A report adopted by the European Commission on 18 June found that most member states have not yet put in place legislation to criminalise all circumstances in which corruption may occur, despite a legislative agreement of 2003 which was to have been implemented by 2005. Vice-President Franco Frattini, EU Commissioner responsible for justice, stated that "We must fight corruption in the private sector because it is harmful to the internal market, it distorts competition and impedes the sound economic development of Member States' economies."
The negative effects of corruption are well known but it might not be something we see as being a particularly widespread. However a 1999/2000 World Bank Institute survey involving more than ten thousand firms in more than 80 countries in 1999/2000 found that 60% of respondents indicated that a bribe above 5% of the value of the contract is typically needed in doing business with a government. This shows that the problem is in fact far more widespread than we might imagine, so much so that one 2005 report put the value of bribes at $1 trillion a year.
For years the USA had taken the lead in anti-corruption legislation, with the Foreign and Corrupt Practices Act being enacted in 1977 and substantially revised in 1988 and 1998. Its provisions made the bribery of foreign government officials illegal by US persons or foreign companies and nationals doing business in the US. Despite the negative effects corruption can have on the economy, critics of the legislation argued that it put the US at a competitive disadvantage when compared with those countries that allowed such payments. It was felt that bribery was an accepted part of business in certain places and therefore the US should be allowed to do this where necessary. However the scope of the US legislation is targeted at the public, rather than private, sector, referring as it does to payments to foreign government officials, and does permit greasing or facilitating payments, for routine government actions such as expediting a visa request.
In the late 1990's, international organisations such as the OECD and UN became actively involved in the fight against corruption because of its impact on the global economy and its implications for the rule of law. The EU then followed suit. The objective of the 2003 European framework decision referred to in the Commission report is to ensure that promising, offering or giving (active corruption) or receiving (passive corruption) an undue advantage of any kind in the course of business activities in the private sector are criminal offences in all member states. Both profit and non-profit entities should be covered by the scope of member state corruption laws.
The Commission report came just a few months after the Government asked the Law Commission to undertake a review of the law in England and Wales with a view to "modernisation, consolidation and reform". In fact, although all member states criminalise direct corruption, the only member states to have completely met the requirements of the Framework Decision are the UK and Belgium. Other member states have yet to make it a criminal offence to give or receive a bribe through an intermediary or to extend their legislation to include non-profit organisations. Austria, Poland and Italy for example, do not criminalise corruption where undue advantage is given or received through an intermediary. Other member states do not punish all types of corrupt conduct and others do not provide for intangible, non-financial benefits.
The problem for Commissioner Frattini is that member states still have full sovereignty over criminal justice and therefore the EU has no real power to make member states do more to stamp out corruption. The Commission's legitimacy to demand such reform is also hampered by still more claims of corruption within the Parliament and Commission themselves – two arrests were made in Brussels in March in relation to Commission tenders for its delegation buildings in Albania and India. This kind of scandal may weaken the Commission's credibility in calling for member states to act.