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NFTC President Says Corruption Remains a Serious Threat to International Commerce
Date: 9/17/2008
Written By: Jennifer Cummings or Eric Thomas, The Fratelli Group for NFTC, 202-822-9491

Washington, DC – National Foreign Trade Council (NFTC) President Bill Reinsch today underscored the harmful impact corruption has on global commerce in a speech delivered during a one-day conference hosted by international law firm McKenna Long & Aldridge LLP, themed “Combating Corruption,” which focused on the transatlantic anti-corruption legal framework and compliance issues facing multinational companies. During his remarks, Reinsch noted that the NFTC, which led the U.S. business community effort to support the United Nations (UN) Convention Against Corruption, has increasingly become engaged on the issue, as corruption continues to be a major barrier to the open, rules-based world trading system.
 
“There is no doubt that corruption, endemic in emerging economies around the world and not unknown in more developed countries, throws economic development into chaos and discourages foreign investment,” said Reinsch. “When corruption is endemic, the people, the country’s infrastructure, its government institutions and companies that strive to comply with good business practices all lose out.”
 
Reinsch made the case that in countries where corruption exists there are no assurances for investors seeking to comply with rules. “Any ethical prospective investor in these countries must expend significant resources to avoid corruption with no guarantee that perfect compliance can be achieved, given the ambiguities and moving goalposts that frequently characterize enforcement today,” said Reinsch.
 
In addition, Reinsch discussed the United States’ leadership in the development and implementation of various international anti-corruption agreements, including the UN Convention Against Corruption adopted by the General Assembly in 2003. He pointed out that to date 140 member nations have signed and 122 have ratified the agreement, but that Vietnam, Saudi Arabia, India, Malaysia, Japan, Germany and others have yet to ratify it. “The efficacy of the Convention depends upon the strength of the signatories’ implementing legislation, relevant legal infrastructure of the member states and most importantly, enforcement against corrupt officials,” he said.
 
Reinsch also outlined evidence that the problem of corruption continues to pose a serious threat to international trade, highlighting a recent report by TRACE International, a non-profit organization that tracks anti-corruption efforts, which documented bribe demands in 136 countries over a five-month period. He also cited a five-fold increase in enforcement actions by the Department of Justice and Securities Exchange Commission in cases brought under the Foreign Corrupt Practices Act (FCPA).
 
With regard to FCPA cases, Reinsch said, “Unfortunately, the scope of FCPA enforcement is such that financial burdens generated by corruption in international trade are not borne solely by the guilty.  Reputable companies in the course of proposed acquisitions have uncovered problems in the company being acquired leading to the expenditure of millions of dollars of legal fees to resolve them and/or the termination of the acquistion.” He also cautioned, “The expansion of the FCPA by Justice and SEC through targeting new areas such as charitable contributions and foreign company operations outside US jurisdiction may be warranted by public policy, but expansion driven by prosecutions and not by amendments to the law raises questions of basic process.  Companies do not have notice of the expanded scope or changed policy and an opportunity to comment before they can be penalized.”
 
In closing, Reinsch said, “If the OECD and UN Conventions do not raise the overall level of global compliance, then the United States may have to seriously consider whether a government’s failure to enforce its own laws or multilateral obligations it has undertaken against endemic corruption should be actionable under either WTO rules or U.S. trade law.”
 
To read the full remarks, please click here.