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For debate in the Standing Committee - see Rule 47 of the Rules of Procedure
Pour débat à la Commission permanente – Voir article 47 du Règlement
Doc. 8402
6 May 1999
Draft Civil Law Convention on Corruption
Report1
Committee on Legal Affairs and Human Rights
Rapporteur: Mr Jaime Bartumeu Cassany, Andorra, Socialist Group
Summary
The draft Civil Law Convention on Corruption, which supplements the Criminal Law Convention on Corruption adopted in 1998, is the first international agreement to be established by the Council of Europe in the field of civil law.
The Convention covers practices in the business world which may not be covered by strict criminal law definitions, provides for full compensation for damage resulting from an act of corruption, for a contract to be declared void if its consent has been vitiated by an act of corruption, and for protection of employees who report, in good faith, acts of corruption.
The Assembly proposes to extend the scope of these provisions to include third parties who may have knowledge of acts of corruption. As a deterrent, it also proposes to make provision for punitive damages as well as full compensation for damage.
I. Draft opinion
1. The Assembly recalls that, in its Opinion No. 207 (1998) on the draft criminal law convention on corruption, it had stated that corruption was a threat to democracy.
2. It therefore welcomes the preparation of a draft civil law convention on corruption as another in the series of conventions established by the Council of Europe to combat corruption. It also congratulates the Multidisciplinary Group on Corruption (GMC) on its imaginative idea to apply the rules of civil law in order to curb this phenomenon by following a multidisciplinary approach.
3. Although the draft convention does not establish any rights exercisable directly by persons in the domestic courts, it nevertheless contains specific obligations for states which undertake to set up mechanisms and procedures available to the victims of corruption. The draft also includes basic principles of civil law, present in most European legal systems, and gives them a new practicality by incorporating them in an overall strategy on corruption.
4. The Assembly welcomes the fact that the draft convention does not permit any reservations.
5. It supports the principle of full compensation for all damage suffered as a result of corruption, but thinks that punitive damages should also be imposed as a deterrent to the commission of such acts.
6. It regrets the fact that only parties to contracts whose consent has been vitiated by an act of corruption may withdraw their consent and apply for the contract to be declared void. This provision could be extended to third parties with a legitimate interest.
7. It also considers that people should be encouraged to report acts of corruption and regrets the fact that only employees are protected against sanctions imposed for doing so. It proposes that this protection also be extended to third parties.
8. Finally, as with the draft criminal law convention on corruption, it considers that the number of ratifications required for the convention to enter into force should be reduced.
9. Consequently, the Assembly recommends that the Committee of Ministers make the following amendments:
i. in Article 3, to add at the end of paragraph 2 the words “as well as punitive damages”;
ii. in Article 8, to add a third paragraph worded as follows: “Each party shall provide in its internal law for any third party having a legitimate interest to apply to the court for such a contract to be declared void, without prejudice to their right to claim damages”;
iii. in Article 9, to add the words “and third parties” after the words “for employees”;
iv. in Article 13, to add a second paragraph which could read as follows: “Parties which have neither signed nor ratified the conventions dealing with the subjects mentioned in paragraph 1 above shall guarantee to each other an equivalent level of mutual assistance in judicial matters in the fields covered by this convention”;
v. in Article 15, to reduce to ten the number of ratifications required.
10. The Assembly also recommends that the Committee of Ministers take appropriate measures to enable the Assembly to participate in the work of the Group of States Against Corruption (Greco).
II. Explanatory memorandum, by Mr Bartumeu Cassany
A. Introduction
1. The Assembly welcomes the draft civil law convention on corruption which, following the criminal law convention on corruption, supplements the series of conventions to combat corruption.
2. The convention’s innovative nature should be highlighted: it is the first international agreement to be established by the Council of Europe for the purpose of codifying basic rules of civil law. In addressing the civil law sphere, the Council of Europe is dealing with relations between private individuals. This innovation is the result of a multidisciplinary approach aimed at combating corruption by every legal means.
3. Furthermore, the choice of a convention makes it possible to monitor the commitments entered into by the states parties. The Group of States Against Corruption (Greco), with whose work the Assembly should be involved, will be responsible for monitoring, as in the case of the criminal law convention on corruption.
4. The convention is open to non-member states and the European Community.
5. Finally, the fact that the draft convention does not permit any reservations should be welcomed.
6. Just as it stated in its opinion on the draft criminal law convention on corruption, the Assembly considers that the number of ratifications (14) required for the convention to enter into force is too high.
B. The content of the draft convention
7. Each party is required to take the necessary measures in its internal law for the convention to function effectively. The fact that the draft convention does not stipulate any time limit for parties to conform to the convention means that the domestic law must enable it to be implemented from the time of ratification. In any event, the Greco will ensure that this is the case. Some parties will only have to make a few changes to their internal law since they already have legislation on this subject. Other parties, by contrast, will be forced by the convention to introduce previously unfamiliar concepts into their internal law.
8. The scope of the convention is actually very broad since it covers all victims of corruption, wherever they may be.
Article 2 — Definition of corruption
9. The civil law definition of corruption is fairly broad, covering practices (mainly business practices) which may not be covered by strict criminal law definitions.
Article 3 — Compensation for damage
10. This article makes provision for full compensation for any damage resulting from an act of corruption.
11. The Assembly supports the principle of full compensation for damage. Every effort must be made to avoid partial or fixed-sum compensation which may, in the long term, mean that corruption pays. It is also worth considering whether compensation should be accompanied by punitive damages which would add a deterrent element.
Article 8 — Validity of contracts
12. Article 8, paragraph 2 stipulates that all parties to a contract should be able to withdraw their consent after discovering an act of corruption and apply to the court for the contract to be declared void, notwithstanding their right to claim for damages.
13. Hence, only parties to contracts are covered, which is unfortunate. It is often in the common interest of the parties to a contract for the contract to remain in force. For this reason, contracts signed as a result of an act of corruption can continue to produce effects harmful to the interests of third parties or the community. Accordingly, third parties with a legitimate interest who are not parties to the contract could perhaps be given the right to apply for it to be declared void if they discover an act of corruption.
Article 9 — Protection of employees
14. This article makes provision for protection against any unjustified sanction for employees who have reasonable grounds to suspect corruption and who report in good faith their suspicion to responsible persons or authorities.
15. The purpose of this provision is, by guaranteeing them protection, to encourage people to report acts of corruption which come to their notice in the course of their work. In order to avoid spiteful or slanderous allegations, Article 9 makes this protection subject to certain conditions. In particular, employees must be protected against unjustified sanctions and must report their suspicions in good faith to responsible persons or authorities and have reasonable grounds for doing so.
16. It is unclear, however, why this protection is only granted to employees. Third parties, such as independent accountants or auditors, may also discover acts of corruption during the course of their work. Why are they not also protected? These third parties, although they are not part of the company's workforce, are contracted to work for it and there is a strong chance that their contract would not be renewed if they were to report acts of corruption. The demands of professional secrecy should also be borne in mind when considering whether the scope of this provision should be extended so that these independent experts are also protected.
Article 13 — International co-operation
17. Article 13 stipulates that the parties shall effectively co-operate in matters relating to civil proceedings in cases of corruption, listing a number of examples. All the fields mentioned are covered by international agreements drawn up outside the Council of Europe. It is likely, therefore, that some parties to this civil law convention are not party to these other instruments. For this reason, it would have been useful to include a clause to the effect that states which are not party to the international instruments mentioned in the draft civil law convention should, at the very least, guarantee to each other an equivalent level of mutual assistance in judicial matters in the fields covered by this convention.
Article 15 — Signature and entry into force
18. As stated above, the number of ratifications required (fourteen states) seems rather high.
19. The Assembly had made the same observation with regard to the criminal law convention on corruption and it is highly probable that the Committee of Ministers will give the same response as it did on that occasion, ie that while recognising that fourteen was a high number, it could be explained by “the strong expectation of the international community to make progress together, at the same time, in an area which [was] both politically and economically sensitive".
20. Finally, implementation of the convention will be monitored by the Group of States Against Corruption (Greco), which will be created when the fourteenth ratification of the criminal law convention on corruption takes effect.
21. The Assembly had expressed an interest in participating in the work of the Greco in accordance with Article 24 of the criminal law convention. The Committee of Ministers took note of this. The Assembly is now repeating its request.
C. Conclusions
22. The Assembly considers it important that the Committee of Ministers adopt the civil law convention on corruption, speedily, and certainly by the end of the year. Therefore, it will propose the following amendments only:
—in Article 3, as well as full compensation for damage, to make provision for punitive damages as a deterrent to committing acts of corruption;—
—to extend the scope of Article 8 to include interested third parties rather than only parties to the contract;—
—af ter Article 9, to make provision for the protection given to employees to be granted also to third parties who report acts of corruption;—
—in Article 13, to add a provision that parties which are not party to the agreements covering the subjects mentioned in paragraph 1 of the same article must guarantee each other an equivalent level of mutual assistance in judicial matters in the fields covered by the convention;—
—in Article 15, paragraph 3, to reduce the number of ratifications required for the convention to enter into force.Re
Reporting committee: Committee on Legal Affairs and Human Rights
Budgetary implications for the Assembly: none
Reference to committee: Doc 8341, Reference No. 2371 of 30 March 1999
Draft opinion adopted unanimously by the committee on 27 April 1999
Members of the committee: MM Jansson (Chairperson), Bindig, Frunda, Moeller (Vice-Chairpersons), Mrs Aguiar, MM Akçali, Arzilli, Attard Montalto, Bartumeu Cassany, Brand, Bulic, Clerfayt, Columberg, Contestabile, Demetriou, Enright, Mrs Frimansdóttir (alternate: Mrs Ragnarsdottir), Mr Fyodorov, Mrs Gelderblom-Lankhout, Ms Hlavac, Mr Holovaty, Mrs Imbrasiene, MM Jaskiernia, Jurgens, Kelam, Kelemen, Lord Kirkhill, Mr Kresak, Mrs Krzyzanowska, Mr Le Guen, Ms Libane, MM Lintner, Loutfi, Magnusson, Mancina, Mrs Markovic-Dimova, MM Martins, Marty, McNamara, Mozetic, Mrs Näslund (alternate: Mr von der Esch), MM Nastase, Pavlov, Pollo (alternate: Mr Minarolli), Polydoras, Mrs Pourtaud (alternate: Mr Bordas), MM Rippinger, Robles Fraga, Rodeghiero (alternate: Mr Speroni), Roth, Mrs Roudy, MM Schwimmer, Shishlov, Simonsen, Solé Tura, Solonari, Sungur, Svoboda (alternate: Mr Kroupa), Symonenko (alternate: Mr Khunov), Tabajdi, Verivakis, Vishnyakov, Vyvadil, Weyts, Mrs Wohlwend.
N.B. The names of those members who were present at the meeting are printed in italics.
Secretaries to the committee: Mr Plate, Ms Coin and Ms Kleinsorge