COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 21.05.1997 
COM(97) 192 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 
ON 
A UNION POLICY AGAINST CORRUPTION 

CONTENTS 
Part I: INTRODUCTION 
1.1 THE NEED FOR A STRONGER EUROPEAN UNION POLICY AGAINST CORRUPTION 
1.2 THE DIMENSIONS OF CORRUPTION 
Part H: FIGHTING CORRUPTION IN SPECIFIC POLICY AREAS 
II. 1 CORRUPTION AND CRIMINAL LAW 
II. 2 TAXDEDUCnBILITY 
11.3 THE SINGLE MARKET AND OTHER INTERNAL POLICIES 
II. 3.1 Public Procurement Directives 
11.3.2 Financial Transactions 
II.3.2.a Company accounts 
II.3.2b Financial institutions 
II. 3.3 Other measures and policies 
II. 3.3. a Blacklisting 
11.3.3 .b Commitments against corruption 
11.3.3c Civil remedies 
II.3.3.d Whistle blowers 
11.4 EXTERNAL ASSISTANCE AND CO-OPERATION 
n.4.1 Preventing Corruption in Third Countries Benefiting from EC Assistance 
n.4.2 Anti-corruption programmes 
n.4.3 "Good governance" and anti-corruption clauses 
II. 5 CO-OPERATION IN INTERNATIONAL FORA 
ANNEX 1 INTERNATIONAL INITIATIVES 
/ 
Part I: INTRODUCTION 
M Tf IL NEED FOR A STRONGER EUROPEAN UNION POLICY AGAINST CORRUPTION 
1. The purpose of this Communication is to set out the main elements of a comprehensive Union 
Policy against Corruption. The need to combat corruption at EU level has already been recognised 
and a number of initiatives have been taken which are relevant to the fight against corruption. 
However these do not address all concerns and were not been part of an integrated approach. A 
number of developments point to the need to take further and more co-ordinated action: 
• The European Parliament in its resolution on corruption of 15 December 1995 (rapporteur 
Mrs Salisch) called on the Commission as well the Council and Member States, to take action 
against corruption in a wide variety of areas. That report, which was not restricted to corruption 
affecting the ECs' financial interests, emphasised the threat posed by corruption, its links with 
organised crime and the need for a Union policy on corruption. 
• The report of the High Level Group on Organised Crime commissioned by the European 
Council stresses the importance of enhancing the fight against corruption. 
• The question of corruption is currently under discussion in a significant number of 
international fora including the G7, OECD, Council of Europe, United Nations and the 
World Trade Organization (see Annex 1). The outcome of these discussions will have 
implications for the Union and it is becoming increasingly clear that the Union has to act in a 
coordinated way if it is to safeguard its interests effectively. 
2. The interests of the Union are affected by corruption as it 
undermines sound decision making, 
distorts competition and challenges principles of open and free markets, in particular the 
proper functioning of the internal market; 
damages the financial interests of the European Communities; 
adversely affects external policies in respect of a number of states receiving 
assistance; and 
is at variance with the transparent and open conduct of international trade. 
3. The Union has an interest in formulating a coherent strategy on corruption both 
within and outside its borders while fully respecting international legal rules on 
jurisdiction. Such a strategy should encompass international trade and competition, 
Community expenditure abroad, Community own resources, development co-operation 
policies and the pre-accession strategy. 
1.2 THE DIMENSIONS OF CORRUPTION 
4. Corruption relates to any abuse of power or impropriety in the decision making process brought 
about by some undue inducement or benefit. This general notion of corruption may be considered 
in the context of a number of parameters. 
Différent forms of misconduct may affect the decision making process. In legal terms they may 
fall under different categories e.g. abuse, fraud, trafficking in influence, bribes, commissions. Not 
all these kind of practices are necessarily criminal offences in every Member State. There is no 
single uniform definition of all the constituent elements of corruption. There are examples of 
practices which are not criminal offences in one Member State but which are still regarded as 
corrupt in other Member States, for example the provision of gifts where there is a tacit 
expectation that the person providing gifts may receive favourable treatment. 
All acts of corruption involve at least two parties, the party who offers the bribe - the offence of 
active corruption - and the party who accepts the bribe - the offence of a passive corruption. 
Active corruption can involve either a private individual, or a legal entity (such as a company) 
offering bribes. Passive corruption can involve the acceptance of bribes by public officials, 
politicians, employees, etc. It can also include persons who do not make decisions themselves 
but have influence over the decision maker. 
Corruption is not limited to the public sector. Also in the private sector a bribe may induce a 
person to act in breach of a contractual, administrative or ethical obligation. 
Corruption can be international. Bribes can involve payments in other states. It may also involve 
payments, on the national territory, to foreign officials and officials of the EC or international 
organisations. 
Certain policy areas may be viewed as particularly vulnerable to corruption. The legislator may 
wish to concentrate on these areas which have special characteristics. An example is the EU 
instrument dealing only with corruption which damages the ECs' financial interests. Clearly a 
specific Union level approach was required. Work in the OECD has concentrated on corruption 
in international business transactions because this type of corruption has particular implications 
for economic transactions involving OECD members. 
5. All Member States criminalise the bribery of their own public officials1 but not in a similar 
way. • 
• 
• 
The following definitions of passive and active corruption of public officials have 
been used in the draft convention on the fight against corruption involving officials of the EC or officials of Member 
States of the European Union and give an indication of the constituent elements which are 
common to the 15 Member States. 
"The deliberate action of an official who requests or receives, directly or 
through a third party, advantages of any kind whatsoever , for himself or for a 
third party, or accepts a promise of such an advantage, to act or refrain from 
acting in accordance with his duty or in the exercise of his functions in breach 
of his official duties shall constitute passive corruption. 
The deliberate action of whosoever promises or gives, directly or through a 
third party, an advantage of any kind whatsoever , to an official for himself or 
for a third party for him to act or refrain from acting in accordance with his 
duty or in the exercise of his functions in breach of his official duties shall 
constitute active correction." 
• In some Member States if a bribe is paid on behalf of a company, then the company itself may be 
criminally liable while in other states the company will have no liability, only the natural persons 
involved will have committed an offence even if it was for the benefit of the company. 
• In certain states, elected officials, Ministers or members of Parliament will not be regarded as 
public officials and will not be subject to the same laws against corruption. 
• In some states paying a bribe to a person who has influence over an official is not necessarily an 
offence. The bribe must be paid to the official who makes the actual decision before any criminal 
offence is committed. 
• In some states the officials must act in breach of his official duties. So no crime may be 
committed when an official accepts a bribe to award a contract to a company which should have 
got the contract in any event. 
6. At present in the majority of Member States it is not an offence to bribe a foreign official or 
officials of international organisations in any circumstances. Even in the four Member States 
who can prosecute the bribery of foreign officials, different approaches are taken. 
• One approach is the application of territoriality. If corruption of a foreign official occurs on the 
territory of such a Member State both the active and passive parties are liable to criminal 
prosecution even if the bribe is not a criminal offence under the law of the foreign official's 
home. However no offence will have been committed in that Member State if the act of 
corruption occurs abroad 
• Some countries take a broad approach to the question of territoriality. They will take jurisdiction 
if any element of the offence has occurred on their territory. Other countries have a more strict 
approach. They require the substantive part of the offence must have been committed on their 
territory before they will take jurisdiction. 
• Another approach, which can be in addition to the territorial approach, is to establish jurisdiction 
on the basis of nationality. It is then an offence for a national of that Member State to bribe a 
foreign official even if no element of the offence is committed on its territory. The offence may 
be limited to the Member State's national who paid the bribe (active corruption only). There may 
be a requirement that the conduct is also a criminal offence under the law of the state of the 
foreign official who was bribed (dual criminality). 
7. A significant number of Member States do have criminal offences involving private sector 
corruption but the differences in approach between Member States is even more marked than that 
found with the corruption of public officials. 
8. This Communication is not advocating that there should be complete harmonisation of Member 
States' laws and policies on corruption. However there are certain key issues where a common 
approach at Union level is desirable. 
PART II: FIGHTING CORRUPTION IN SPECIFIC POLICY AREAS 
II. 1 CORRUPTION AND CRIMINAI . LAW 
9. One of the essential elements in combating corruption is to ensure that it is criminalised. 
In addition to its deterrent and repressive effect, criminalising corruption represents a clear and 
unequivocal statement that those practices are not acceptable and are against the public interest. 
Ideally the criminal law within the Union should address the bribery of EC officials, the bribery 
of officials of other Member States, the bribery of officials from states outside the Union and 
private sector corruption. 
10. In most Member States it is not an offence to bribe EC officials or officials of other Member 
States. This poses a particular problem where the EC budget is being affected. In 1995 Spain 
proposed what became the First Protocol to the Convention on the protection of the 
European Communities1 financial interests2. This Protocol makes active and passive 
corruption involving an official of the Community or any Member State a criminal offence in all 
Member States if it damages the ECs' financial interests. The Protocol is not yet in force. No 
target date for its implementation has been set. Its ratification is linked to the ratification of the 
Convention on the Protection of the financial interests of the Union. 
11. Member States should commit themselves to ratifying and implementing the First 
Protocol by mid-1998. 
12. The First Protocol was limited to corruption affecting the ECs' financial interests. Italy, 
therefore, proposed in 1996 a draft convention to ensure that active and passive corruption 
involving officials of EU institutions or officials of Member States will be criminalised even if the 
EU's financial interests are not affected. The substance of this draft convention was agreed upon 
quickly but there have been delays in its adoption. 
13. Member States should commit themselves to adopting the draft convention on the 
fight against corruption involving officials of the EC or officials of Member States of the 
European Union as soon as possible with a view to its ratification by end 1998. 
14. The initiatives taken so far do not address the corruption of officials from third countries 
even where Community funds are at risk. As regards corruption outside the Union a step 
forward would be to criminalise the active corruption of a foreign official. This would cover 
those persons within the EU who bribe officials of non Member States. Any proposal has to 
respect international rules on jurisdiction. Therefore it should address offences committed in part 
or in whole on the territory of a Member State and possibly also offences committed abroad by a 
national of a Member State. The question of dual criminality and the definition to be used 
requires further consideration. 
Signed on of27/9/% 
15. It is important that any agreement on criminalising bribery of foreign officials involves as 
many countries as possible. This would ensure that Union enterprises subject to a law against the 
bribery of foreign officials are not put at a disadvantage compared to their competitors from 
other countries. There were attempts in 1978/1979 to draw up a UN convention. The Council 
of Europe is at present drawing up a comprehensive convention which will address this issue. 
The OECD is also looking at this issue. A draft instrument is to be discussed at this year's 
OECD Ministerial. It is limited to corruption affecting international business transactions. This 
will be a valuable step forward. It would however not address all types of corruption notably 
those affecting EU external financial and technical assistance. 
16. The Commission supports the adoption of a common position under Title VI of the 
TEU favouring the criminalisation of the bribery of foreign officials with that objective to 
be pursued in the Council of Europe/OECD. 
17. Private sector corruption has not yet been addressed within the EU. It occurs when for 
example a person in a private economic entity is bribed to act in a way which is in breach of his 
or her duties. Some Member States already criminalise private corruption to some degree3. In 
other Member States civil or administrative measures are the only remedies applicable. Private 
corruption is being discussed in the Council of Europe. Because of its implications, notably for 
competition, the Union has an interest in combating this form of corruption. 
18. The Commission is in favour of criminalising private corruption using Title VI of 
the TEU and, as a starting point, supports the adoption of a common position for the 
purposes of the negotiations currently underway in the Council of Europe. 
19. Criminal sanctions alone are not a sufficient method of combating corruption. Only a 
modest number of corruption cases are successfully prosecuted. A wide variety of measures, 
such as improved transparency and socio-economic conditions, are also required. The following 
sections refer to some of the more relevant non-criminal measures against corruption. 
II.2. TAX DEDUCTIBILITY 
20. In calculating taxable business profits, it is normally permissible to deduct from the 
business receipts those expenses that are associated with earning the income. This is a 
7 Member States have provisions criminalising the bribery of the employees or 
agents of private sector companies. In some, although it is a criminal offence 
it is dealt with under the law on labour, unfair competition or unfair business 
practices. An example of this is the Code du travail Français, article L.152-6 
which makes it a criminal offence for a manager or employee to solicit or accept, 
directly or indirectly, without the knowledge and authorisation of his employer 
offers or promises of gifts, discounts or consideration to carry out or abstain 
from carrying out an act relating to his position or facilitated by his position. 
In others, the general criminal law applies to corruption in both the public and 
private sectors. For example section 1(1) of the U.K. Prevention of Corruption 
Pet 1906 applies to all "agents" whether in the public or private sector. 
widely-accepted principle of taxation. That said, not all current expenses are universally 
deductible. For example, some countries specifically disallow tax deductions for certain 
categories of expenditure, such as payments which are illegal under the laws of that country, or 
entertainment expenses. 
21. Only a few Member States' tax codes provide for the outright disallowance of corrupt 
payments made to foreign officials. Apart from such a total disallowance, the main existing 
grounds for not allowing tax deductions in some countries include the nature of the payments 
themselves (gifts and entertainment, etc. may not be tax deductible, irrespective of whether their 
acceptance is corrupt or not); the difficulties in substantiating such payments; or their illegality 
(whether in the country of the payer, or in that of the recipient). 
22. A number of Member States specifically permit tax deductions for the bribery of foreign 
officials if the bribes are recognised as being customary business practice in the territory in 
question. In such circumstances, the giving of the tax allowance may be made conditional upon 
the disclosure to the tax authorities of the identity of the recipient. 
23. The two major EU trading partners have differing grounds for disallowing tax deductions 
for the bribery of foreign officials. The USA does not allow deductions for bribes paid to foreign 
officials if the payments constitute criminal offences under its Foreign Corrupt Practices Act of 
1977. In Japan, however, bribes are are disallowed for other reasons. 
24. Taxation policy is classically regarded as being morally neutral. This view is not justified 
where allowances are granted for what is a criminal activity in the state in which the bribe is 
accepted. This can be seen as endorsing criminal acts committed in other jurisdictions. 
Moreover, tax allowances which may induce bribery have implications for competition, and may 
distort the single market and international trade. It also affects the economic and social 
development of third countries. The practice may engender scepticism in candidate and third 
countries as to real aims of the Union when EU enterprises are seen to be receiving tax 
allowances for bribing officials of these countries in the pursuit of business. 
25. The criminalisation of the bribery of foreign officials will have some positive effect. In 
countries where payments are tax deductible as long as they were not illegal, the criminalisation 
will automatically put an end to tax deductibility. But it could be some time before such a 
criminalisation takes place. Even when it does, it will not necessarily resolve all the issues. 
• A state might allow tax deductibility unless a criminal offence has been proved. In practice, a 
requirement for proof could mean very little improvement over the existing position. 
• There will still be cases where a bribe paid to an official of a third country constitutes a 
criminal offence in that third country but not in the EU Member State. This could be so 
where a substantive part of the offence was committed abroad, or because the requirement 
for dual criminality has not been met. 
• There are dubious practices which, for various reasons, will not be criminal offences. The 
absence of criminalisation does not remove the moral case for disallowing tax deductibility for 
such payments. The practical difficulties in doing so should however not be underestimated. 
26 There are calls from a number of fora for the abolition of such tax deductibility which may 
favour bribery (UN, the Council of Europe, the OECD and the European Parliament). All 15 
Member States have adopted the OECD recommendation that "countries which do not disallow 
the deductibility of bribes to foreign officials re-examine such treatment with the intention of 
denying this deductibility". It would appear therefore that all Member States are in principle in 
favour of disallowing such tax deductibility. Some Member States are, however, concerned that 
they will be at a competitive disadvantage if other major trading nations continue to allow it. 
Furthermore, it may be easier for an affected Member State to introduce changes in response to 
an EU instrument rather than to initiate reform on its own, at national level. 
27. The Union has an interest in a common approach to the abolition of tax allowances that 
may induce corruption. 
• The fact that corruption can distort competition is already recognised by international 
organisations such as the OECD and the Council of Europe, as well as being already reflected 
to some degree in the laws of certain Member States (e.g. German and Austrian legislation 
against unfair competition). The purpose of bribery in a business context is to gain an illicit 
advantage which distorts competition. 
• State measures which effectively encourage the use of bribery by allowing the deductibility of 
bribes to foreign officials give exporting enterprises in those Member States an unfair 
advantage both over domestically-orientated competitors and over enterprises in Member 
States where no such deductibility is allowed. The external dimension of an action against 
bribery therefore has to be taken into account 
• The question of tax deductibility of bribes for foreign officials is not just relevant for 
competition and commerce. Clearly any policy measure relating to the bribery of foreign 
officials has implications for development co-operation and potentially affects developing 
countries. 
28. The Union should also exploit to the full existing channels for the exchanges of 
information between taxation authorities so far as corrupt payments are concerned. In so far as 
a bribe may affect the tax liability of the recipient, the Mutual Assistance Directive4 provides a 
framework for the provision of information to the taxation authorities of the Member State in 
which the recipient of a bribe resides. Ensuring that the recipient is at least taxed on sums 
received would act as a deterrent to bribery, even if the taxation authorities may not pass the 
information on to the judicial authorities in the state concerned. 
29. As an initial approach the Commission will raise the question of the tax 
deductibility for bribes with the Member States in the appropriate fora, with a view to 
reaching consensus to abolish such provisions in the framework of a joint conceited move. 
(Directive 77/799/EEC) 
II. 3 THE SINGLE MARKET AND OTHER INTERNAL POLICIES 
30. The free movement of goods and services is based on the principles of non-discrimination 
and free competition. Corruption runs against these principles. There is a case for examining the 
rules protecting the free movement in a number of areas to see whether specific measures aimed 
at combating corruption may be proposed. 
H.3.1 Public Procurement Directives 
31. These directives aim at assuring transparency and equality of access for public 
procurement. 
The existing directives5 on public contracts under the heading 'Criteria for qualitative selection' 
lay down that any enterprise/supplier may be excluded from participation in the contract 
who has been convicted of an offence concerning his professional conduct by a judgement 
which has the force of res judicata; 
who has been guilty of grave professional misconduct proven by any means which the 
contracting authorities can justify. 
These provisions cover corruption. 
32. The Commission Green Paper entitled "Public Procurement in the European Union: 
Exploring the Way Forward" of November 1996 recognises that fair, transparent and non­
discriminatory award procedures, together with the possibility for suppliers to have recourse to 
national courts to assert their rights limit the risks of fraud and corruption. Even though the fight 
against corruption may not be the primary objective, any improvement in the existing situation 
regarding public procurement could usefully contribute to that fight. One particularly relevant 
idea put forward in the Green Paper is that of a statement of personal accountability by the 
responsible national official that the Union's public procurement rules have been followed. 
33. Areas which could be explored further include blacklisting, anti-corruption commitments 
and civil remedies. There are provisions in the public procurement directives6 dealing with 
attestation and civil remedies but only in respect of the authority which awards the contract. 
In an international context it is very much in the Union's interest to promote greater transparency 
in the area of public procurement. This objective can be pursued in the OECD and the WTO 
where work is on going at present 
34. Following the consultation launched by the Green Paper, the Commission will 
explore how the application of provisions in the area of public procurement relevant to 
the fight against corruption can be improved. 
(93/36/EEC, 93/37/EEC and 92/50/EEC) 
6 
(Directive 92/13/EEC) 
II.3.2 Financial Transactions 
35. Corruption frequently involves a transfer in cash or kind. Cash transactions, particularly 
those involving large sums of money, can leave traces as the money moves from the body paying 
the bribe to the person receiving it. The bribe has to be sourced from somewhere to be 
transferred and finally the recipient has to deposit the bribe (e.g. a bank account) or convert it 
into goods, services or property. As bribes are generally illegal, any measure which allows the 
payment of bribes to become known serves as a preventive measure, deterring the payment of 
bribes, as well as facilitating the confiscation of illicit money paid to public officials. 
II.3.2.a Company accounts 
36. If a company uses its assets to pay bribes then these payments must be accounted for in 
some way. The existence of "slush funds" in companies are a key element in the corruption 
process. This may be countered to some degree by rules on the transparency of company 
accounts. Work in the Council of Europe has drawn attention to the importance of auditors and 
company accounts in combating corruption. The OECD has recommended that accounting 
requirements and practices should provide for adequate recording of relevant payments. In July 
1996, the Commission presented a Green Paper on "the role, the position and the liability of the 
statutory auditor within the European Union". That paper also addresses the role of the auditor 
in detecting corruption in the company accounts. A series of follow-up actions, based on co­
operation with the representative bodies of the accounting profession, will be undertaken, to be 
monitored by the Contact Committee on the Accounting Directives. 
37. Following the Green Paper consultative phase the Commission will present a 
Communication with concrete proposals on how the Accounting and Auditing Directives 
and their application can be made more effective in the fight against corruption. 
II.3.2.b Financial institutions 
38. A bribe is normally routed at some stage in the transaction through a financial institution. 
The OECD has recommended that banking and financial institutions should be required to 
maintain adequate records for inspection and investigation in cases of corruption. The Second 
Banking Directive already requires every credit institution to have a sound administrative and 
accounting procedures and adequate internal control mechanisms. The question of access to 
those records by police or judicial authorities is normally determined by national law. 
39. The Money Laundering Directive applies to the proceeds of drugs offences and to the 
proceeds of other offences designated by Member States. Banks and other financial institutions 
would have to keep and make available customer identification and transaction details for use as 
evidence in any investigation into money laundering and would also be obliged to report 
suspicious transactions. The Commission has already proposed a "Second Protocol" to the 
Convention on the Protection of financial interests of the Community which makes it a criminal 
offence to launder the proceeds of corruption in relation to the EC budget. 
40. Member States should establish as a criminal offence the laundering of the proceeds 
of corruption. The Commission has already formally proposed this as regards corruption 
affecting the Communities financial interests in the draft "Second Protocol". 
II.3.3 Other measures and policies 
41. In any particular sector such as agriculture, structural funds, the transit regime, specific 
measures may contribute to combat corruption. This section explores the application of certain 
anti-corruption measures which might be of value in various areas where Community policies 
involve large scale expenditure with a potential for corruption or other forms of abuse. 
n.3.3.a Blacklisting 
42. Blacklisting provides a mechanism to recognise an undertaking which has been convicted 
of having committed some infringement. In this regard it may also be envisaged to identify 
companies who represent a substantiated risk of non-reliability as regards corruption. 
Blacklisting can be used to prevent such undertakings from competing for or being awarded 
further contracts/subventions or it may be used merely to alert people to possible risks in dealing 
with such an undertaking. 
43. A Council Regulation7 provides for measures against blacklisted operators, such as 
exclusion from entitlements under the FEOGA guarantee section. This Regulation deals with 
irregularities in respect of Community provisions. It does not, however, cover every form of 
corruption committed in connection with FEOGA funds. Furthermore nothing prevents a 
particular company, which has previously been excluded under this Regulation because of 
corrupt practices from applying for a contract or entitlement which is funded by another part of 
the Community budget. 
44. The provisions in the directives on public contracts under the heading 'Criteria for 
qualitative selection' lay down that an enterprise may be excluded from participation in a contract 
in the case of certain infringements8. These provisions cover corruption. They apply equally to 
contracts awarded by the Commission or its services. 
45. Establishing some form of comprehensive blacklisting system applicable to areas where 
Community finances are at risk could be considered. This would include the area of external 
assistance. The use of that list would vary from sector to sector. In some cases it may be 
appropriate for a blacklisted enterprise to be automatically excluded from certain benefits for a 
7 
(Council reg. 1469/9b, Commission req. /45/96) 
8 
The Criteria Cor qua I i t .it i vc .-if I <>or i on lay down that any enterprise may be excluded f i om 
participation in t lu- '-uni rvl 
- who has been convicted of an offence concerning his professional conduct Ly a 
judgment which has the force of res judicata; 
- who has been guilty of grave professional misconduct proven by any means which 
the contracting authorities can justify.(See also section II.3.1 above.) 
10 
set period. In other cases such as public procurement, blacklisting would be for information 
purposes. The deciding authority, having been alerted to the past record, might have the option 
to determine what action should be taken. Alternatively a register of legal and natural persons 
who have been blacklisted could be established so that national and Commission services could 
be alerted to the dangers of dealing with those particular operators. Data bases could identify 
who is behind firms and be readily accessible. 
46. An important consideration to be taken into account when exploring the possibility of 
establishing a system of blacklisting would be the need to respect data protection principles as 
well as the principles9 of proportionality, subsidiarity and the rights of the individual. 
II.3.3.b Commitments against corruption 
47. All competitors for a specific project might be required to give a written undertaking that 
they will not use bribery to obtain the contract. This commitment discourages bribery and can 
leave the enterprise open to a civil action for damages or a contractual fine. Another approach is 
to restrict certain tenders to enterprises who have adopted special codes of conduct or practices 
against the use of corruption in seeking to obtain contracts. Caution would have to be exercised 
with this latter approach to ensure that it does not unduly restrict fair competition for tenders. 
48. The Commission will work on a scheme of blacklisting and commitments against 
corruption applicable to areas where Community finances are at risk. It would allow for 
an inter-sectorial exchange of information on persons and enterprises who have engaged 
in corruption while respecting data protection requirements. 
11.3.3c Civil remedies 
49. A criminal or administrative sanction does not compensate the undertaking who was not 
awarded a contract because of corrupt practices by a competitor. A civil action would provide 
some remedy for such loss. It would also allow an injured competitor to take action against a 
corrupt competitor on his own initiative and as such might reduce the need for administrative 
action. It would be self policing. 
50. Although not specifically aimed at corruption, the possibility of civil remedies does exist 
under the Public Procurement Directives for an enterprise which has lost out on a contract due 
to an irregularity in the procedures followed in awarding the contract. However such action is 
limited to the public procurement area and lies against the body awarding the contract and not 
against the competitor who actually paid the bribe. A more general approach for civil action 
by enterprises against competitors who have paid bribes is being examined by the Council of 
Europe. 
Directive 95/46/EC 
11 
51. At an appropriate stage the Commission will propose the adoption of a common 
position on the question of civil remedies against corruption in the context of the 
discussions going on in the Council of Europe. 
II.3.3.d. Whistle Blowers 
52. Whistle blowers are employees working for corrupt enterprises who alert the authorities 
to the fact that their firm is engaged in corrupt practices. Such "whistle blowers" are often left 
without the appropriate legal protection and can be victimised for their actions. The report 
entitled "Whistleblowing, fraud and the European Union" published in February 1996 by Public 
Concern at Work (London) called for by the European Parliament and sponsored by the 
Commission addresses many of the issues involved. The Commission is carrying out a study on 
national legislation and practices regarding the individual rights of workers to be consulted on 
internal company matters, including the worker's rights to be protected against any prejudice 
arising from a legitimate complaint put forward by a worker to a public authority. 
53. Member States should review and, where appropriate, amend their existing law to 
ensure that individuals who report instances of corruption are adequately protected from 
victimisation. 
n.4 EXTERNAL ASSISTANCE AND COOPERATION 
II.4.1 Preventing Corruption in Third Countries Benefiting from EC Assistance 
54. The Commission has included the fight against corruption in its external co-operation and 
assistance policies. Funding is provided for a range of projects which relate to the fight against 
corruption directly (regional seminars) or indirectly (improving the judicial structure and 
administrative transparency). Initiatives are taken to combat corruption such as the organisation 
of seminars on rules of origin and workshops aimed at improving financial management and the 
fight against fraud. 
55. The fight against corruption requires a balanced approach. The conditionally linked to the 
fight against fraud and corruption must be part of a coherent development strategy. There is a 
case for greater coherence between the Union's anti-corruption policies taking account of 
regional differences. 
56. Any strategy should: 
support the creation of appropriate legalisation and control mechanisms and institutions by 
way of providing the necessary technical assistance, 
12 
improve the functioning and transparency of public procurement, 
take performance regarding the management of public resources into account when 
deciding on initiatives based on financing from Community funds, 
support the improvement of the socio-economic environment. 
57. The Commission will establish a coherent anti-corruption strategy in the area of its 
co-operation with Third countries which benefit from EC assistance or have concluded 
co-operation or assistance agreements with the EC. 
The Commission will further its support for the prevention of corruption, in particular by 
promoting conditions favouring transparency, good governance and an independent 
judiciary and by providing technical assistance for establishing appropriate legislation 
and efficient procurement and control mechanisms. 
The Commission will review its procurement and contract rules in the field of foreign aid 
with a view to introducing more effective measures against corruption. It will seek to 
harmonise rules applied in different groups of countries. This revision will include the 
question of sanctions against firms which engage in corrupt practices. 
II.4.2. Anti-Corruption Programmes 
58. Certain candidate countries for EU membership in Central and Eastem Europe face 
problems with corruption during the transition to full market economies. It is important that the 
Union helps these countries to overcome these problems. It affects their own reform programme 
and furthermore corrupt practices may spill over to neighbouring states in the context of an 
enlarged Union. 
59. In addition to concerns about the effect of corruption on third countries themselves, the 
Union, as a major provider of aid, has to be concerned if EU financial support is diverted from its 
intended purpose due to corruption. The European Parliament, the Court of Auditors and 
Member States are keen to see better management control and cost-effectiveness. This issue is 
currently discussed at the Personal Representatives Group on SEM 2000. The recent 
reorientation of the PHARE programme puts emphasis on the fight against irregularities and 
fraud. 
60. Technical assistance for containing corruption in the public sector in Eastern Europe has 
already been provided to a limited degree under the PHARE programme (e.g. the joint Council 
of Europe/ EU OCTOPUS programme on corruption and organised crime in Central and 
Eastern Europe). The joint SIGMA project with the OECD which addresses the problem of 
public procurement is also relevant. The Newly Independent States have their own problems 
with corruption which are affecting their process of economic and democratic transition. A 
special initiative under the TACIS programme could be of relevance. 
13 
61. In the case of Mediterranean third countries, there is a movement towards free trade and 
strong links with the single market. The 27 Euromed partners specifically committed themselves 
in the Barcelona Declaration of 28 November 1995 to fight jointly against corruption. Moreover 
the Council MEDA regulation °, which establishes co-operation procedures, defines strict and 
precise standards for the transparent management of financial and technical assistance to 
Mediterranean third countries. 
62. Special anti-corruption programmes should be established, particularly in the 
applicant countries in Central and Eastern Europe in line with the protocols to the 
Europe Agreements on opening of programmes and in connection with the envisaged 
Accession Partnership established around a national programme for the implementation 
of the acquis.. 
II.4.3 "Good Governance" and anti-corruption clauses 
63. The Lomé IV Convention, as revised by the agreement signed in Mauritius on 4 
November 1995 now includes "good governance" as one of its basic principles. A more 
widespread application of this principle is required if the Union is to pursue a comprehensive 
strategy. 
64. The principle of "good governance" should be considered for inclusion in all 
international agreements of assistance, co-operation and development. 
65. The inclusion of anti corruption clauses could be envisaged in all specific contracts which 
are aid funded. For example in March 1990 it was agreed with the ACP States to include 
specific clauses aimed at fighting corruption in the general conditions for all contracts financed 
through the European Development Fund. The Commission is now reviewing such clauses to 
see how their effectiveness can be improved. 
This particular issue is receiving attention at an international level. The World Bank has 
strengthened its approach in this area and the Development Aid Committee of the OECD made 
recommendations in 1996 on the inclusion of anti-corruption clauses in aid funded contracts. 
66. The Commission, in co-operation with the OECD, the World Bank and remaining 
multilateral donors, will ensure that anti corruption clauses are included in aid funded 
contracts. 
10 (n° 1488/96) 
14 
II. 5 CO-OPHRATION IN INTKRNATIONAI. H )RA 
67. If the EU is to adopt strong anti-corruption measures which may have implications for 
trade, it is in the interest of the EU that action be agreed at the widest possible level in order to 
achieve synergy benefits and to avoid a competitive disadvantage. 
The EU must also seek to ensure compatibility between internal rules aimed primarily at the 
single market and external policies which aim notably at strengthening the open multilateral 
trading system. The absence of such compatibility could be costly for trade and industry 
68. The issue of corruption and transparency arises regularly in international organisations 
such as the G7, World Trade Organisation (WTO), the United Nations, the OECD and the 
Council of Europe. It is also high on the agenda of the EU's major trading partners, particularly 
the USA. A UN declaration on "Corruption and Bribery in Transnational Commercial Activities" 
was adopted in December 1996, which calls on Member States to criminalise bribery (domestic 
or transnational) and prohibit tax deductibility of bribes. A Model Procurement Law of the 
United Nations Commission of International Trade Law (UNICITRAL) has been developed. 
69. The new WTO Government Procurement Agreement (GPA) entered into force on 1 
January 1996. As the GPA is "plurilateral", not all WTO members are signatories. At this stage, 
it does not include certain key markets in Asia, the Americas, Eastern and Central Europe and 
Africa. 
At their Singapore meeting of December 1996, WTO Ministers agreed to establish a working 
group on the subject of transparency in government procurement practices with a view to 
developing elements for inclusion in an appropriate agreement. 
70. The Commission, will also press for an ambitious and co-ordinated policy line to 
combat corruption in all appropriate international fora including the G-7 in Denver in 
June 1997. 
***** 
15 
ANNEX 1 
INTERNATIONAL INITIATIVES 
The G7 heads of State in Lyon on 28 June 1996 stated that: 
"... we are resolved to combat corruption in international business transactions, which is detrimental 
to transparency and fairness and imposes heavy economic and political costs. In keeping with the 
commitment of OECD Ministers to criminalise such bribery in an effective and co-ordinated 
manner, we urge that the OECD further examine the modalities and appropriate international 
instruments to facilitate criminalisation and consider proposals for action in 1997." 
The G7 Finance Ministers on 27 April 1997 made reference to question of bribery and corruption 
and the issue is likely to come up again at the Denver G7 /P 8 summit in June 1997. 
The OECD Ministerial Council on 11 April 1996 adopted a recommendation against tax 
deductibility for bribes to foreign government officials. This was in addition to recommendations 
on corruption adopted earlier in May 1994. It also asked that a report and proposals on the 
criminalisation of the bribery of foreign officials in line with the G7/P8 summit statement in Lyon be 
submitted to it in 1997. The issue is on the agenda of the May 1997 Ministerial Council. 
A World Trade Organisation agreement on Government Procurement entered into force 
on 1 January 1996 laying down various provisions on transparency, openness and legal challenge 
which will help alleviate the problem of corruption in the area of public procurement. This 
agreement, while relevant for key trading partners of the Community does not apply, however, to 
all WTO countries. QUAD countries have therefore tried to increase compliance at the WTO 
level. At the Singapore Ministerial Conference December 1996, negotiations were launched on a 
new interim agreement on transparency, openness and due process (legal challenge). Following 
these efforts, further work will be undertaken in the WTO to develop an agreement on 
transparency. 
The Council of Europe has established a special multidisciplinary group on corruption 
(GMC). A detailed action programme has been adopted. The group is now discussing draft 
instruments in the civil, penal and administrative areas. The theme of the next Justice Ministerial 
meeting in Prague, June 1997 is Corruption and Organised Crime. 
The United Nations have addressed the issue of corruption on a number of occasions. Most 
recently, in December 1996 as part of a resolution on Action against Corruption, the General 
Assembly adopted an International Code of Conduct for Public Officials. They also adopted a 
declaration against Corruption and Bribery in International Commercial Transactions which 
addresses inter alia the question of bribery of foreign officials, tax deductible bribes, extraterritorial 
jurisdiction and bank secrecy. 
The World Bank in August 1996 introduced specific anti-corruption provisions in their 
procurement guidelines which apply to all goods and services financed from bank funds. Later in 
1996 a decision was made that the Bank should treat corruption as a development issue and 
internal groups were established to review the situation under a range of headings. 
16 
The International Monetary Fund has recently stressed the importance of fighting 
corruption and has focused on the promotion of good governance. 
In March 1996 the Organisation of American States (OAS) adopted a convention against 
corruption. 
The Transatlantic Agenda and the Joint EU-US Action Plan includes a specific 
commitment to combating corruption and bribery. The US and European business communities 
at a meeting of the Transatlantic business dialogue in Chicago 8-9 November 1996 included a 
reference in their declaration deploring bribery and corruption and stating that the issue would 
remain on their agenda for 1997. 
In May 1996 the International Chamber of Commerce strengthened its rules of 
conduct on bribery in international business transactions and urged greater action at national and 
international level against corruption. 
Transparency International, a non-governmental organisation dedicated to curbing 
corruption in international business transactions, has presented a paper advocating that action in a 
number of areas should be taken by the EU against corruption 
17 

ISSN 0254-1475 
COM(97) 192 final 
DOCUMENTS 
EN 09 
Catalogue number : CB-CO-97-244-EN-C 
ISBN 92-78-20208-8 
Office for Official Publications of the European Communities 
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