UNIDROIT 90th Anniversary Conference: The fight against Corruption - A Crossroads of Private and Public Law, Panel on “Private Law Rules as Implementation Tools for International Policies”

20 April 2016, Rome

Dear Chairman, excellencies, ladies and gentlemen,

Let me first congratulate UNIDROIT on its 90^th anniversary.

With this respectable age and its 63 members, it is both older and larger than the Council of Europe with our 47 members and 67 years of existence.

While UNIDROIT was set up for the unification of private law, the Council of Europe was set up to foster human rights, democracy and the rule of law.

It does so in many ways but in particular, like UNIDROIT, through the establishment of binding conventions.

Cultural property was referred to several times to this morning. The Council of Europe is preparing a new criminal law convention to combat the illicit trafficking of cultural property.

The trafficking of cultural property is a lucrative and complex issue linked to international cross-border organised crime.

Its very nature poses a challenge to law and policy makers. In recent times this form of trafficking has come to international attention as it is increasingly being exploited by terrorist groups including the so-called Islamic State (IS). 

On 2 March 2016 the Committee of Ministers of the Council of Europe adopted the terms of reference of the Committee on Offences Relating to Cultural Property (PC-IBC) which will meet over the next two years (2016-2017) and draft the new convention, with its first plenary meeting taking place in Strasbourg from 31 May to 1 June 2016.

This pioneering Convention should be ready by the end of 2017 and will replace the 1985 European convention on offences relating to cultural property (known as the “Delphi Convention”).

The new Convention aims to criminalise the illicit destruction and trafficking of cultural property and enhance co-operation between states.

With this ground-breaking convention the Council of Europe is working to reinforce European co-operation on the deliberate destruction of cultural heritage and illicit trafficking in cultural property. 

The UNIDROIT Convention of 1995 on stolen or illegally exported cultural objects is one of the key legal instruments in this field.

For this reason UNIDROIT will be invited to attend the meetings of the PC-IBC as an observer and it is hoped that the 2 organisations will be able to work closely together on this important new convention underlining the complementarity of our activities.

Let me now turn to some examples that illustrate the important inter-relationship between private and public law by focusing on the fight against corruption.

How does the Council of Europe work?

The Council of Europe’s action in the legal field is based on three key premises.

Firstly, that its member States will implement the agreed policy through their national legal frameworks, of which the private law rules governing the relations between natural and legal individuals represent a cornerstone in all states.

Secondly, the agreed policy responds to a commonly identified challenge or need for at least a majority of member States; and, thirdly, there exists already a basis of good practice, expertise or knowledge in some of the member States which can be shared and upon which the desired agreed policy can be built.

As the statute provides, the Council of Europe’s aim of achieving greater unity amongst its members shall be pursued through its organs by discussion of questions of common concern and by agreements and common action in, inter alia, legal matters.

In the area of public and private law, the conventions prepared by the Council of Europe have varied with the evolving challenges facing member States and the developing competences of other international bodies: from commercial law and freedom of movement in the early years, to nationality, family law, animal protection, legal aid, and administrative law, to give but some general examples.

These topics have been similarly reflected in the soft law instruments prepared by the committee in particular, Committee of Ministers recommendations, which in recent years have become more prevalent.

To give an idea, in the last five years these instruments have covered the presumption of death in the case of missing persons, continuing powers of attorney and advance directives in the case of incapacity, nationality of children, independence of the judiciary, data protection and profiling, child-friendly justice, the role of prosecutors outside the criminal field and the protection of whistleblowers and child relocation.

Let me now address the binding legal instruments on corruption.

When the Council of Europe launched its initiative against corruption at the 1994 Malta Conference of the European Ministers of Justice, it stressed a clear interest in fighting corruption as it threatens the basic principles the Organisation stands for i.e. the rule of law, the stability of democratic institutions, human rights and social and economic progress.

The specificity of the Council of Europe lies in its multidisciplinary approach, meaning that it deals with corruption from criminal, civil and administrative law points of view and that it covers repressive as well as preventive policy elements.

This initiative led to the adoption of a series of six international instruments, two of which will be the focus of my presentation:

• the Criminal Law Convention on Corruption of 1999 and its additional Protocol of 2003; this Convention has been ratified by all Council of Europe member States but three.
• the Civil Law Convention on Corruption of 1999, which has been ratified by all Council of Europe member States but 13.

The other four instruments cover general anti-corruption policy components and preventive mechanisms for the public sector and political financing.

Starting with the Criminal Law Convention on Corruption: this treaty refers to a range of criminal behaviour which countries are required to criminalise: bribery, trading in influence, money laundering (of proceeds from corruption), account offences, participatory acts (aiding and abetting).

In that context, it addresses equally the active and passive forms of certain offences (bribery and trading in influence), corrupt acts involving a public official and those involving a private sector entity.

It deals equally with national and transnational offences, including involvement of foreign or international officials.

The protocol of 2003 to the Convention extends the scope of bribery offences to further categories of persons including those who perform arbitration.

By addressing private sector bribery, the Convention seeks not only to ensure fair business practice and competition, but also to preserve certain important public interests related to public health, consumer protection, environment etc.

In February this year, it was reported in Irish and British newspapers that it is quite common for Apple employees in Ireland to be offered up to €20 000 in bribes to pass login IDs to hackers.

One can easily imagine the consequences of such acts if they are successful.

These articles actually do not mention whether any prosecutions for active bribery have been brought against hackers. This would certainly contribute to putting an end to the phenomenon.

The case I have just mentioned is one example of a situation where an enterprise becomes a target of corruption from the outside.

An important feature of the Convention which contributes indirectly to new developments in a number of branches of private law (business and commercial law, civil law, labour law) as well as in business management, is that states parties need to establish a mechanism to hold legal entities liable for bribery, trading in influence and money laundering.

This liability can be criminal, administrative or civil and, in practice, we can say that a majority of countries in Europe have now opted for a system of criminal liability.

The objective of “corporate liability” is thus to facilitate the prosecution of corruption in an increasingly complex environment.

The Criminal Law Convention on Corruption envisages two situations in which legal entities can be held liable.

The first one is where the offence is committed for the benefit of the entity by a person holding senior responsibilities based on a) power of representation, b) authority to take decisions on behalf of the entity or c) authority to exercise control within the entity.

The second situation refers to cases where the commission of the criminal act is facilitated by a lack of supervision or control by the management.

In 2006, the Siemens “affair” hit the headlines for its massive involvement in corrupt and other fraudulent dealings aimed at obtaining or retaining business.

Criminal proceedings were brought in Germany and subsequently in other countries – for instance, the United States.

These involved about 300 serving or former staff members.

The cases also resulted in several hundred disciplinary actions (including dismissals), the debarment of the firm from dealings with certain clients.

Moreover, the company had to pay fines in an amount of about €2 billion.

These fines were sometimes part of a prosecution agreement (in the US) and imposed on grounds of the company’s lack of internal control.

What is interesting in this case is that Siemens rapidly drew lessons from these convictions: it introduced a comprehensive anti-corruption and integrity policy, recruited a number of renowned international specialists to serve as investigators or advisers for its new investigation unit, and as internal compliance officers.

Apparently, it hired over 500 full-time compliance officers (up from just 86 in 2006). It also established compliance hotlines and an external ombudsman accessible worldwide and online.

It created a web portal for employees to evaluate risks in their client and supplier interactions.

Further initiatives included the launch of a comprehensive training and education programme for its staff on anti-corruption issues specifically.

Siemens is not an isolated case.

Nowadays an ever increasing number of businesses are introducing internal integrity and anti-corruption programmes, to avoid situations where the lack of internal control could lead potentially to the prosecution of the entity for corruption and other criminal offences committed by the entity’s staff or representatives.

In this connection, the International Chamber of Commerce has elaborated a number of guidance documents for the business community on anti-corruption compliance programmes, specific guidelines on gifts and hospitality, standard anti-corruption clauses to be included in business contracts, advice on whistleblowing (so that employees will feel comfortable reporting concerns), and on the management of relationships with third parties (suppliers, representatives etc.)

This concept of legal risk has also become an integral part of the risk-based management of entities, besides the commercial, financial, reputational and other risks.

The international norm ISO 31000 of 2009 now reflects such a global approach. 

Ladies and gentlemen,

I should now like to turn to the Civil Law Convention on Corruption of 1999.

This convention deals with subjects which were fairly new at the time and had seldom been considered in the context of anti-corruption policies.

However, they can contribute significantly to instilling a culture of integrity, social responsibility and control, and clean business practice.

I will detail three series of standards enshrined in the convention:  

a) Countries are required to put in place mechanisms that allow persons to obtain full compensation for damages resulting from an act of corruption.

This compensation may cover material damage of course, but also loss of profit or non-pecuniary loss.

The most frequent example of the latter is the loss of reputation of the competitor which may be compensated financially or by the publication of a judgement at the cost of the defendant.

In principle, such internal law mechanisms would provide for the right to bring a civil action in corruption cases.

The judge, in the individual case, will decide whether or not the conditions for compensation are fulfilled.

It is still a widespread belief that bribery, because it involves secret consensual dealings, is an offence which generates no victim.

However, this is a misconception.

Let us imagine the commercial and reputational damage that a car manufacturer would suffer when one of its employees is bribed by a supplier seeking to sell sub-standard components.

The damage could even go beyond those affecting the manufacturer and have an impact on third parties; for instance, the customers involved in car accidents caused by defective components.

b) The Civil Law Convention also requires the introduction of legislation that would allow the authorities to challenge the validity of contracts or contractual clauses which contain an element of corruption.

In the same vein, a party to a contract should be granted in law the faculty to challenge a contract before a court if its signature is the result of a corrupt act.

Of course, it will always be for the judge to assess the individual situation and the consequences of the cancellation of a contract, as it may have significant consequences for “innocent” third persons, especially employees.

Moreover, the Convention limits the right to file a challenge to the parties of a contract.

Countries can go beyond this standard in their national legislation by opening such a possibility to third persons too.

However, in any event, persons who have a legitimate interest would normally be entitled to bring an action for compensation for damage resulting from an act of corruption.

c) Even more importantly, the Convention was one of the first international initiatives to require that employees who disclose a corrupt act – so-called whistleblowers – be given protection against retaliation from the employer or colleagues.

This protection would entail - at a minimum - civil compensation in cases where the whistleblower has suffered negative consequences for having reported a concern to the top management or outside the employing body.

Ideally though, the protection should take the form of measures preventing such negative consequences from occurring.

Practice in recent years has shown that, unfortunately, private entities - but public institutions too - have a tendency to sanction those who work for them when they speak up and try to alert criminal justice bodies or the media about possible crimes and other matters of public concern deriving from the entity’s internal activity and practices.

Retaliation can take many forms including psychological harassment, demotion and dismissal by the employer.

The subject is of such high relevance that the Council of Europe adopted, in 2014, a detailed set of standards to address this phenomenon, by means of Recommendation CM/Rec(2014)7 on the protection of whistleblowers.

This recommendation calls on member States to have in place a normative, institutional and judicial framework, firstly to protect whistleblowers from reprisals and secondly to set up reporting channels for them to appropriate public regulatory bodies.

As we are concerned with individuals who in the context of their work-based relationship discover wrong-doing, providing them with adequate protection from their employer against reprisals for whistleblowing, necessarily implies private law protection, particularly with changes to employment law whether or not they work in the private or public sectors – although in some countries certain persons’ employment will be covered by public law.

Clearly this has an impact on substantive employment law, particularly in relation to contracts and protection against dismissal, suspension, demotion, loss of promotion opportunities, punitive transfers and reductions in or deductions of wages, harassment or other punitive or discriminatory treatment.

It also has an impact on civil, criminal and administrative proceedings arising out of the whistleblowing, particularly in the area of:

• Evidential presumptions - where action is taken against an employer immediately following a whistleblowing incident, the presumption may be on the employer to show that its action was not motivated by the whistleblowing,
• Compensation levels - possibly reduced where the whistleblower has gone public without first making use of internal reporting mechanisms, and
• Legal procedure - for example in providing interim relief to a whistleblower who has been dismissed pending the outcome of the civil proceedings, and ensuring respect for his or her confidentiality whilst maintaining fair trial guarantees.

Setting up reporting channels for whistleblowers will be largely in the public law domain, except for requirements on employers to set up internal reporting procedures which will of course impact on the private law employment relationship.

Apart from this, and other than public media disclosures, the requirements to provide a reporting channel to public regulatory bodies imply adjustments to the public law responsibilities of these bodies, particularly in relation to their duty to investigate the reports and act upon their findings – and so provide a public law follow-up to the private law rights and obligations that have been introduced to protect the whistleblower.

More generally, in relation to the importance of private law as a foundation for implementation of the recommendation, the text provides a caveat to the effect that where employment relations are regulated by collective labour agreements, member States may give effect to the recommendation in the framework of such agreements.

Ladies and gentlemen,

Let me now conclude with a few observations.

Overall, we are still at an early stage of anti-corruption policies.

Let us just remember that some 15 years ago, corruption-related expenses were still too often tax deductible.

Such an indirect legitimation of bribes, kickbacks and other dubious benefits has clearly sent the wrong signal to the private sector for many years now.

International anti-corruption standards and domestic anti-corruption policies have paved the way over recent years for many new developments concerning the prevention of corruption.

This is particularly true in the public sector, governed by general administrative law, civil service law, constitutional law etc.

By contrast, preventive measures for the private sector have often been neglected in those instruments and the development of internal anti-corruption programmes and measures was often the result of a reaction to legal and other risks.

Corruption is seen by many all over the world as one of the greatest threats to citizens.  We therefore, need to bring together all legal tools, from both public and private law. We look forward to close co-operation with UNIDROIT in future.