Criminalising corruption in the private sector

The second string in the EU’s criminal law strategy against corruption has been to criminalise corruption in the private sector. In this context, a post-Maastricht Joint Action adopted in 1998²⁵ was replaced in 2003 by a more clearly legally binding Framework Decision.²⁶ While the Framework Deci-sion is still a third-pillar instrument,²⁷ its adoption was justified for a num-ber of reasons : the need to improve judicial cooperation after abolition of

22 COM (2008) 77 final, 14 February 2008.

23 Ibid., p. 4.

24 See part 2.B below on corruption in the private sector.

25 Joint Action 98/742/JHA on corruption in the private sector, OJ L 358, 31 December 1998, p. 2.

26 Council Framework Decision 2003/568/JHA on combating corruption in the private sector, OJ L 192, 31 July 2003, p. 54.

27 Adopted under Articles 29, 31(1)(e) and 34(2)(b) TEU.

dual jeopardy for corruption in the European Arrest Warrant Framework Decision²⁸ was coupled with the acknowledgement that “along with glo-balisation, recent years have brought an increase in cross-border trade in goods and services. Any corruption in the private sector within a Member State is thus not just a domestic problem but also a transnational problem, most effectively tackled by means of a European Union joint action”.²⁹ In this light, criminalising corruption (in both the public and private sectors) is considered necessary in order to protect a variety of interests ranging from the market to economic development and the rule of law : accord-ing to the Preamble to the Framework Decision, “Member States attach particular importance to combating corruption in both the public and the private sector, in the belief that in both those sectors it poses a threat to a law-abiding society as well as distorting competition in relation to the purchase of goods or commercial services and impeding sound economic development.”³⁰

The Framework Decision criminalises both active and passive corrup-tion in the private sector. Article 2 calls upon Member States to criminalise the following intentional acts, if committed in the course of business activi-ties : “promising, offering or giving, directly or through an intermediary, to a person who in any capacity directs or works for a private sector entity, an undue advantage of any kind, for that person or for a third party, in order that that person should perform or refrain from performing any act, in breach of that person’s duties ; and directly or through an intermediary, requesting or receiving an undue advantage of any kind, or accepting the promise of such an advantage, for oneself or for a third party, while in any capacity directing or working for a private sector entity, in order to perform or refrain from performing any act, in breach of one’s duties”.³¹

“Breach of duty” is to be construed in accordance with national law, but should cover as a minimum “any disloyal behaviour constituting a breach of a statutory duty, or, as the case may be, a breach of professional regula-tions or instrucregula-tions, which apply within the business of a person who in any capacity directs or works for a private sector entity”.³² Criminalisation

28 Preamble, recital 5, see below.

29 Preamble, recital 1.

30 Recital 9.

31 Emphasis added.

32 Article 1.

applies to business activities in both profit and non-profit entities³³ and also extends to instigating, aiding and abetting.³⁴ The Framework Decision also includes standard provisions on the liability of legal persons³⁵ and on jurisdiction.³⁶

The Framework Decision has introduced a broad criminalisation of corruption in the private sector.³⁷ As in the public sector, promising or requesting (or accepting the promise of) an undue advantage is enough to constitute criminal liability : no further action is required. The only limitation is that the offence must be carried out in the course of business activities. Further limitations on the harmonisation of criminal liability (and harmonisation in this field) may stem from the fact that owing to the broad criminalisation adopted by the Framework Decision (which as a third-pillar measure was adopted unanimously), the latter allows Member States to declare that they will limit its scope to conduct which involves, or could involve, a distortion of competition in relation to the purchase of goods or commercial services.³⁸ A further obstacle to harmonisation may be the fact that the definition of the concept of “breach of duty” is left to the national law of Member States. The definition of what constitutes disloyal behaviour will be crucial in this context. However, it is noteworthy that EU legislation itself sets out quite extensive minimum criteria for defin-ing breach of duty and extends it to breach of professional regulations or instructions. This is indeed a very broad definition, since it criminalises the mere breach of professional guidelines.³⁹ The limitations on liability included in the definition of corruption in the private sector may not be adequate to stop the risk of over-criminalisation as a consequence of trans-planting the concept of breach of duty to the private sector.

33 Article 2(2).

34 Article 3.

35 Articles 4 and 5.

36 Article 7.

37 Convictions for corruption may also involve the exclusion of applicants from making tenders under EU public procurement law and exclusion under the Financial Regula-tion from public contracts involving EU funds. See P. Szarek-Mason, The European Union’s Fight Against Corruption. The Evolving Policy towards Member States and Candi- date Countries, Cambridge University Press, 2010, pp. 94-97.

38 Article 2(3). According to the Commission’s report on the implementation of the Framework Decision, Germany, Italy, Poland and Austria have lodged declarations under Article 2(3) (COM (2007) 328 final, 18 June 2007, p. 7).

39 On this point, see M. Kaiafa-Gbandi, “The penal repression of corruption in the public and private sector” (in Greek), in Poinika Chronika, 2010, pp. 3 et seq.

However, perhaps the greatest obstacle to the harmonisation of an EU-wide criminal law framework against corruption in the private sec-tor is not solely the complexity and breadth of the legislation, but rather the combination of these factors with the lack of political will in Member States to implement fully the Framework Decision. Because it was adopted under the third pillar, the implementation of the Framework Decision de-pends primarily on Member States ; at the time of writing the Commission still lacked the power to fully monitor the implementation of measures ad-opted under the old third pillar and to institute infringement proceedings in the Court of Justice. According to the 2007 Commission Implementa-tion Report on the Framework Decision,⁴⁰ Article 2 (on criminalisation) proved highly problematic for most of the 20 Member States which sub-mitted reports to the Commission : the Commission noted only two “full”

transpositions of the provision. This demonstrates that translating broad and complex definitions of corruption into the domestic legal systems of Member States has proven far from an easy task. As we shall see, the value of legally binding EU anti-corruption standards in this field thus far re-sides not so much in their implementation in Member States as in creating an EU benchmark for defining corruption which has been used by the EU in external relations, in particular when negotiating international stan-dards in this field.