On 31 August, the IBA held a live webcast with the Organisation for Economic Cooperation and Development (OECD) Director for Legal Affairs, Nicola Bonucci. Topics included the changing identity of the OECD since its inception 50 years ago, finance and regulatory reform, corporate governance and anti-corruption initiatives. Read the transcript below, or watch the webcast here.
The OECD's mission is ‘to promote policies that will improve the economic and social well-being of people around the world’. In the midst of the international financial crisis which has precipitated widespread austerity measures, the OECD’s role has perhaps never been more significant.
The interview was conducted by award-winning former CNN presenter Todd Benjamin.
Todd Benjamin (Interviewer - IV): I'm Todd Benjamin, and welcome to this live broadcast on behalf of the IBA from Paris. We're at the OECD, the Organisation for Economic Cooperation & Development headquarters; and I'm joined by Nicola Bonucci. He is the Director for Legal Affairs. It's great to have him here. And I want to encourage you throughout the hour to submit your questions, because we want to get to as many questions as we can in this hour that we have with Nicola.
And for those of you who aren't familiar with the OECD, of course, its main mission is to improve the economic and social wellbeing of people around the world; and of course, there is a shared commitment to market economies backed by democratic institutions.
First of all, I want to ask you, because you are the Director of Legal Affairs, how does that really tie into economic policy?
Nicola Bonucci (NB): Hi, Todd; and welcome, everybody. Well, yes, I'm a lawyer in an economist organisation, an economic organisation, but I think the answer is twofold. First, law and economics are, in fact very closely linked, and more and more, there is a use of legal instruments, even to start or to instigate economic policies. Let me give you a couple of examples.
One area in which we are actively involved is anti-bribery. The OECD negotiated an anti-bribery convention in 1997, which is the first and unique supply side convention, and we are very heavily involved in that.
The secondary aim in which we are heavily involved nowadays is exchange of information, tax matters. You have treaties; you have exchange of information instruments. Again, there is a strong legal component, even though, clearly, at the end of the day, the outcome is an economic outcome.
IV Well, because of the OECD's work which is very multi-disciplinarian in its approach, it seems to suggest this very porous boundary between certainly the economic side and the legal side. So really where does your work begin, and where does it end?
NB The boundaries are not clear; I agree with you. They are not clear and I'm not sure we really would gain by making them more clear. I think what is important is that when you are a lawyer in an economic organisation, you should give your analysis, and you should apply your legal techniques to assess the situation. The policy decision is not clearly your competence. You don't have the skills for that. But what you can do is apply your legal techniques, as I said, to say, okay, if you want to achieve that, those are the possible ways to do it.
IV But what's interesting is you work in an organisation which can be extremely political, to say the least, yet you're doing something that's based on facts. Aren't there conflicts at times?
NB I wouldn't call them conflicts. There are ambiguities, and one of the big challenges of a legal adviser in an international organisation, in particular international economic organisation, is where your legal role starts and finishes and where your policy role starts. But as I said, I think what is important is that we shouldn’t be naïve. Clearly, there are areas in which my legal role tends to be almost a policymaker role, but what is important is to first assess all the possible options, be objective and transparent on that, and also to at the end of the day give the real decision-making person, which can be either the Secretary General or the member countries, the possibility to choose and to take an evidence-based decision.
IV Are you ever compromised because of those political considerations?
NB What kind of value do you give to the word compromise? If you're asking me are you taking into account the fact that you can provide an impeccable legal opinion, but one you know in advance will not fly, and henceforth you will tend to privilege a less impeccable opinion but one which has the advantage to reconsider [?] a different position, yes, I've done that in the past. I've never compromised though on ethical values, integrity and objectivity.
IV Here's something I find interesting, because you first joined the OECD in 1993. Before that, you were with the UN's Food & Agricultural Organisation, so you have never worked in the private sector. You make US$125,000 a year. It's tax free, so that's plenty to live on, yet if you were in private practice, given your expertise in areas like corruption and bribery, you could be making easily US$1 million a year. What is it about this type of work, or public service work, that you find so interesting; and why is it that you're still committed to it?
NB I think that's an excellent question. I think there are a number of reasons, but let me give you two, one which is the politically correct reason and one which is a maybe less politically correct reason. The politically correct reason is because I love public service. I believe that this is the only way, more and more, to make the agenda of the world moving. I mean, we can see every day that everything is interconnected. Everybody is interconnected. Every country is interconnected. And this idea that you could solve the solution on your own at your local level doesn't work. This is my main motivation.
There could be, I accept also, some part of maybe ego. It's very exciting to be there and to be, you know, with the key decision-maker people trying to move an international agenda. It can be very frustrating also though, but it is very exciting.
IV You mention the word frustration. Is your biggest frustration working in a multi-country approach?
NB When you work in an international organisation, you have two parameters which are extremely different from working in the private sector; the speed of the decision making and the result of the decision making. The speed of the decision making is naturally, necessarily longer, because I have at the end of the day almost 35 bosses. I have the Secretary General, but also each and every member country. And most of the decisions in the OECD are taken by consensus, and to reach consensus you need more time.
The second point is indeed the quality of the decision making, which is sometimes the product of the consensus. And you can go back to my original idea; you can come with something which you know intimately well from a legal point of view is the ideal solution, but because of political reality, you will adjust to the limit of what is achievable.
IV You are working in a global reality. We have globalisation; a lot needs to be decided among many countries, yet oftentimes, there are compromises which aren't effective, because you have to compromise even with small countries who want a voice. So is this really an effective way to have decisions made?
NB This is an international debate in international law. It's very interesting to note that the organisation, the OECD, has been always working on the basis of consensus, even at the time of the OECE, the predecessor organisation. And in my view, it's a bit of how much you front load and how much you back load. I think the consensus is a lot of front loading, but then once you get a real consensus, you achieve a much greater degree of empowerment and acceptance of the consensus. If you go through more from a mechanism of decision making, or even unilateral decision, yes, you can impose a unilateral decision, but how effective will it be? I'm not sure that consensus is less effective than a qualified majority, for example.
IV We've been talking around it, but the bottom line is that you have peer reviews that are undertaken by the OECD. Your Secretary General, Angel Gurría, has described them as ‘the genetic code of the organisation’. Could you explain exactly, without getting into too much detail, how this peer review process works; is it effective, and in which ways has it been most effective?
NB The peer review processes are not done by the OECD per se, they are done by the member countries, and that's why it's peer. So how it happens is very simple. You have a policy which is assessed by your peers – all the other member countries. And the other member countries will decide that, for example, on this particular part of the policy they agree with you, and on this other part of the policy they have strong reservations, or they have suggestions.
What I think is great in the peer review process is that it is a way to ensure a coordinated approach, but which is done without not… it's the power of conviction and not the power of imposition.
Now, how effective it is. The effectiveness depends on two parameters: first, on the level of acceptance of the conclusions by the country which is assessed and we don't impose solutions, but we recommend, our members recommend.
The second is it's based very much on how much your arguments are based, and what is important in the peer review is that they are based on experiences of other countries, on the fact that what you are trying today was tried before and didn't work, and those are the reasons. So in my view, if you look at an area like anti-bribery, the peer review process has been extremely effective to a level which to my surprise is even greater than I would have hoped.
There are other areas in which maybe it's less so, but at the end of the day, what is important is the fact that you have a process in which you are tested in front of your peers, and it is the judgment, the collective judgment of your peers.
IV Let me give you a quote from your Secretary General again, Mr. Gurría, and again, it's a bit long, but I think it's a very important quote. It says, ‘OECD evidence-based analysis and recommendations serve as a way to support and leverage policy changes and rule making at home, so in a sense, a support group. But formulating and adopting the best possible policies and international instruments is not enough, as we have learnt from this crisis’, a very important point. One of the major challenges for international standard setting is ensuring compliance. It's one thing to formulate policy, it's one thing to do analysis; it's another thing to get compliance. Given your role, and since a lot of your recommendations are not legally binding, how effective can you really be as an organisation?
NB The question of the legally binding nature of the OECD is not unique to the OECD, it is a question which is faced by all the other international organisations. Two points on that, Todd.
First, it is not strictly true that not all our rules are really legally binding, as I said. The OECD Anti-Bribery Convention is a legally binding instrument. We have the Codes of Liberalisation which are very important instruments in terms of international investment which are also legally binding. But you are right; most of our legal notes are not legally binding. They are what we call soft law.
Now the law can be soft, but the monitoring and the implementation of the recommendations is not soft, and we go back to what I was saying. In the peer review process, the monitoring, the follow-up, ensures a level of understanding and acceptance and implementation which is probably much higher than the usual average in other international organisations.
IV But when you say it's legally binding, is that watertight; or again, is that open to interpretation?
NB No, no; it is legally binding.
IV What does that exactly mean?
NB Naturally, what it means, it's no more than what it says, which is the country is legally bound. On the other hand, most of our instruments do not have a settlement of dispute mechanism. Most of international law does not have a settlement of dispute mechanism. But the advantage of the OECD is that we can circumvent this shortcoming by the peer review, the peer pressure that we were mentioning before.
IV A lot has changed since you joined the OECD in 1993. You've seen several crises since you joined, be it the Swedish crisis, the Asian crisis in 1997/1998, the Russian default crisis, the dot.com boom and bust; and of course, the severest financial crisis that we're still living through now. What have you learned through all these crises, and what do you think as an organisation that you've learned; and as a result, how you've evolved?
NB I think there have been two kinds of challenges. Yes, you are right. The OECD I joined in 1993 is radically different from the OECD of 2011, and we have expanded considerably. In 15 years, there have been ten additional members out of 34, so percentage-wise, it is a huge enlargement. We are much more diverse than we were, and I think one of the lessons learned by the crisis is that you need to encapsulate more diverse position in order to have a more diverse analysis of what the situation is.
I think what we have learned first and foremost is that no crisis is identical to the previous one. I don't remember if it was Confucius who said basically experience is a lamp that we have in our back, and it is true. We can see what the previous mistakes were, but not necessarily anticipate what will be the future. And the forms of the crisis have changed.
What we also have seen and learnt is that the economic balance has changed. When I joined the organisation in 1993, OECD member countries were representing more than 80 per cent of the world trade; they are now representing barely more than 60 per cent of the world trade; and if we look at the forecasts, 50 per cent in less than ten years' time. So the world has become much more diverse than before, and the organisation is trying to meet this new challenge.
IV But looking at it objectively from the outside, you look at the OECD, and you look at some of its members, key members like the United States, huge debt crisis. Other countries, you know, Portugal, Ireland, Greece, Italy, Spain, right at the heart of the crisis that we're having here in Europe. Given those crises in those countries, given that you give this analysis, how much credibility really does the OECD have when you have countries that have these sorts of problems?
NB I think, Todd, this is a very valid question, but let's not focus too much on the snapshot picture. One has to look at economics in the medium/long term, and one has to look at, for example, the history of the organisation. When we had established the OECD, we had members like Spain and Portugal in the early '60s, I can tell you, they were everything but rich countries. We had Turkey, which until a few years ago could certainly not be characterised as a rich country. What the OECD has achieved is to bring up those countries, and the economic model of the OECD, the development model of the OECD, has proved to be successful for 50 years. We are now facing a real situation of crisis; I agree with you.
IV It hasn't proved to be successful.
NB Yes, it has proved to be successful for 50 years. Now the reason…
IV Excuse me. How can you say that given the crisis these countries are in?
NB Because you cannot discard what has been achieved in the 45 previous years. If you look at the level of development of Spain, as I said in 1965, and you compare it to now, even with the crisis you cannot say that Spain has not been successful, or you cannot say that Portugal has not been successful.
Now there is a specific situation of countries, and in particular for OECD countries in terms of debt margin, you are right. The question is, and the difficulty that we are facing today is that we are facing in fact two crises. One is the level of debt, and the other one is the level of growth. To solve those, it's very simple. You need to grow more. The difficulty is how to achieve that without jeopardising and creating further debt, and this is where it becomes very tricky for the OECD countries in particular to play with those two parameters.
But clearly, when you look at the macroeconomic situation and when you look at the social situation which is very important also in our countries, I think that one of the main challenges, I know it's not the one that people are focusing on though today but it is maybe the main challenge that we should be focusing on, is the level of unemployment. If you raise the level of employment in OECD countries, you start to generate growth, to generate wealth, to generate expenses, to boost consumption, and to reduce the level of debt.
Now the question is how do we get back to the level of employment that we had before the crisis, and this is a real difficulty, and to be honest, I'm not sure we have a magical recipe. If I had, I would not make $1 million, I would make $100 million, and I would leave the OECD and join the private sector.
IV Because you know the OECD has been called a think tank, a monitoring agency, a rich man's club, an unacademic university. Do you really think any of these descriptions encapsulate what the OECD is about?
NB I think they are parts of truths. I think it's the combination of all this. I see this. The OECD is a very unique and generous organisation, both in terms of composition, in terms of multi-disciplinarity, in terms of working methods, in terms of quality of staff. To be honest with you, I'm impressed by the quality of my colleagues.
IV How does it differ, let's say, from the IMF or from the European Commission?
NB Well, because we are much more multi-disciplinary. We are the only organisation which can talk about climate change with people who know a lot about the economics of climate change, people who know a lot about the energy aspect of climate change, and people who know a lot about the environment aspect of climate change, because we have all this expertise within the house.
IV A few moments ago, you were mentioning how the OECD has evolved over the years since you have joined in 1993 in terms of the number of countries and the trade that's represented, but when I look at the roster at the OECD, and I realise it came out of the ruins of World War II, there's still a heavy emphasis on Europe and under-representation of Asia and other continents in the OECD. If I look at the Middle East, there are currently no members except Israel. So it doesn't seem to me very representative of the way that the economies are moving where there's a lot of emphasis on big countries like China, Brazil, India, Indonesia, none of whom are members of the OECD.
NB No, I accept that. I accept that the OECD is… well, let's agree on something. The OECD will never be a universal organisation. I don't think it has a vocation to become universal. If we were to become universal, then we probably would become less useful and relevant. The question is how to get, indeed, a sample of countries which represents the variety of views and development model. And you are totally right, I think, and it is absolutely recognised by the Secretary General that we should become more open.
Now vis-à-vis the big countries, the big five countries that you mentioned, we have set up a programme which we call the Enhanced Engagement Programme in 2007. Those countries, yes, they are not members of the OECD at large, but they are more and more involved in OECD activities. A country like Brazil is a party to the Anti-Bribery Convention. It has adhered to the Guidelines for Multinational Enterprises. It has adhered to the corporate governance guidelines.
South Africa, ditto on the Anti-Bribery Convention. Even China and India are approaching us. China and India are asking for our expertise in environmental area, for example. We have done an environmental deal with China and we'll probably soon be doing something for India. China and India are very interested in our green growth projects. So I think short of membership, there is a very close relationship between India and China.
But I think what we should also focus our attention in the future as OECD is not so much what we call the emerging countries, which have indeed emerged in fact already, but the future emerging countries. You know, let's try to see where are the Chinas, Indias, Brazils of the next ten years. And this is one of the interesting parts of our work, and we have some tools for that. We have a body which is called the Development Centre, which includes a number of emerging markets like Vietnam, like Colombia, like some of the Caucasian countries which are very interesting in terms of economic growth and development.
IV Let me ask you another question about China, or a China-specific question. If it wanted to accede to the OECD, and it hasn't indicated it does at this point, what would your requirements be on China in terms of human rights and corporate governance?
NB Let me take the easiest part of the question first, the corporate governance. In terms of corporate governance, it's very clear we have the legal instruments which are not binding but very important, which are the principles of corporate governance, including on state-owned enterprises. And in fact, we have done a lot of work, and the idea is that, if I can summarise, all enterprises should be governed according to a similar model and same model, be they state owned or partially state owned. And I think this is an important part of what we call the OECD… a key of the OECD background.
In terms of human rights, it's a bit more tricky, because we don't have legal instruments in human rights. We have the Guidelines for Multinational Enterprises, which have been amended just recently to include a full part on human rights, but it is also true that we are not an organisation which has as its core functions human rights.
On the other hand, when you look at the OECD accession process, we will be looking in areas like protection of investment; are the foreign investors well treated, or are they treated equally than domestic investors? We will be looking at issues in the environment of transparency of stakeholder possibility to enter in public debates, public consultations. All those aspects are a partial response to your question on human rights.
IV Does the OECD need countries like China and India more than they need the OECD? They seem to be doing quite well without the OECD.
NB Well, this is more for China and India to answer to your question than for me. I think it would be a win-win situation. I think there is a lot of China… a lot of things that China and India can learn. And in fact, if they are approaching us and asking for our expertise, it's because they agree that they can learn from our experience.
And you know, they are successful in a number of respects, but they have also their own challenges. We have been talking about the level of corruption, for example, in those countries; about inequality in those countries; about, you know, how much is sustainable, how much is their model of growth sustainable. And I think they have elites [?] which are conscious of the fact that, yes, they are booming for the moment and we hope that this will stay, but they also have an equivalent [?] respect.
IV Well, we have some questions here, and thank you so much for submitting these questions, and keep them coming. In light of the Siemens case, how effective has the peer review process been with regard to Germany?
NB Well, first, if it had not been for the OECD, there were have been no Siemens case because there would have been no OECD Anti-Bribery Convention, and there would have been no changes in the German law. Let's not forget that before the OECD Anti-Bribery Convention in Germany, it was a crime to pay a bribe in Germany but not a crime to pay a bribe abroad. Not only was it not a crime to pay a bribe abroad, but the bribe was even tax deductible, legally tax deductible in Germany. Okay? All this was changed because of the OECD Anti-Bribery Convention.
So the Siemens case is the product of the Anti-Bribery Convention, and you can see a seachange both in the corporate culture, and in the judicial handling of those cases in Germany. Germany is now one of the most scrupulous enforcers of the OECD Anti-Bribery Convention, probably second, and one could even argue first vis-à-vis the United States if you compare the size of those two countries.
IV We have a question here from Egypt from Medhat el-Banna with the Ramzi law firm. What prevents countries like Egypt from signing the OECD Anti-Bribery Convention?
NB Legally speaking, nothing; and in fact, we have been approached by the Egyptian authorities as recently as a couple of months ago, and we will most probably organise a conference in Egypt on that subject in the beginning of 2012.
The question is that the OECD Anti-Bribery Convention is focused very much on… as I said, on the supply side; punishing the briber, the company, or the legal or physical person. So we need to invest in countries which have some sort of external market taxes, but it is true that Egypt, for example, has a number of successful companies which are maybe not global players, but certainly regional players. And Egypt is certainly a strong candidate for becoming party to the OECD Anti-Bribery Convention.
IV Well, staying in the MENA region just for a moment, because the OECD has been working there since 2005, in this context, what difference has the Arab Spring made in terms of your involvement there?
NB Well, it's clearly opened a number of other possibilities that were maybe less obvious before. We have been focusing our work initially on two aspects since 2005; investment and governance, public governance. I think one of the big areas which we need to invest and on which we have a lot of experience is the social environment situation. Those countries have patterns of developments which are completely different… they have a huge asset which is the young population, but it's a very massively under-used and under-utilised asset, because they don't work because there is no employment prospective.
So this is certainly an area in which a lot can be done in the near future. We are revamping, strengthening our MENA programme. We have been focusing a lot on short-term issues like corruption, for example. We are probably organising a similar conference to the one in Egypt in Tunisia in three weeks' time. But as I said, social and employment issues are very high on our agenda too.
IV Let's talk about Israel, because as I mentioned a few moments ago, it is the only country in the Middle East that is a member of…
NB For the moment it is.
IV …the OECD, for the moment, yet it occupies the Gaza Strip, and…
NB No, not any more; the Gaza Strip, no.
IV But it still occupies parts…
NB Certain parts, yes.
IV Excuse me. And some might say that stretches to the breaking point the definition of a democracy which is the requirement of an OECD member. How do you respond to this?
NB This was a question which was very much in the mind of our members. You will have to look at the question of democracy in a different perspective. But let me put it this way. Nobody disputes that within Israel there is a democratic regime. People are… and we have seen that less than two or three weeks ago with the massive demonstrations. There is also an Arab representation within the Knesset.
The question of the occupation of the territories is a real issue. I think we have addressed it not as such because we are not the UN; we don't pretend to be the UN, and I don't think we should suppose ourselves to be. But we have exercised, for example, our focus and our knowledge on something which was to my great surprise, something which was completely unnoticed until now, which is the statistics. When Israel produces statistics from Israel, what do we mean by Israel? And we have as part of the assessment process, agreed with the Israelis that we will have a specific study on exactly how the statistical data are produced in Israel. And this study was released and has been published, and it's the most accurate description of the situation.
Now is this a political statement? No. But it's a factual document which can be used by both camps in a sense to at least agree on exactly the magnitude of the problem. And this is what our strength is. We're very good at assessing what the problem is, and very often, people are disagreeing on issues without really agreeing on what the issue is about. We're very good at saying, okay, let's agree exactly… and that's what the Secretary General was saying about evidence base, let's agree exactly what the evidence is. Then there are different ways of reconciling the issues.
Now if I go back to Israel, there is a challenge for Israel. The Israeli authorities know it. I would say and I would argue that membership in the OECD prompts democratic debate. We issued as part of the assessment process a very important report on employment, the social situation in Israel, showing that there were discrepancies, there were discriminations, and that those should be addressed. I think by doing OECD reports from the Secretary General of Israel, we improved the state of democracy in Israel.
IV I want to ask you a few questions about Russia because you're discussing accession with them right now. Corruption is huge issue in Russia, as you're well aware. Are you satisfied that Russia has improved sufficiently in this area, or is this something that you're going to have to continue to work with them after accession?
NB No, we are not satisfied. I think even the Russian authorities would not say, I hope, that they have settled the issue. What is true though is that there have been very concrete steps which have been undertaken by Russia. They changed their legislation in order to meet our requirements.
IV But you have corrupt judges there.
NB But we do have a certain number of corrupt officials. I would not say necessarily judges, but corruption in the judiciary certainly is an issue there, as in other Eastern and Central European countries.
Now this is again the perfect area in which you need to work on a day to day basis by monitoring, pushing, keeping the pressure. We are going to Russia in two weeks' time to have a seminar with our colleagues from the Ministry of Justice. Russia will then be evaluated in December of this year most probably by the Working Group on Bribery, and you know, this will be an ongoing process.
Accession is not the end of the road, it's the beginning of the road. Once you are becoming an OECD member, you are undertaking the acceptance of the peer reviews, the peer pressure, and the striving for the better movement, better policies for better lives that the slogan is about. This is a day to day commitment that you are taking by becoming an OECD member.
IV Of course, corruption is just one issue in terms of the accession process and the Business Industry Advisory Council, which has served under the umbrella of the OECD, has identified other aspects that need to be dealt with in terms of Russia, in terms of its accession talks, including weakness in the rule of law, lack of transparency, burdening bureaucracy, and the limitations in terms of being able to invest in strategic sectors. How have these concerns been addressed?
NB They are addressed in the various committees. Let me maybe take this opportunity to talk, to explain very briefly to the auditors what the accession process of the OECD approach is. Russia will be evaluated by 22 different committees, Investment Committee, Environmental Directorate, Environmental Committee, Education, Health. Becoming an OECD member is like when you turn 50 and you go to a check-up, you are going to have a full check-up. And we're going to start areas of weaknesses; we're going to say, and we are saying to Russia, you need to correct those weaknesses. If we believe that some of those weaknesses are major, you need to correct them before becoming an OECD member as a condition in order to become an OECD member. If we believe that those weaknesses are not major, you can correct them afterwards.
The examples you just gave on strategic possibility to invest in strategic sector, we are having serious discussions in Russia, and the Russians have already amended their legislation to reduce the number of sectors and allow easier access to foreign investors. Is the discussion over? No, it's not over. The accession process has no target. Remember that. We have been maybe more prudent than some of our colleagues. We have not set up any target. Russia will become an OECD member when our members will deem that Russia is ready to become an OECD member.
IV I know you feel very passionate about public service, or governmental service. We spoke about that early in the interview. And corruption is something that you feel very passionate about in terms of being absolutely wrong. Normally, when we talk about corruption, or think about corruption, we think of it in terms of a lack of transparency, bribery, so on and so forth. What we don't often think about is the ramifications for corruption in terms of the human toll it can take. I know this is something that you've addressed.
NB Yes, absolutely; absolutely. I think people have this idea that corruption is a white collar crime. Now the crime may be white collar; the consequences are not white collar at all. If you sell, because of bribery, defective equipment to a hospital, as happened in an Italian case a few years ago, and you have six people dying for that, this is not white collar at all. You have practical consequences on people. There has been a study which has shown that in India, because of corruption, the quality of the roads is poor; and because the quality of the roads is poor, the number of deadly accidents increases. This is not white collar. This has a huge consequence on day to day life.
IV Or building codes and earthquakes.
NB Exactly, exactly. So I think we should get out of this idea that this is, you know, a purely economic crime. No, this is a crime which has a lot of effect and not only in terms of rule of law and poor governance, but on the day to day life of people, and death.
IV We have another question here, this one from Bruno Kova. Thank you, Bruno, and please keep those questions coming.
On the Anti-Bribery Convention, a number of countries may have jurisdiction on the same facts. Article 4.3 of the Convention, consultation to determine the most appropriate jurisdiction does not seem to provide an adequate mechanism to avoid multiple investigations, which has the effect of substantially increasing costs for the defendants. Are there plans to rectify this? Great question.
NB Yes, it's a very great question by Bruno, who knows the Anti-Bribery Convention better than I do. Article 4.3 in effect has not been really used so far, so I could not say if it is effective or not. The fact is that it has been not really used by our constituency. Now why is that? That's a very good question, and I must say that I don't have a really satisfactory answer to offer to Bruno. What I can say is that there is more and more recognition, even within the Working Group on Bribery, that this issue of multiple jurisdiction will need to be addressed. But, and as Bruno knows, for example, this is an area which is potentially under consideration in the context of the G20 and the Working Group on Bribery work of the G20.
On the other hand, it's not so easy to settle it from a legal point of view, because you will probably have to undertake an assessment of which is the jurisdiction which has the stronger case or the stronger link. In some cases it can be obvious; in some others it's much less obvious when you have a case which involves corruption in five different countries with the corruption level being of an equal nature or size. But I certainly agree with Bruno, and I realise that this is an issue which we'll need to address.
Let me just note though that there has been more and more collaboration between law enforcement authorities. If you look at the Siemens case that you mentioned before, both the German and the US authorities worked together and basically agreed together on an overall package of damages that Siemens had to pay.
IV Well, the European Union of course, as you're well aware, is asking for mandatory debarment from future contracts for companies convicted of bribery offences. Is this the right approach, or do you think they need to be more pragmatic?
NB I think this is an approach which based on experience proves to be not as effective as it would have been.
IV Why not?
NB Because it is the kind of sanction which is so disproportionate that at the end of the day it's not used. You know, you have in the legal systems of some of our countries, the same problems with legal person. The only sanction for a legal person who is corrupt or who was bribed is dissolution of the company, for example. The sanction is huge, it's massive, so what the judge will do is to try to find ways to requalify the facts and not, you know, qualify them under bribery.
This question of the mandatory debarment in all the European countries I think has been proven to be a bit of a disincentive for accepting companies to plead guilty on bribery charges because if they plead guilty on bribery charges, then they will then face this additional sanction. And I think this is something that we need to discuss with our European Union colleagues and see if we cannot be a bit more pragmatic in that legislation.
IV Staying on the company front for just a moment, because you mentioned in passing the multinational enterprises. You have guidelines for big businesses. You say it's, ‘the only inter-governmental instrument to address responsible business conduct’. That's quite a sweeping statement.
NB It's a fact.
IV Given the power and influence that big business has, can the OECD or anyone else effectively hold them to account?
IV We have examples of this. Siemens is an example of that, for instance; but broadly speaking.
NB Well, the guidelines on multinational enterprises is a tool which has a lot of potential. Is it fully used? No. I agree with you it is not fully used. It is more and more used though, and there have been a number of instances, recent instances, in which trade unions have been, interestingly enough, talking about multiple jurisdiction, by opening cases, for example, in two or three different countries at the same time vis-à-vis the same company. For example, there is an important case vis-à-vis a French company bought in the US in France nowadays. So it can be more used.
It will be interesting to see what will happen with the new revision of the guidelines which was endorsed by the OECD Council in May, because as I said, we had this human rights chapter. We also increased and added due diligence provisions, and we have enlarged also the accessibility of the guidelines to not only the trade unions, but also civil society organisations. So it will be interesting to see how the civil society organisations will use that.
IV You mentioned human right abuses just a moment ago and the work of Professor John Ruggie for the United Nations has been a great leap forward for business and human rights. And of course, there are three cornerstones he mentions; protect, respect, and remedy. It's the last of these three that I think we can say certainly remains problematic. Should the OECD be doing more to encourage laws like the US Alien Tort Claims Act?
NB As you know, there has been a lot of discussion even with the US about the effectiveness of the Alien Tort Act. I think there are issues about remedies that are important. If you take another case which is I think very interesting, which is in France today, I don't know if you have heard about it, it's what we call the biens mal acquis, which is assets which are in the hands of African heads of states, and a couple of civil society organisations, including Transparency International France, have initiated legal action on those.
I think there is certainly a need for civil society organisations to be recognised as legal, as having a legal interest in protecting goods and people outside of the country. Now should it take the form of the Alien Tort Act and what would be the consequences of that? I would be prudent on that. But certainly, the remedy aspect is an area which the OECD needs to address in the future.
IV May I ask you something about terrorism? The work of the OECD in conjunction with the Financial Action Taskforce on Financial Crime and Money Laundering is also extremely important in combating terrorism. What are the legal challenges here for you and your team?
NB To be very honest, this is very much in the hands of the Financial Action Taskforce secretariat which is composed of lawyers, and they are much more specialist than I am. But I know, because I speak a lot with them, that the real issue is always the same; tracing the money, following the money, and recuperating the money. Now one of the interesting parts of our work is that we can see more and more how the work of one part of the OECD has an impact in other parts of this. For example, we are now having discussions about the fact that corruption should be a predicate offence for money laundering.
And the two are linked. Money laundering is then linked to possible terrorism. When you look at the discussion about assets of former President of Egypt, or Gaddafi, or Ben Ali, you have all the links together.
The question of, as I said, tracing the money, following the money and recuperating the money are the big challenges that we are facing.
IV How can you get more involvement on the OECD side in this process?
NB By doing the work that we're doing. As I said, I think if we develop our techniques that we have had in anti-bribery, we had STAR project which is World Bank, United Nations, but in which we are also involved, if we also look at the link between economic crimes at large, very often, you can see that when you have corruption, you have money laundering; when you have corruption you have bid rigging; when you have bid rigging, you have money laundering; if we can start to establish those links which in our countries are often dealt by different agencies, you know, you have the Anti-Money Laundering Agency, the Anti-Bribery Agency, the Antitrust Agency, which may not necessarily work together, I think this is an area in which the OECD could really bring an added value, because again, as I said, we are a multi-disciplinary organisation and we can bring a more holistic view of how to combat those illegal movements of money.
IV Among the major achievements that the OECD claims is a polluter pays principle, and given the BP Macondo disaster… I want to move to the environment now… given the disaster that we saw in the Gulf of Mexico, first of all, what is your reaction to how BP and other companies involved in that disaster have handled the situation and the responsiveness? And in terms of the polluter pays principle, is there more to be done?
NB That's a question which I didn't think about. I think in terms of operationality of the PPP, the polluter pays principle, there is probably more to be done, yes. The polluter pays principle is now well acknowledged and accepted. It was developed by the OECD in the '70s. It was encapsulated in the Rio Declaration of the '90s. But I think one has to put some teeth and some funds and some money. I think this is certainly an area which we should look at.
We are working together with Russia on a project which is drawn partially from this experience of the Gulf of Mexico, which has to do with natural disaster coming from exploration operations, and we may end up with some proposals for the G20 summit here in Cannes.
In terms of the responses of BP and other companies, I would not comment on that.
IV One other question about the private sector, because one of the criticisms of the OECD has been that there is not enough involvement by the private sector, and if you're on the ground, it's really the private sector that knows what's going on. Is this still a problem, and what are you doing to address it?
NB I think this is an unfair comment. I think the OECD is probably, if not the most open, one of the most open organisations vis-à-vis the private sector. You need to remember that it was the OECD which basically encouraged business, industry and trade unions to set up what we called the BIAC, and TUAC, which is the Trade Union Advisory Council, back in the early '60s as advisory council to the OECD members. And those two bodies have been existing since the inception of the OECD.
What we have been lacking so far is the third leg of this constellation of non-governmental organisations, which are the civil society organisations. Now it is true that it is more difficult to group civil society organisations into an umbrella organisation, and on the other hand, we don't want to end up in a sort of UN body in which you have 250 observers and everybody can speak for 30 seconds while all the others are sleeping. So we want to have an input from those organisations which is meaningful, and we want to take this as it is.
But if you look at the guidelines, the revision of the guidelines, BIAC, TUAC, the civil society organisations were involved in all the discussions, including the most confidential discussions, from the beginning; were able to provide their inputs, were able to provide their ideas. Is it to say that we have been taking 100 per cent of the BIAC comments? No. We have been taking 100 per cent of the TUAC comments? No. We have been taking 100 per cent of the civil society organisations' comments? No, naturally. But this is the part of the inter-governmental process I was describing. But in terms of the involvement of the civil society and others, I think we are fine.
IV Early on in this conversation I asked you about your biggest frustration in terms of the way that the OECD works. I want to end by asking you what you see as the biggest challenge in the next five years for your department and for the OECD at large.
NB For my department, I think the biggest challenge is to continue to maintain the quality of our systems. We are involved in more and more issues. There are new issues coming up; intellectual property, for example, which has become more and more important within the OECD. You have probably heard about the Singapore decision about the domain names, which has an impact on the organisation, for example; just to give an example.
So this is the main challenge internally; to keep the quality of our work with the limits and constraints of working for a public institution.
For the OECD at large, I think we have covered that, Todd, in the past with your very good questions about the representative of the OECD. Is it to say that we will not be representative if we don't have 70 countries? I'm not sure. But what we need to do is certainly to be sure that all the countries that have some interest in developing new standards and new instruments be at the table and be in a position to influence the deliberative process at the OECD.
IV Following up on this new area, intellectual property, it raises the very interesting question about technology. Technology always moves much faster than the law.
NB That's why soft law is probably a better response than hard law, because you can adapt your legal instruments. They are easier to negotiate; they are easier to modify than if you enter into a legally binding instrument which has to go through Parliament, which has to be ratified by Parliament.
IV What else besides intellectual property?
NB You mean in terms of new challenges and new areas?
NB I think one of the most difficult ones is the fact that we are talking more and more about horizontal projects here within the OECD. It's the fact that we cannot continue to work as we used to work. The OECD was established almost as a mirror of government. We have diverse directorates. But the world doesn't work this way. If you touch on an environmental issue, it has an economical impact and a social impact, and we need to find different ways of working together.
IV And you have been in the public sector all your life, or working for governmental agencies, inter-governmental agencies, all your life. If you talk with your friends who are in private practice, what do you think they could learn from your process, and what do you think you can learn from their process?
NB That's a very good question there, Todd. What I can probably learn from their process I imagine is how to get very quick decisions on very important issues. And as I said before, this is maybe an area in which the OECD as an organisation can improve.
I think what they can learn from our way of handling issues is that there is a temptation to provide very simplistic answers to very difficult questions, and you should be aware, and you should not fall into the trap of providing very simplistic answers to very difficult questions.
IV And on that very sage advice, I'd like to thank you, Nicola Bonucci, Director of Legal Affairs for the OECD, for joining us on this live broadcast.
NB It was a pleasure.
IV On behalf of the IBA, I'm Todd Benjamin, thank you so much for your questions, and thank you for watching.