International Regulatory Enforcement (PHIRE)

Watch Out the Blind Spot: Export Credit and the Fight Against Corruption

July 08, 2020

Nicola Bonucci

The UK NGO “Spotlight on Corruption” just issued a report entitled “WEAK LINK OR FIRST LINE OF DEFENCE? THE ROLE OF UK EXPORT FINANCE IN FIGHTING CORRUPTION IN A POST-CORONAVIRUS AND POST-BREXIT TRADE DRIVE”  (see the executive summary and recommendations at https://drive.google.com/file/d/1FAIaAc378sASShFOqx_I2rEoAdGLq992/view).  The report highlights an area which is often overlooked, including by companies that benefit from it, i.e the role and responsibilities of export credit agencies in the international fight against corruption.   The Organisation for Economic Cooperation and Development (OECD) has developed an international framework that applies to all export credit agencies of OECD members but also to countries that are not OECD Members like Brazil or Russia.  The 2019 Revised Recommendation adopted by the OECD (https://legalinstruments.oecd.org/public/doc/201/201.en.pdf) builds on and strengthens earlier texts developed by the OECD and provides for enhanced due diligence “If one of the parties involved in the transaction has been convicted of violation of laws against bribery, been subject to equivalent measures, or been found as part of a publicly-available arbitral award to have engaged in bribery within a five-year period preceding the application”.  While not being legally binding the OECD Recommendation is closely monitored including by NGOs as demonstrate by this recent report.  Companies seeking support from one or several export credit agencies should therefore take due notice of a spot which is becoming less and less blind.

Companies doing export credit agency (ECA)-financed business should be aware of real-world business and other consequences of these requirements:

  • Companies seeking official support from an ECA should be aware  that an ECA covered by the OECD Recommendation will carry out legal and business due diligence in line with the OECD Recommendation, and that such due diligence will be more rigorous where there have been previous corruption issues

  • Operations benefitting from ECA support are under an increased scrutiny by NGOs, and

Post-COVID crisis, ECA and NGO scrutiny of compliance with the OECD standards is likely to increase, and result in media and public attention given the use of public funding.

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