GENEVA, Dec 23: The world's shiny new laws to deal with corruption and bribery in international business transactions trip at the Bofors trap.

Bofors trap?

That is the name of at least two legal loopholes made famous by the Swedish arms manufacturer. The first is that political parties can be bribed and companies that bribe them are not prosecuted in their countries. The second trick is to deduct the bribe money from taxes, a practice common in many European countries.

Fancy -- some already say fanciful -- anti-corruption and bribery laws unveiled this week amidst much back-thumping and hand-shaking by the Paris-based Organisation for Economic Cooperation and Development (OECD) seek to tackle international business corruption without upsetting this applecart. The new laws do not prevent companies from lining political parties irrespective of where that money goes thereafter. Neither does the OECD think badly of tax write-offs for bribes.

"We are not very happy with this -- if you remember the Bofors case in India, this is exactly what happened," says Carel Mohn of Transparency International (TI), a Berlin-based group that tracks corporate and political bribing in international contracts and puts out a widely-read and quoted international corruption perception index. He says the Bofors-India case is now part of the international corruption lexicon.

Bofors could not be prosecuted in Sweden because it broke no Swedish laws which draw a thick line between a member of the government (politician) and a government official (bureaucrats, etc). Neither was the company acting illegally when it deducted the bribes paid to Indian politicians and officials from its taxes -- bribes which had been built into the total price of the contract which in other words meant that the Indian taxpayer actually subsidies the bribes.

"It will still be legal to bribe political parties and companies can deduct that from taxes -- these are big problems with the new convention," Mohn added.

Thirty-four of the world's richest countries including the United States, Japan, Canada and most of western Europe -- all members of the OECD, have signed a much-awaited anti-bribery convention this week making it a crime to bribe foreign officials. Recognising for the first time that "...bribery is a widespread phenomenon in international business transactions...which raises serious moral and political concerns, undermines good governance and economic development and distorts international competitive conditions", the world's movers and shakers have put together a convention that has to be ratified by their national parliaments by April 1998. Ambitiously christened the Convention on Combating Bribery of Foreign Public officials in International Business Transactions, the proposed law tops a year-long anti-corruption drive backed by the World Bank, the International Monetary Fund, the World Trade Organisation, the United Nations and the European Union.

The new rules define a "foreign public official" is a person holding legislative, administrative or judicial office of a foreign country, any person exercising a public function for a foreign country and any foreign official agent of a public international organisation. Foreign country here includes all levels and subdivisions of government from the national to the local level.

The convention also deals with "active" and "passive" corruption thus ensuring that the blame is equally shared between the briber and the bribed. However, the new rules do not outlaw "funding" political parties in foreign countries no matter where the funds go from there.

The convention's architects say companies that play by the rules will no longer feel at a disadvantage, that competition will no longer be distorted by large envelops under international tenders and quality will no longer be sacrificed for a bank account. At least, that is the theory. In practice, even the World Bank with all its sophisticated data-gathering and processing capabilities says it has little knowledge of how the drive against graft is working or whether it is working at all.

Since it is difficult to be virtuous when alone, the OECD's new convention is seen as pledge that binds them all. No one expects miracles. The next time a business group says it's writing out cheques to politicians for campaign contributions, you would still be wise to wonder what that piece of information, like the OECD's conventions, excludes.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.