Introduction - the OECD Anti-Bribery Convention ("the Convention")

In November, the OECD Anti-Bribery Convention (officially the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions) celebrated its 10th anniversary. The Convention aims to reduce corruption in developing countries by encouraging sanctions against bribery in international business transactions carried out by companies based in the signatory countries, including Japan.

In October last year, the OECD issued a Report which considered the effectiveness of Japan's legislation and concluded that, despite commendable progress, Japan still has some way to go if the Convention objectives are to be achieved. This bulletin reviews the background to the Convention, Japan's efforts to comply with its anti-corruption obligations as a member of the OECD, and the recommendations in the recent Report.

Background - Summary of the Convention obligations and mechanisms for review

Countries that have signed the Convention (the "Parties") are required to put in place legislation that criminalises the act of bribing a foreign public official. The Convention also requires that Parties confiscate bribes and any profits obtained through foreign bribery, and these sanctions must apply to both individuals and companies. According to the Convention, Parties must work together to ensure its effective application— for example, in gathering and exchanging evidence, or through extradition.

The Convention also contains provisions for monitoring and review by the OECD Working Group which consists of a two-phase examination process. Phase I is a review of the legislation put in place by the Parties to implement the Convention. Phase 2 assesses the effectiveness with which the legislation is applied by each Party.

To date, thirty-seven countries have ratified the Convention. They have been credited with varying degrees of success in implementing the objective. However, it remains the case that the United States is by far the most proactive in investigating and prosecuting corruption cases under its now well known domestic legislation, the Foreign Corrupt Practices Act.

Steps taken by Japan to implement the Convention

Japan has implemented the Convention through provisions in the Unfair Competition Prevention Law ("UCPL").1 As initially enacted the foreign bribery provisions in the UCPL were subject to criticism from the OECD for their narrow scope, wide exceptions and the short limitation period for actions which meant that by the time a bribe was discovered the liability of the person giving the bribe could be time barred. The legislation has also been heavily criticised on the basis that the UCPL is a broad statute dealing with competition law and the FCPA-equivalent provisions therefore do not have the profile that they need.

In 2001, following the Phase 1 Review by the OECD, the UCPL was amended to deal with some of these issues. This amendment removed the much criticised “main office” exception, under which an offence was not committed if the “main office” of the person giving the bribe was located in the same country as that in which the foreign public official was engaged in public service.2 It also broadened the definition of foreign public officials in relation to public enterprises.

Further statutory amendments to improve compliance with the Convention were made following the Phase 2 Review by the Working Group, which reviewed the legislation in practice as well as on paper. In January 2005, Japan established nationality jurisdiction over foreign bribery offences, with the result that foreign bribery offices committed abroad by Japanese nationals and officials are now covered. Secondly, amendments which strengthened the sanctions and increased the statutory limitation period from three years to five years came into force for "natural persons" in November 2005 and for "legal persons" in January 2007.

Thirdly, from April 2006 amendments have been made to tax legislation in order to expressly deny the tax deductibility of bribe payments to foreign public officials in all circumstances.

Remaining practical issues with the Japanese implementation of the Convention

In October this year the OECD published the results of a review of the progress of Japan towards meeting its Convention obligations since the 2005 Report. This commented on and added to Japan's March 2007 Self-Assessment Report.

As Angel Gurría, OECD Secretary-General, pointed out in her speech to mark the recent anniversary of the Convention "it is one thing to enact laws, and another to enforce them". The primary criticism which has been frequently levelled at the Japanese authorities (and those of many other countries) is that, having enacted the legislation, they have done little to apply it. To date, there have been no prosecutions under the anti-bribery sections of the UCPL and Japan has been far from proactive in investigating foreign bribery cases. The most recent Report reiterates this complaint, and calls on Japan to do more. Japan admits that it has found it difficult to obtain investigative leads, and that this is the main impediment to the effective application of the legislation.

Japan's self assessment recognised that the low level of awareness by the general public and the private sector of the foreign bribery offence, and also of the whistle-blowing protection measures, could be contributing to the problem in obtaining investigative leads. However, despite this acknowledgment the Working Group still criticises Japan for not seriously considering its recommendation to move the foreign bribery offence from the UCPL into a separate statute.

The Working Group recommends a separate statute for two reasons. First, it would enhance the visibility of the office. Second, a separate statute would deal with concerns related to the role of the Ministry of Economy Trade and Industry ("METI") in respect of the current statute. One of the consequences of placing the foreign bribery offence in the UCPL is that its implementation is mainly the responsibility of METI as opposed to the Ministry of Justice, which has responsibility for the Penal Code. The Working Group has repeatedly expressed concerns that the overall mission of METI (to promote foreign trade by Japanese companies) is not entirely consistent with the goal of the Convention.

The Self Assessment Report made several recommendations to enhance its information gathering mechanisms, which were endorsed by the Working Group. These include (i) increasing public awareness of the whistleblower law and the foreign bribery offence; (ii) enhancing information gathering at Japanese overseas missions; (iii) promoting the conclusion of bilateral Mutual Legal Assistance ("MLA") agreements, and utilising MLA at the earliest stage; (iv) actively making use of voluntary investigative measures at the earliest stage; (v) enhancing the investigative authorities’ foreign language abilities and knowledge of foreign legal systems; (vi) promoting coordination between police and prosecutors; and (vii) continuing to explore the use of immunity from prosecution and plea bargaining. It remains to be seen whether and to what extent Japan will successfully implement these steps and the additional points raised by the Working Group. However, the government has recently reaffirmed its commitment to the aims of the Convention3 and stated certainly stated its intention to do so.


The Working Group has recommended a yearly informal meeting between the lead examiners and the Japanese authorities to assess progress following the most recent report. The OECD will continue to monitor Japan's compliance not just on paper but in practice and Japan is likely to come under continuing pressure to be increasingly proactive in investigating and prosecuting cases of alleged bribery. Japanese companies will therefore need to be aware of their obligations under the new laws and be particularly vigilant when operating in developing countries, where what might be regarded as "normal" practice to facilitate business could fall foul of the anti-corruption legislation.