidate explicitly disallows the tax deductibility of bribes to foreign public officials for all tax purposes.

2.5.3. Criteria relating to the willingness and ability to participate in the Working Group on Bribery’s work programme

The last category of criteria for acceding to the Anti-Bribery Convention concerns a country’s willingness and ability to participate in the work programme of the OECD Working Group on Bribery, and to fulfil Convention obligations that go beyond legal and enforcement issues. These criteria include an assessment of a candidate country’s ability to co-operate in the Working Group’s accession review process and other review mechanisms; participation in the Working Group as a non-member, and the procedure and time (including possible limits) for accession.8 Since these criteria do not relate to a country’s legal and policy framework, they are beyond the scope of this report.

References

[2] OECD (2021), 2021 Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions, https://www.oecd.org/daf/anti-bribery/2021-oecd-anti-bribery-recommendation.htm.

[3] OECD (2009), 2009 Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions, https://www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf.

[4] OECD (2009), Recommendation of the Council on Tax Measures for Further Combating Bribery of Foreign Public Officials in International Business Transactions, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0286#dates.

[1] OECD (1997), OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, https://www.oecd.org/corruption/oecdantibriberyconvention.htm.

Notes

← 1.  Anti-Corruption Strategy for 2021-2030 (Strategija sprječavanja korupcije za razdoblje od 2021. do 2030. godine), Official Gazette No. 120/21, Section 4.1 and Annex 1, Measure 4.1.12.

← 2.  OECD Working Group on Bribery in International Business Transactions (2014), “Criteria and Procedure for Acceding to the Anti-Bribery Convention and Non-Member Participation in the Working Group on Bribery” (Accession Criteria), DAF/WGB(2014)2/FINAL.

← 3.  The 38 OECD members are Austria, Australia, Belgium, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The 6 non-OECD countries that are Parties to the Convention are Argentina, Brazil, Bulgaria, Peru, Russian Federation and South Africa.

← 4.  Accession Criteria, DAF/WGB(2014)2/FINAL.

← 5.  Accession Criteria, para. 9.

← 6.  Accession Criteria, para. 11.

← 7.  The Working Group adopted its Accession Criteria in 2013, before the 2009 Anti-Bribery Recommendation was updated in 2021. At the time of this report, the Working Group has not yet discussed a revision to the Accession Criteria to account for the updated 2021 Anti-Bribery Recommendation.

← 8.  Accession Criteria, para. 12.