Police Corruption

An alleged British bribery scandal shows just how far world efforts to police corruption have come--and how far they have left to go

The Paris meeting in mid-January was a tense affair. In an oak-paneled conference room of an elegant mansion that once belonged to the Rothschild family, government representatives from more than 30 countries listened skeptically as British officials explained why they had dropped a high-profile bribery investigation into $80 billion in British contracts to supply military aircraft and other equipment to Saudi Arabia.

At the closed session, according to several people familiar with the proceedings, the British officials sketched out details of the case: the Serious Fraud Office (SFO) had uncovered various strands of alleged corruption at BAE Systems, a U.K. defense contractor, including one that allegedly involved a member of the Saudi royal family. (The company denies any wrongdoing.) But, the officials continued, the fraud office's director in London had decided to discontinue the investigation after several meetings with the British ambassador in Saudi Arabia. The reason given: national security.

That vague and largely undefined explanation didn't satisfy anyone in the room, including a U.S. State Department representative there. According to people with knowledge of what was said, the American asked "what comfort could the British government give" to other countries that there was no corruption currently taking place. The meeting closed with a published statement expressing the "serious concerns" of the other governments represented with what had happened--and a requirement that Britain explain itself more fully, this time in writing, before another meeting in mid-March. The British government won't comment on what happened in Paris, but Attorney General Lord Goldsmith told Parliament that dropping the case "does not mean that we are backing off in any way from our commitment to tackling international corruption."

At a time when the world is preoccupied with intractable geopolitical and climatological issues, that session of the Organization of Economic Cooperation and Development's Working Group on Bribery in International Business may seem of marginal significance. In fact, it was one of the hot topics on the fringes of the World Economic Forum in Davos, because it exemplifies just how far the world has come--and how far it still has to go--in cracking down on one of the great scourges of globalization.

The fact that a nation such as Britain is required to answer to its peers over a specific case highlights the prominence of the fight against corruption. The O.E.C.D.'s 30 rich-country members signed an antibribery convention in 1997 after years of difficult negotiation and several failed attempts by others to construct something similar. That 1997 convention--under which signatories pledge themselves to outlaw bribery of foreign public officials in international business--has since become the cornerstone of international antibribery policy; six non-O.E.C.D. members, including Brazil and Argentina, have also signed it.

But if a government is allowed to plead that reasons of national security excuse it from its obligations, any international consensus on bribery would quickly disappear. "What happened with the U.K.--that a country has to explain itself and justify what it is doing internally--would have been impossible some years back," says Mark Pieth, a Swiss law professor who chairs the O.E.C.D. working group. Pieth says he wants Britain to have a fair hearing, but he worries that, if there has been a breach, the convention itself would be "squarely at risk."

For decades, paying bribes was an unspoken but largely inevitable cost of doing international business. The World Bank Institute, the bank's in-house think tank, estimates that more than $1 trillion is paid in bribes each year, lining the pockets of officials at the expense of economies, distorting competition and giving business a bad name the world over. The U.S. tried to outlaw the habit with its Foreign Corrupt Practices Act of 1977, which makes it unlawful for any American firm to make a corrupt payment to a foreign official. But that was long the exception; many other rich countries simply turned a blind eye. In Germany and Luxembourg, bribes used to be tax deductible. In many countries, and for many firms, bribes were just the way things were done.

That was then. Of late, opinion on corruption has changed, as campaigners such as rock star Bono, joined by businesses and governments, have argued that corruption is a key cause of Africa's underdevelopment and makes a mockery of international competition for contracts. In part, that is because business leaders in the old rich countries fear new competition. At a conference on business corruption in Paris last December, executives from France--no strangers to business-ethics scandals themselves--complained that they were losing out in Africa to Chinese firms that were less legally and morally encumbered.

In the new climate, many developed countries have changed their legislation to crack down on bribery. One hundred and forty governments have now signed a 2003 United Nations convention against corruption. There are currently more than 100 foreign bribery investigations under way worldwide, according to Angel Gurria, the O.E.C.D.'s secretary-general. One of the cases with the highest profile involves the huge German firm Siemens, which is under investigation for allegedly paying bribes to win telecommunications contracts. The company said recently that, on checking