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Are Polish companies exporting corruption?

Transparency International reports that Poland is not enforcing the OECD Anti-Bribery Convention.

Few people in Poland have yet to perceive the broader implications of corruption as a barrier to economic growth. Poles typically perceive the problem of corruption within a local context, as a failing of the administration in their own region, and often confuse it with nepotism and conflicts of interest, which are related but distinct problems.

Hardly anyone in Poland is aware that the country is a signatory to the OECD’s 1997 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

The OECD observed long ago that the incidence of corruption rises when an “outside” investor attempts to enter a national market, obtain a lucrative contract, or reinforce its position. This problem frequently affects developing countries, with deficient administration or threatened with economic crisis—countries where proper oversight mechanisms familiar in established democracies with an active civil society have not taken root.

In order to understand the scale of the problem, it is worth remembering that until fairly recently there were regulations in place in Western Europe allowing companies to write off expenditures incurred to obtain favourable treatment from decision-makers in countries where they were planning or carrying out investments, as an ordinary cost of doing business.

The OECD Convention imposes on signatories an obligation to introduce legislation providing for criminal sanctions for corruption of foreign public officials. The relevant amendments were introduced into the Penal Code in Poland in 2003, making such actions an offence punishable by up to 12 years’ imprisonment.

As every lawyer knows, however, the letter of the law is one thing, but its application can be something else entirely.

This is depicted by the recently published report by Transparency International entitled Exporting Corruption? Country Enforcement of the OECD Anti-Bribery Convention Progress Report 2012, in which the organisation studied the enforcement of the convention in 37 of its 39 signatory states, together representing two-thirds of the value of global exports.

The data for the report were collected by local branches of Transparency International or by volunteers working with the NGO. For the second year in a row, lawyers from Wardyński & Partners participated in preparing this year’s report by providing information on enforcement of the convention in Poland.

The data show that Poland is one of the countries, alongside others such as the Czech Republic, Ireland and Israel, in which the convention is practically not enforced at all (or, more precisely, in which the relevant national regulations are not enforced).

But it is hard to believe that Polish exporters are not affected by this problem. It appears more likely that failure to enforce the convention results from the limited flow of information about the activity of Polish companies abroad. It might be added in this respect that during a time of economic crisis, slogans like “unleashing growth” and “supporting exports” sound much more palatable than calls to monitor exports and demand transparency in the operations of exporters. Even in the United States, which has been relatively successful in enforcing the convention, critics have complained recently that the regulations are too strict and as a result the US may lose the battle for investments on emerging markets with countries that are effectively not tied down by these rules.

While the achievements of other countries in fighting corruption may be linked to their affluence, the strength of their state administration and their high profile on global markets, the Transparency International report nonetheless shows that the phenomenon of corruption as such is present everywhere. Sooner or later, it is bound to have an impact on Polish companies.

On one hand, Poland must be prepared to face down such problems, by learning to uncover these offences and prosecute the perpetrators, and on the other hand it must arm Polish companies to avoid situations on difficult foreign markets presenting unnecessary risks.

Janusz Tomczak, Business Crime Practice, Wardyński & Partners