Transparency International (‘TI’) just published its 2014 Corruption Perceptions Index (‘CPI’). It comes a little over a month after the publication of TI’s annual progress report on the OECD anti-bribery convention (‘Progress Report’), which tracks enforcement activity in countries that have ratified it.*
For countries in our region of operation – Czech Republic, Slovakia, Hungary, Romania, Serbia, Bulgaria, Turkey and Kazakhstan – the results are an unsurprising mix of modest progress (Czech Republic, Slovakia, Bulgaria and Kazakhstan), stagnation (Hungary and Romania) and setback (Serbia and Turkey).
The country bettered its standing in this year’s CPI. It now sits at 53rd overall (from 57th in 2013) with a score of 51, though it remains in the ‘Little or No Enforcement’ category in the Progress Report. However, the report’s focus on deterrence, which emphasises successful prosecution of major cases with substantial sanctions, may not reflect all progress on the ground. In fact, it seems that the police and state prosecutors are increasing their efforts to fight corruption. While the prosecution of corruption crimes fell in 2013, the prosecution of crimes related to public procurement rose during the same period. Furthermore, numerous high-profile criminal prosecutions relating to bribery (involving several top politicians) have been initiated. Still, none of these cases have led to convictions yet, so it is difficult to judge whether the police and state prosecutors’ efforts will bear fruit.
The police also seem keen on prosecuting legal entities (which is possible since provisions on corporate criminal liability were introduced in 2012). In 2013, 48 legal entities were prosecuted, many for tax evasion, but there were also several cases of corruption, including the prosecution of a major Czech construction company. Due to the typical length of criminal proceedings there have been few convictions yet (other than in some simpler tax evasion cases).
Slovakia improved its standing by three points this year, reaching a score of 50, which places it in 54th position overall, just below the Czech Republic. Like its neighbour, it still sits in the ‘Little or No Enforcement’ category in the Progress Report. However, personnel changes at the office of the President of the Slovak Republic, the Chairman of the Supreme Court and the Chairman of the Court Council in 2014 give hope that reform of the judiciary may be coming soon. Another positive move is the introduction of new legislation on whistleblower protection, including a scheme for financial reward (albeit of a very limited scope). The long expected legislation on criminal liability of legal entities is still in the works – the public debate has concluded and the bill was submitted to the Government, which should bring it to Parliament.
The level of enforcement of anticorruption legislation is nonetheless stagnating, 2014 having produced no new major case. However, a recent scandal related to procurement of medical equipment in one hospital resulted in personnel changes at the office of the Minister of Health and the Chairman of the Parliament. It also opened a broader public debate on the transparency of procurement procedures in the healthcare sector and the reasons underlying public hospitals’ huge losses.
Hungary’s standing in the CPI has not changed in 2014. With a score of 54, it still fares better than most CEE/SEE countries. The country remains in the ‘Limited Enforcement’ category in the Progress Report, largely on the strength of three investigations and other cases commenced in 2010-11, and TI recently noted the reluctance of local authorities to fight corruption. It remains to be seen whether the new whistleblowing legal framework will prove effective in the fight against corruption. Since its coming into force in January 2014, there have been some 100 public notifications to the competent authority, but all cases are still pending.
Meanwhile some Hungarian cases have received strong public attention, among which the police investigation into the operation of the Norwegian Civil Fund in Hungary, following a report issued by the Hungarian Government’s Control Office. The decision to suspend entry into the United States of six Hungarian government officials further to U.S. Presidential Proclamation 7750 also attracted the attention of the media. The measure may have been connected to the officials’ suspected involvement in alleged high-profile corruption at the Hungarian Tax and Customs Office. So far no investigation has been launched in Hungary against the individuals concerned.
With a score of 43 and 69th overall in the CPI, Romania has not budged in the last year. The specialised anti-corruption prosecutorial authority, the National Anti-Corruption Directorate (‘DNA’), has been very active in spite of prosecutors’ workload. The agency was praised by the European Commission in its 2014 EU Anti-Corruption Report, noting that it ‘has built a notable track record of non-partisan investigations and prosecutions into allegations of corruption at the highest levels of politics, the judiciary and other sectors […] Key to these results has been DNA’s structure which incorporates, apart from prosecutors who lead and supervise investigations, judicial police and economic, financial and IT experts.’ More than 90% of the DNA’s indictments in the last seven years have been confirmed by final judgements.
The past year has also seen the conviction and imprisonment of a former Prime Minister, as well as of a Minister still in office, and the sentencing of a well-known former politician and influential media owner in a money-laundering scheme designed as a series of (illegal) privatisation transactions. Recently, the DNA and the courts have also put an emphasis on recovering losses resulting from such criminal acts, in addition to convicting individuals or companies involved. This pro-active trend is expected to continue in the coming year. Such was the message delivered by the new President-elect, Klaus Iohannis, scheduled to take office on 22 December 2014, who emphasized during his campaign the necessity to build further on anti-corruption enforcement efforts.
Serbia fell a couple of rungs this year, its overall standing dropping to 78th (from 72nd in 2013) with a score of 41. Despite this poor showing, Serbian authorities have maintained a relatively high level of enforcement against corruption and corporate crimes throughout 2014. This activity was in part generated by new failures of the Serbian banking sector, resulting in probes into questionable lending practices. Some high-profile figures, including magnates, were arrested in the wake of these investigations. While a number of trials and pre-trial procedures are pending and the first convictions are still to come, there is hope that the outcome will demonstrate the system’s capacity to deal with such challenges.
An important development in the regulatory field was the adoption in November 2014 of the first law on the protection of whistleblowers. This should represent another milestone in Serbia’s fight against corruption and anticipation is building while awaiting the first developments in this area.
Though it improved its standing by two points in the CPI (with a score of 43), Bulgaria is one of only two countries that regressed in the Progress Report, moving down to the ‘Little or No Enforcement’ category. The country’s slip is reflected in the results of a survey by the Bulgarian Centre for Democracy Studies, according to which the corruption level in the Bulgarian administration in 2014 was the highest on record in the past 15 years. Reasons explaining this poor showing include the political crisis in 2014, the unstable governance and the lack of a common position among authorities with regards to anti-corruption measures. Efforts at reforming the system and reducing corruption include the establishment of internal bodies (such as the State Agency for National Security and the Centre for Prevention and Countering Corruption and Organized Crime), though their activities has been limited in scope. Irregular payments and bribes by firms and individuals continue to be perceived as common.
Despite a few major corruption scandals involving Bulgarian public officials, dissuasive sanctions have not yet been applied. The judiciary, the police and public procurement are the areas most affected by corruption. However, the newly elected Bulgarian National Assembly gives hope that the situation will improve. But whether the promises for transparency, effective supervision and severe sanctions are respected by the new MPs remains to be seen.
Turkey has regressed significantly this last year, losing five points in the CPI (its score is now 45) and dropping from 53rd to 64th overall, one of the worst plunges this year (a feat it shares with China and Angola). The country also remains in the ‘Little or No Enforcement’ category in the Progress Report. Following the wave of protests against the government’s increasing authoritarianism in 2013, the past year has seen corruption at the highest levels of government and business being exposed. While these allegations initially led to some arrests and resignations, the government’s response – a crackdown on political foes and purges in the police force and prosecutors – does not bode well for the future.
The country improved its standing in 2014, rising from 140th to 126th overall and gaining three points on last year’s score of 26. Kazakhstan also fares significantly better than its Central Asian neighbours. This year’s climb stems from the country’s efforts in implementing reforms, namely the 2011-2015 anti-corruption programme, which contains a number of measures aimed at improving the legislative framework, reducing the risks of corruption in government bodies and eliminating the country’s shadow economy. Key initiatives include the introduction of criminal liability for illicit enrichment, as well as the abolition of the Agency on Combating Economic and Corruption-Related Crimes and transfer of its powers to the newly created Agency on State Affairs and Counteracting Corruption (for corruption-related crimes) and the Ministry of Finance (for economic and financial crimes).
In terms of legislative developments, a new Criminal Code will come into effect in January 2015. As regards corruption-related crimes, the code introduces additional mandatory sanctions, such as loss of rank and state decoration and life ban against holding public office. Though its score of 29 on the CPI still denotes a corrupt environment, Kazakhstan seems resolved to combat corruption-related crimes and it is hoped that this year’s initiatives will improve the country’s future standing.
Three countries in our region of operation have now reached or surpassed the 50 points mark in the CPI (Hungary, Czech Republic and Slovakia), indicating that they may slowly be shedding their corruption heritage. In many countries, there seems to be increasing enforcement activity, although not yet sufficient to bring about real deterrence, which explains the systematically poor results in the Progress Report. In any event, there is no reason to rejoice, as much remains to be done. We will follow the coming year’s developments closely.