Anti-corruption

Despite the fact that corruption still constitutes a major impediment to harnessing the full potential of the commodity sector,¹⁸² most of the rules addressing issues of

173Vöneky and Wolfrum (2016), paras. 1, 44.

174Dam-de Jong (2010), p. 44.

175Cf. Dam-de Jong (2010), p. 44.

176Dam-de Jong (2010), p. 48.

177Dam-de Jong (2010), p. 48.

178Dam-de Jong (2010), p. 46.

179Dam-de Jong (2010), p. 48, n 90.

180Dam-de Jong (2010), p. 48, n 90.

181Dam-de Jong (2010), p. 44.

182Extensively, including a typology of corruption risks OECD (2016b). With respect to e.g. the livestock sector in the Horn of Africa, cf. Desta and Hirsch (2012), pp. 131, 133. On the types of both demand- and supply-side corruption in the mining sector, Marshall (2001). On corruption in 4.2 The Contribution of TCL to a‘Balanced’Commodity Sector 97

corruption are‘indirect’. Corruption constitutes the‘abuse of public or private office for personal gain.’¹⁸³

Corrupt practices may occur at every stage of the commodity value chain and are particularly proliferate when it comes to the award of mineral rights as well as the regulation of commodity operations.¹⁸⁴ Frequently, corruption in the commodity sector occurs due to wide discretionary powers and inadequate governance mecha-nisms, which result from the high politicisation of the sector and lead to clientelism and favouritism.¹⁸⁵It may also be caused by gaps in the anti-corruption legal and judicial system.¹⁸⁶Large-scale corruption has been observed particularly also in the

‘procurement of goods and services, commodity trading, revenue management through natural resource funds, and public spending.’¹⁸⁷ Local actors as well as transnational corporations may‘act indistinctly as instigators or beneficiaries of the corruptive behaviour.’¹⁸⁸ State-owned enterprises (SOEs) seem to be particularly prone to corruption when it comes to awarding of rights, procurement, trading, and social expenditures.¹⁸⁹This risk arises in particular, where SOEs function as both administrators and regulators of the commodity sector.¹⁹⁰Typical offences include

bribery of foreign officials, embezzlement, misappropriation and diversion of public funds, abuse of office, trading in influence, favouritism and extortion, bribery of domestic officials and facilitation payments.¹⁹¹

Bribery, trading in influence and collusion are used for instance in order to manipulate a state’s decision to extract. These corrupt practices may lead to envi-ronmental law or HR being ignored in favour of allowing commodity extraction.

They may occur within administrative, e.g. licensing procedures, on national as well as local levels or be applied to influence policies and legislation in the corporate interest or interests of the private elite. Oftentimes, the practices involve high-level

commodity trading Chêne (2016), who describes the commodity trading sector as‘notoriously opaque and poorly regulated, with low levels of transparency and accountability’, p. 4. Cf. also Article 62(1) CAC, which recognises the negative effects of corruption on SD.

183OECD (2016b), p. 13 referring to OECD (2008).

184OECD (2016b), p. 9.

185OECD (2016b), p. 18.

186OECD (2016b), pp. 18–19.

187OECD (2016b), p. 9.

188Cf. also OECD (2016b), p. 10:‘At the local level, corruption may be favoured by a culture of clientelism and patronage as well as informal structured networks of local public officials, civil servants, community leaders and local business elite. It may also result from a hasty decentralisation process carried out without proper assessment of the capacity of the local economy and of the human, technical and administrative capabilities of subnational authorities to absorb new respon-sibilities and large inflows of resource revenues.’

189OECD (2016b), p. 9.

190OECD (2016b), p. 19.

191OECD (2016b), p. 9. Specific issues in commoditytradinginclude trade mispricing, money laundering and‘bad deals’, cf. Chêne (2016), pp. 5–7.

public officials, such as parliamentarians or ministers.¹⁹²What contributes signifi -cantly to such corruption, is a lack of information and resources on the part of the host state of the commodity activity, which is thus unable to adequately assess its own resource wealth.¹⁹³ As a consequence, states often rely on research reports, which have been elaborated and paid for by extractive companies.¹⁹⁴

Furthermore, specific risks occur with regard to social and environmental impact assessments, which are often subject to a highly politicised approval process and lack adequate participation of local communities. Also, ‘ambiguous, outdated or unenforced legislation on the protection of socio-environmental rights’may increase the risk of corruption during the decision to extract, particularly where‘unclear and opaque land tenure systems’, e.g. based on local customs, exist.¹⁹⁵

After somewhat ignoring corruption-related issues until the 1970s, the interna-tional community in the past three decades has adopted several legal instruments dealing specifically with corruption. Typically, international anti-corruption agree-ments contain provisions regarding the scope of offences they are applicable to, preventive measures, law enforcement issues, international cooperation, and imple-mentation mechanisms.¹⁹⁶ None of them, however, are directly aimed at tackling corruption in the commodity sector.

The arguably most prominent, almost universally ratified international agreement is the 2003 UN Convention Against Corruption (CAC).¹⁹⁷The CAC in its preamble explicitly recognises that corruption constitutes ‘no longer a local matter but a transnational phenomenon that affects all societies and economies, making interna-tional cooperation to prevent and control it essential’. According to Article 5 (1) CAC,

[e]ach State Party shall, in accordance with the fundamental principles of its legal system, develop and implement or maintain effective, coordinated anti-corruption policies that promote the participation of society and reflect the principles of the rule of law, proper management of public affairs and public property, integrity, transparency and accountability.

192OECD (2016b), p. 32.

193OECD (2016b), p. 33 reports from countries, in which the competent department is making hydrocarbon reserve calculations manually and documents them in an Excel sheet. On these

‘information asymmetries’, cf. already Sect.2.1.2above.

194OECD (2016b), p. 33.

195OECD (2016b), p. 34. Thisfinding further underlines the benefit of TCL as a transnational framework promoting corresponding standards for the protection of socio-environmental rights.

196Abbott (2009), paras. 23–29.

197UN GA (2003) Resolution 58/4 of 31 October 2003, https://www.unodc.org/documents/

brussels/UN_Convention_Against_Corruption.pdf(last accessed 14 May 2021). The CAC is said to complement the 2000 United Nations Convention against Transnational Organized Crime, Annan K, Foreword to the UN CAC, https://www.unodc.org/documents/brussels/UN_Conven tion_Against_Corruption.pdf, p. iii. Transnational Organized Crime, UN GA (2000) Resolution 55/25 of 15 November 2000, https://www.unodc.org/documents/middleeastandnorthafrica/

organised-crime/UNITED_NATIONS_CONVENTION_AGAINST_TRANSNATIONAL_

ORGANIZED_CRIME_AND_THE_PROTOCOLS_THERETO.pdf(last accessed 14 May 2021).

4.2 The Contribution of TCL to a‘Balanced’Commodity Sector 99

Article 5(2) CAC mandates states to takepreventivemeasures for this purpose, while Article 5(3) CAC postulates that states ‘shall endeavour’ to evaluate the adequacy of their legal instruments and administrative measures on a regular basis.

According to Article 5(4) CAC states are held to collaborate with one another as well as international organisations in their fight against corruption. Article 6 CAC requires states to establish and maintain independent anti-corruption bodies, which ensure the implementation of policies pursuant to Article 5 CAC. According to Article 7(1)(a) CAC civil servants as well as non-elected public officials shall be recruited, hired and promoted‘based on principles of efficiency, transparency and objective criteria such as merit, equity and aptitude.’ Furthermore, states shall provide them with adequate remuneration and equitable pay and offer training programmes, which promote awareness of the risks of corruption, according to Article 7(1) (c) and (d) CAC respectively. Article 8(3) CAC specifically refers to the International Code of Conduct for Public Officials, which may provide guidance for the elaboration of further national standards.

According to Article 9(1) CAC states shall ‘establish appropriate systems of procurement, based on transparency, competition and objective criteria’in order to effectively prevent corruption. These systems shall address, i.a., the public distribu-tion of informadistribu-tion, condidistribu-tions for participadistribu-tion in a tender, ‘objective and predetermined criteria for public procurement decisions’, an effective mechanism of domestic review, as well as measures addressing the behaviour of personnel, such as screening procedures and trainings. Article 12 CAC addresses prevention of corruption with regard to the private sector and i.a. sets forth that states ‘shall provide effective, proportionate and dissuasive civil, administrative or criminal penalties’ for violations of accounting and auditing standards. Article 12(2) CAC suggests specific measures, which states may take to achieve these ends, including the promotion of cooperation between law enforcement authorities and private actors, business standards and codes of conduct, transparency between private entities particularly regarding the‘identity of legal and natural persons involved in the establishment and management of corporate entities’, the prevention of misuse of procedural rules with regard to subsidies and licences, as well as of conflicts of interest, i.a. by restricting the professional activities of former public officials, and ensuring sufficient auditing of private entities.¹⁹⁸

According to Article 13 CAC, states shall‘promote the active participation of individuals and groups outside the public sector’, particularly of NGOs and local communities, i.a. by ensuring effective access to information by the public, as well as‘[r]especting, promoting and protecting the freedom to seek, receive, publish and disseminate information concerning corruption.’Article 14 sets forth specific mea-sures to prevent money laundering.¹⁹⁹ Bribery of national and foreign public

198These measures naturally go hand in hand with the standards and guidelines designed for corporations, some of them specifically for the commodity sector, which will be discussed in more detail in Sect.4.2.2.2below.

199For more specific guidance on how to tackle the issue of money laundering, cf. FATF (2012–2018).

officials, embezzlement, trading in influence, and other abuses shall all be established as criminal offences, according to Articles 15–25 CAC. Article 26 CAC postulates that the liability of legal persons for the participation in these offences be established. According to Article 40 CAC bank secrecy laws must not hinder criminal investigations into potential corruption offences. Articles 43–50 CAC set forth several forms of international cooperation in order to tackle the increasingly transnational phenomenon of corruption, including extraditions, trans-fer of sentenced persons, mutual legal assistance, law enforcement cooperation and joint investigations.

Further regulatory instruments in thefight against corruption include the Interna-tional Code of Conduct for Public Officials, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions,²⁰⁰as well as, on the regional level, respective anti-corruption Conventions in the Americas, Africa as well as Europe.²⁰¹

The CoE Civil Law Convention on Corruption (ECLC) has been described as an

‘innovative’instrument in thefight against corruption in that it,²⁰²according to its Article 1, mandates every state party to

provide in its internal law for effective remedies for persons who have suffered damage as a result of acts of corruption, to enable them to defend their rights and interests, including the possibility of obtaining compensation for damage.

Article 3(1) ECLC further spells out that states shall adopt legislation, which grants all persons that have suffered damage from corruption‘the right to initiate an action in order to obtain full compensation for such damage.’According to Article 4(1) ECLC domestic legislation shall generally entitle victims of corruption to compensation if certain criteria are fulfilled. Article 5 ECLC requires states to establish respective procedures also in cases, in which the damage resulted from acts of corruption committed by public officials, thus directed against the state itself.

Article 13 ECLC mandates states to ‘co-operate effectively in matters relating to civil proceedings in cases of corruption’.

200Preceding recommendations: Recommendation of the Council on Bribery in International Business Transactions, 27 May 1994, https://www.oecd.org/daf/anti-bribery/anti-briberyconvention/1952622.pdf; Recommendation of the Council on the Tax Deductibility of Bribes to Foreign Public Officials, 11 April 1996, http://www.oecd.org/officialdocuments/

publicdisplaydocumentpdf/?doclanguage¼en&cote¼c(96)27/final; Revised Recommendation of the Council on Combating Bribery in International Business Transactions, 23 May 1997,http://

www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote¼C(97)123/FINAL&

docLanguage¼En(all last accessed 14 May 2021); Abbott (2009), para. 7.

2011996 Inter-American Convention against Corruption; 2003 African Union Convention on Preventing and Combating Corruption; CoE Criminal Law Convention on Corruption; CoE Civil Law Convention on Corruption; 1997 Convention on the Fight against Corruption Involving Officials of the European Communities or Officials of Member States.

202Abbott (2009), para. 12.

4.2 The Contribution of TCL to a‘Balanced’Commodity Sector 101