Art.5. Ppa1

TRADITIONS OF CORRUPTION
Andras Sajo*
It is very dangerous to suddenly speak of Eastern Europe as a unified space.

There are enormous differences both in the level of corruption and in the level of
discussing corruption. I will come back to that, but first let me mention that cor -
ruption became part of the tradition, part of the self -presentation myth in a
number of countries in Eastern and East-Central Europe. I'd like to quote Prince
Bakunin from his confessions addressed to the Czar when he was in prison in what
is today again St. Petersburg:
There is stealing and corruption everywhere, including in what is the
most honest Germany, but in Russia I think there is more stealing and cor-
ruption than in any other state. In the West the deceived cannot disguise
himself from public opinion and if there is public opinion then there is no
minister to protect the thief. In Russia, however, where everyone knows the
thief and the oppressor and the law breaker, everyone is silent because they
are afraid of their superiors and their only interest is to avo id that this be-
comes known to the Czar. But the Czar, your royal majes ty, is far away. It is
impossible in Russia for a public servant not to become a thief. Everybody is
stealing around him and soon it becomes his own personal habit and what
formally was something of disrespect becomes his personal nature. This is
inevitable because if someone tries to remain honest he will be hated by his
superiors. He will be called first a barbarian, and if he does not improve, he
will end up a free-thinker and, worse, a liberal. Those who were educated in
this school take these lessons with them when they become bureaucrats at
the higher level. It is inevitable because there is a m iserable payment to
bureaucrats. To fear or fear itself is not sufficient enough to co mbat this
disease.
Prince Bakunin wrote this in the 1850's. Now, because of the economy's
viscosity and because of the communist or state soc ialist structures, corruption is
still an everyday practice. It had its roots in the precommunist period as you ha ve
seen, and it certainly has increased. A consequence was, according to the surveys
which have been conducted, that corruption became normalized. People
understood that what they did in everyday life was corrupt, but they increasingly
considered this inevitable and therefore acceptable even though, with a double
consciousness, they still believed that there was something wrong with the bribery
of government officials. However, they considered corruption a fact of life and, as
such, it is impossible to
Professor of Law, Central European University, Budapest.
Institute for Constitutional & Legiihtr. e

Budjpes:. 1^'-- create moral theories about corruption because the only way to avoid it is
PANEL II: CORRUPTION IN EASTERN EUROPE
to avoid everyday life.
The overwhelming presence of bureaucracy is already a kind of hotbed for cor-
ruption. But there is also a social structure to bureaucracy: clientelism. There will be
a long debate I suppose about corruption in Italy and its de-masking, but it is very
clear that at least in Southern Italy, clientelis m as part of the social structure was
clearly linked to corruption. I imagine that this kind of clientelism is also common
in East and Central Europe.
The miserable pay of state bureaucrats compounds corruption in everyday
practice. The .only way to pay bureaucrats a higher wage is to reduce their
number. Because few civil servants are interested in risking their positions for a
raise, there is resistance to an increase in salaries.
Given the level of income, these traditional bureaucracies are suddenly c on-
fronted with a completely different standard of l ife and a completely new clientele:
Western and new local investors. It is simply not true that only Western investors
are bribing East European public officials, although national pride prevents us
from admitting that we are active bribers. As payo rt and bribery offers continue to
rise, a bureaucrat’s ability to resist decreases. Th is problem also existed in earlier
periods in Latin American and Africa.
I would also like to raise a different issue to refl ect upon corruption in Eastern
Europe. We find enormous variety in the region. A recent public opinion poll in
Ukraine shows that the number one concern among the population is the mafia.
The mafia is the single strongest social factor m society. This is not the Sicilian ma-
fia, but a local one which—although they love to say they are based on a Western
model—is organized on a completely different basis. Mafia and corruption are in -
terrelated because the mafia operates not only through fear, which plays a s econ-
dary role, but by establishing good relations with the government.
The mafia has become the most prominent factor in public opinion in Ukraine.
In the Hungarian press, as well as in other East -Central European countries, there
is little coverage of the mafia’s activities. This is because there are different
methods of social domination; fear of the mafia is superficial in the countries of the
former Soviet Union. In Central Europe, however, social stabilization is achieved
by silence. As a result there is little reporting of the mafia’s activities in Central
Europe. It is therefore very difficult to mobilize society against corruption because
fear of participation is deeply rooted.
To some extent, corruption, or a politician’s lack of honesty, allows f or more
political stability because corrupt office -holders are not interested in, or pushing
for, new elections. They want to serve their entire term because exercising power is
very lucrative. The Polish parliament has clear conflict of interests rules, s o they
didn't lose too much by calling for earlier elections. In Hungary, there are no such
rules and the Hungarian parliament is serving its full term.
One final remark. I share the view that corruption is a dysfunction or malfunc -
tion of society. But it is important to consider that corruption performs many eco -
nomic and social functions in this early stage of transition. For example, my friend
Tamas Pal told me that, in Russia, the payment of ten percent of a transaction price
to the mafia will ensure safe passage on the roads—a service the government does
not provide. Many other governmental services are inefficiently provided in
44 CORRUPTION & DEMOCRACY

TRADITIONS OF CORRUPTION
Eastern Europe. Hungary had an enormous bureaucracy which, because of its size,
was unable to cope with corruption. Such a lar ge bureaucracy is also unable to
provide services, including banking, which are now provided by the mafia. This
must be taken into consideration, or we limit ourselves to conflict of interests rules
and bank transparency regulations, among others, without addressing the roots of
the problem.
We will never understand the social background which keeps these corrupt
practices alive. It is true that Eastern European politicians are aware of conflict of
interests rules and that those who drafted banking laws were aware of minimal re -
quirements in that area. But, there is no social pressure to enact those laws so as to
prohibit corruption. Once again we can come up with suggestions, and I believe we
should, but we must realize that we may end up working in a vacuum.
DEFORMATION OF ORGANIZATIONAL PRINCIPLES: CORRUPTION IN POST-
SOCIALIST SOCIETIES
Josip Kregar"
1. The Syndrome
“Corruption is the most infallible symptom of constitutional liberty .” 1
1.1 False Problem: Betrayed Revolutions
Revolutions offer a rare opportunity to study the circumstances in which people

experience a heightened sense of morality. Euphoria, eruptions of joy and a spirit
of freedom are common reactions. Revolutionaries exploit these emotions with
promises of a better future, more democracy, personal freedom, economic devel -
opment, national emancipation or independence, and the fulfillment of collective
dreams. Movements are organized based upon widespread identification with such
goals. Anarchists dream of permanent revolutions and Utopians believe that
revolutions are the unavoidable result of good intentions. But both groups desire
them because, whether progressive or reactionary, based on religion or ideology,
peaceful or violent, all successful revolutions hav e moments of exaltation and
euphoria. During a revolution, morality transcends rational calculation and is
often symbolized by the revolution’s leaders and expressed in terms of idealistic
motives.
Revolutions are often identified with charismatic leaders who are morally above
the temptations of the material world. Cromwell, Robespierre, Lenin, Trotsky, Sta -
lin, Mao, and Castro were willing to sacrifice themselves to brutally eliminate
competitors and dissidents, and promised to use al l—even immoral—means to
achieve their ideological goals. They did not appear to care about material
benefits; they lived in spartan circumstances and their past did not suggest
personal ambition or a threat that they would use their public positions for
material benefit.
CORRUPTION & DEMOCRACY 45
Panel II: Corruption in Eastern Europe
But when the revolution ended, everything was different. The movement trans -
formed itself and became an institutionalized order. Order requires rules and le -
gitimized power as well as regulated status, income and material situations. Power
must be expressed in material forms. Nepotism, “state” villas, western cars, bank
Professor of Law and Director, Center for Legal Consultations, Zagreb

School of Law. E. Gibbon.
Institute for Constitutional Legislative

accounts in Switzerland, benefits for vet erans, ceremonies all became part
Budapest. I'y^-
of the newly established order. The following quote illustrates this phenomenon:
He who wants to establish absolute justice on earth by force requires a
following, a human “machine.” He must hold out the necessary internal and
external premiums, heavenly or worldly reward, to this “machine” or else
the machine will not function.... This belief, even when subjectively sincere,
is in a very great number of cases, really no more than an ethical
“legitimization” of cravings for revenge, power, booty, and spoils. Emotional
evolutionism is followed by the traditionalist routine of everyday life ....
After coming to power, the followers of the crusader usually degenerates
very easily into a quite common stratum of spoilsmen/
The revolution becomes corruptedtheir leaders turn out to be nothing more than
common men, with average abilities and often a lack of morality.
We do not emphasize the problem of degeneration 4 following revolutions be-
cause revolutions—the Russian, Chinese, anti-colonial, and the anti-socialist,
velvet revolutions—are symbols of our time. We emphasize them to point out the
contrast between fascinating promises and somber reality. The recent dramatic
changes in the now post-socialist countries reveal that, here too, unrealistic
revolutionary expectations and promises are contrasted with reality. Those newly -
emerging democracies are attempting to function as normal modern societies, but
the burden of social inertia is a visible obstacle. D isappointment in betrayed
promises, the revelation that the revolutionary ideals were false, and the lack of
moral orientation of the leaders shatter the spirits of the populace as the state
returns to business as usual in a still corrupt society. Because a certain level o f
corruption exists in developed societies, the burden and danger of devolution
must, therefore, be analyzed not on the superficial level of emotions (false
problem: betrayed revolutions) but from a concrete view of reality.
1.2 Real Problems: The Burdens of Post-Socialism
Post-socialist countries, in general, are faced with three general social problems:
1)the destruction of the moral basis of society, and simultaneously, the explosion of
aspirations; 2) an undeveloped and inefficient system of democratic in stitutions;
and, 3) the lack of political tradition and culture.
48 C ORRU PTION fic D E M OCRA CY

CORRUPTION IN POST-SOCIALIST SOCIETIES
H. H. Gerth and C. W. Mills, Max Weber: Politics as a Vocation, p. 125 (Oxford Uni- versiry Press 1958).
Not only in speech, but also in reality.
A. Tourame, LA VOIX AT LE REGARD, chap. IV (Seuil, Paris 1978).
Socialist dogmas were destroyed because they lacked credibility. By aspiring to
create a Marxist scientific heaven on earth, these dogmas succeeded in eliminating
the traditional moral foundations of society, including religion. Cynicism,
“doublethink,” and the realization of moral norms were typical of the totalitarian
political administrations. Now the “western way of life” has penetrated deeply
into the consciousness and values of the people, but in a deformed, perverse
manner. A false picture of western society has been presented: pure leisure and
entertainment, in which everyone is young and healthy, oriented toward the
emotional side of life, and full of action and excitement. The mundane aspects of
Western life are not revealed—the years of education and hard work from which
technological superiority and the high standard living has resulted. The traditional
basis of morality is now lacking. Dogmas were functionally replaced by popular
movements, nationalism, “witch hunting,” hatred of enemies, and religion. The
discrepancy between aspirations and possibilities is glossed over by campaign
promises of a better future (through de-nationalization and privatization, and de -
bureaucratization).'
The lack of democratic institutions is not dir ectly visible. Constitutions and
laws are drafted that are comparable or even identical w ith those found in
democratic societies. Elections, parliaments, administration, judiciary,
constitutional courts, and civil rights are proclaimed as they are in devel oped
democratic societies. The legal system is impressive in its size, but illegal behavior
is rampant. New campaigns and discussions about new legislative acts,
reorganizations, and schemes to rid society of these problems often emerge, but
usually have a very short life expectancy. The goals of new institutions are not
clear, while internal relations and relations with the public are confused.
Operating methods and organizational routines are disconnected from the goals.
Institutions need time to develop manageable and understandable goals and areas
of competence: what is the aim of the organization and who is responsible for
what? Inside the state hierarchy, horizontal and vertical coordination and control
is insufficient. Only in time will the institutions be able to function normally. It is
not always clear what the official rules are; discretion in interpretation of laws is
vast and therefore it is difficult to ascertain when interpre tation stops and abuse
begins.
Critical to all governmental organiz ations are its employees. The old personnel,
being identified with the communist regime, were replaced by people who may
have more education but were inexperienced. The new civil servants had the revo -
lutionary spirit, but with no specialization or adminis trative knowledge. Many po-
sitions remained politically important even after the old system of nomenclature
was abandoned. Selection of individuals for key positions was based on personal
loyalty rather than professional competence. The methods of work and the values
of new personnel revealed the hidden inertia of the old system. A precarious bal -
ance resulted: inertia was confronted with ideas and inspirations from abroad,

The situation is similar to the anomaly described in works of E. Durkheim.
knowledge was contrasted to politics, and stability was necessary, but change,
inevitable.
Post-socialist countries are defined, not only by their political past, but also by
their level of social and economic development. Material conditions in these coun -
tries do not support individual prosperity. Lower standards of living widen the
gap between rich and poor. Successful private entrepreneurs, segments of political
bureaucracy, war barons and the other nouveaux riches, show off the symbols of
wealth that previously were invisible in these societies. Only a small m inority are
included in the new economic elite and enjoy real improvement in their everyday
life. Social stratification in a society with an egalitarian cultur e and tradition 6 cre-
ates heightened social tensions while moral standards become more flexible. The
“werewolf hunger for surplus” during war (in the former Yugoslavia) and the ac -
cumulation of capital produce individual frustration, suppressed anger, and inde-
finable feelings of dissatisfaction and alienation. Work ethics are not present. A
free press, and motivated and responsible public opinion have yet to be developed.
Cynicism and pessimism are more than just a “style” in post-revolutionary coun-
tries. Passivity and social depression are common. Often, the political culture is
more parochial than participative. In times of insecurity “normal” social problems,
such as alcoholism, drug abuse, and family violence increase. Each of these prob -
lems are now very evident in all the transition states.
The problems are the result of under-development as well as the result of the
transition to a market society. In such a situation , corruption is not an incidental
phenomenon but an integral part of the model.
2. Corruption: Causes and Remedies
Corruption is not a social phenomenon which can be explained by a simple

cause/effect model. Corruption is not the product of a single cause, but rather of
sets of causes which complement each other and occur simultaneously. Corr uption
often is a result of many contingent circumstances which sometimes produce
different effects. The levels of causality are numerous, hidden behind manifest acts
of corrupt practices in deeper social structures.
Explanations of corruption in the social sciences are problematic, not so much
due to the reconstruction of causal chains, but in the very essence of pre -
paradigmatic knowledge. Social scientists to a greater extent are able to reconstruct
deeper and more indirect influences for a single phen omenon, and then disagree
This is not a result of socialist ideology but of a longer “tribal” and social past.
Naturally, after J 0 years of proclaimed material equality the inertia in this value
orientation is even
n' o re pronou nced .
about them. Corrupt practices are contingent, complex, 7 and explainable by many
different theories.

Social scientists emphasize that corruption in post -socialist countries must be

explained by “discovering” the many levels of structural causalities. A distinction
is made between the levels of interaction (institutional and social), not to create
rigid distinctions, but to demonstrate differences (and similarities) in theoretical
approaches. Starting with the most visible, manifest, and elaborated levels and
moving to the indirect and latent social cau ses of corruption, social scientists focus
on particular elements of corruption, such as, the international phenomenon, the
interconnection between environment (political, economic, and social) and
organizational principles and the role of law.
2.1 Corruption as Market Interaction
Corruption in its manifest form is visible through individual interactions. It is

relatively easy to see an act of corruption as a market transactio n—a result of
offers and demands. The price' of the transaction is a function of the relationship
between the potential gains and the risk of punishment. The greater the
supervision and control, security of social position, consistency of salary, and the
certainty of severe punishment, the lower the risk of corruption. The higher the
bribe and the better excuse for corruption (“everybody else is corrupt”), the higher
probability for corruption. In mathematical formulation these principles are
expressed as a simple formula:’ Particular benefit (PB) > Universal benefit (UB)
where:
PB = (Expected benefit/EB) + (Guaranteed benefit/GB)

In this view, corrupt acts are perceived as acts of Homo Corrupticus—an ideal type
of human personality—who rationally chooses acts in situations of potential
corruption. The predictability of this rule, how ever, is limited; the rule implicitly
“Komplexitat in dem angegebenene Sine heifit Selektionzwang, Selektionzwang

heilSt Kontingenz, und Kontingenz heifit Risiko. Jeder komplexe Sachverhalt
beruht auf einer Selektion der Relationen zwischen seinen Ele menten, die er
benutz, um sich zu konsti- tuiren und zu erhalten. Die Selektion placiert und
qualifiziert die Elemente, obwohl fur diese andere reiationierungen mdglich
waren. Dieses ‘auch anderes moglich sein’ bezeichen wir mit traditionsreiche
terminus Kontingenz. Er gibt zugleich den Hinweis aus die M oglichkeit des
verfehlens der guenstigsten Formung.” N. Luhmann, SOZIALE SYSTEME, SUHRKAMP, p. 47
(Frankfurt 1991).
“ The price is not expressed exclusively in money; social status, influence, and
indirect benefits are even more important.
9 Compare with formulations in H. Ludtke, H. Schweitzer, KORRUPTIONSNEIGUNG BHI
UNTERSCHIEDLICHEN ERWARTUNGKONSTELLATIONEN IN DER HANDLUNGSITUATION, KOLNER ZEITSCHRIFT FURSOZIOLOGIEUND
SOZIALPSYCHOLOGIE, p.
470, Vol. 45, No. 3 (1993).
presupposes axioms of human nature and ignores the fact that situations are fluid
and determined by higher sets of social and organizati onal factors. This results in

the formulation of a sophisticated “sociological proverb” that occurs in mutually

contradictory pairs. “It is not that the propositions expressed by proverbs are in -
sufficient; it is rather that they prove too much .”'" We can add to the formulation
almost all of what we see as more or less important determinants of price (PB).
From this point of view, the remedy for corruption is to simply increase its price
by introducing more rigid sanctions and more supervision. Moreover, to ward off
the susceptibility to corruption the government ought to increase wages, job secu -
rity, and professional ethics.
For science, this is an unacceptable simplification. The rule of common sense
based on limited evidence cannot be submitted to proof, and incorporates pre-
sumptions which are taken for granted. Perhaps corruption does not occur in most
situations because the offered price was simply too low. Furthermore, the formulas
do not explain non-monopoly situations where both actors have other po ssibilities
to pursue. The problem is much more complex than it appears for one simple rea-
son: the factors for PB are derivations of other factors which are not determined by
individual interactions but by social, political, and economical structure s—the par-
ticular environment of the actors.
2.2 Corruption and the Normative Regulation of Interactions
Interaction between individuals is not random; it is regulated by norms of mu -

tual expectations. A concrete act results from the interpretation of certain rules by
the actors. Rules are the crystallization of such norms; corruption results from an
interference that blocks this crystallization. From this perspective, corruption can
be seen as a phenomenon which reflects cultural and social norm s—the environ-
ment in which the actions take place."
" H. A. Simon, The Proverbs of Administration, PUBLIC ADMINISTRATION REVIEW, Vol. 6 (1946).
Legal definitions are not often very precise. According to the principle of
legality (nulla crimen sine lege), corruption is “a deviation from legal or formal
norms of official conduct." This, in many variations, is defined in different
criminal laws as the taking of a private benefit (anything of value) by a public
official for some official act. The defendant must have a corrupt intent, and the
relationship must involve an intent to influence the public official. Experts of
comparative law give more definitions. The criteria of legal definitions , or
implementation of sanctions against corruption, are changeable in time and
space. They are not only different in different countries (in space), but they also
are variable in time—sometimes under the same legal regulation.

The perception of reality is a construction of human conscience, and this per -

ception is a result of values and attitudes inherited and internalized by
socialization. People imitate each other, they internalize family, group, and
cultural values, they learn what to except from others and how to behave, and they
rationalize situations and direct their personal behavior accordingly. In this
respect, corruption is, more or less, a predictable form of behavior. The exchange
of verbal and nonverbal signals is so subtle, the “language of corruption” so multi-
interpretative and variable due to the fluidity of the circumstances that a very
delicate situation is created. Internalized values and attitudes of individuals and
groups, and societal norms, reflect in the minds of the actors. At the same time
desires for wealth, status, and power also motivate the actor.
The point here is that the main determinant of the corrupt act is not objective
circumstances, but rather the subjective perception of the circumstances as deter -
mined by the socialization of actors—i.e., the social, cultural, legal, and ethical
norms (the “core personality”). Corruption is then understood as a pathological
distortion of normative imperatives and thus a phenomenon which can be cured by
general education, campaigns, organized professional education, and the develop -
ment of sensitivity to societal interests by appealing to “ ideological” and even
“eschatological” values. There is also then a limitation : the social norms reflected
in the actor’s mind define the perception o f what is corrupt, and ultimately, the
success of imposing more rigid sanctions, supervision, organizational and legal
measures.
3. Corruption as a Cultural, Legal, and Organizational Phenomenon in Premodern

Societies
All levels of analysis are interconnected, so only in rare cases are definitions or
explanations focused on any particular subject—e.g., corruption as a specific hu-
man interaction. The different levels—interactional, institutional, and social—are
as overlapped as they are interdependent. We fi nd it is natural for researchers to
integrate many levels and the influences of indirect structural causes for
corruption in their explanations. Here we shall focus our attention on other
aspects: the social, political and economical factors.
Corruption is probably universal as a set of isolated incidents (to wit: everybody
has a price) and treated as a dangerous by-product of systemic rules. 12 In some cul-
Many forms of corruption and bribery are not covered by legal definitions, and
the etiology of corruption must take into account social causes and functions of
corruption, just as jurists searching for the deeper structural determinants of
criminal behavior must do.
”Is democracy necessarily corrupt and inefficient? It must be said at once that
the democracies have gone through a phase in which bribery and corruption
CORRUPTION & DEMOCRACY-

were ram-

tures and political systems, corruption is not an isolated phenomenon but an

effective operating practice (according to rumors, impressions, and
estimations).” In these societies, corruption is a system which pervades the entire
structure of the state and society. 1 In some societies, corruption is condemned as
a morally unacceptable act; in others, the moral obl igation to help relatives,
peers, or friends supersedes the prescribed rule that duty must be exercised
impartially. In these societies, the acceptance of gifts for an offic ial act is not
only perceived as normal, but to refuse a gift is viewed as an act of temporary
insanity. 2
1 “Corruption at the highest levels attracts the most attention in public forums, and
involves the largest amount of money in individual transactions, [but] corruption
at the bottom levels is the more apparent and obvious.” D . H. Bayley, The Effects of
Corruption in a Developing Nation, in Heidenheimer, CORRUPTION, p. 941.
An “acceptable” gift is very difficult to define: a golden pen or a box of
expensive chocolates in France is an “indispensable courtesy”; in the Arabian
world a gift represents an introduction to trade or a civilized way of c arrying on
business; but in Australia, a minister cannot purchase a ticket on an airline that
employs a spouse or other close family member; in England high-level officials
cannot take advantage of “knowing good op portunities on the market.” Nota bene,
just 100 years ago in France, positions in the ad ministration were the best sources
of private enrichment; in United States the mantra of official politics was “to the
victors go the spoils,” and the spoils was private gain at the tax-pavers expense.
In England, corruption—in cash money—was normal behavior (see

3.1 Differences and Dimensions of Development
Very often, sociologists (e.g., Durkhei m, Tonnies, Redfield, Parsons) contrast

two types of societies: premodern and modern. 11 ’ Premodern society is
characterized by ascription, diffusion, stability, a predominance of community,
limited vertical and social mobility, and murky but existent social stratification. As
its mirror image, modern society is defined by universal norms, inclusion, social
mobility, political equality, functional specialization, individualism, and a value -
neutral scientific approach to knowledge. After the anti -colonial revolutionary
period, scholars of modernization used such models as th e basis for sophisticated
theories of prismatic society. 1 ' We shall compare archaic, fused societies, with modern
industrial societies or diffracted societies.
The economy of a premodern society is autocratic and is characterized by the
dominance of agriculture and limited market principles. The state is not interested
in supporting or regulating the economy and perceives production as a resource
for its own use (plunder!), war, or public works. Control over the land is the
dominant interest. In developed forms, the state is also a mechanism for the
distribution of production, investments, services, and other benefits. Nepotism and
cronyism dominate the organization of the administratio n: the criteria for office is
not ability or knowledge, but connections, appropriate origin, and personal contact
with superiors. Civil servants are loyal to the sovereign because their office is the
source of their personal wealth. Consequently, the officials are more interested in
their positions and less with the policy of the state or its effects.
The social dimensions are different. In premodern societies the primary social
groups are important; a person without a family, tribe, or clan, in an emotional
sense, is lost, for group identity is the most important orienta tion in life. Group
differences are explicit and lines of division are clear: life takes place in homoge -
nous residential areas among neighbors with the same language, religion, social
status, and political opinions and the same life style. Many symbols de monstrate
the similarities within the community, while differences and mobility between
groups is very limited. It is in premodern societies that communities serve as an
elementary form of a social system. Such societies are also marked by solidarity,
Samuel Pepy’s diary!). W. Brauneder, Die Korruption als Historisches Pbanomen, in C.

Brunner, KORRUPTION UND KONTROLLE, pp. 75-104; L. Levy Peck, Corruption and Political
Development in Early Modern Britain, in Heidenheimer, CORRUPTION, pp. 219-232; J. P. King,
Socioeconomic Development and Corrupt Campaign Practices in England, in Heidenheimer,
CORRUPTION, pp. 233-251.
Naturally, such an dichotomy is refined by introducing different sub -
classifications and more steps in development—archaic and transitional.
F. Riggs, AGRARLA AND INDUSTRIA (F. X. Sutton).
close relationships, and by face-to-face communication between people who
CORRUPTION & DEMOCRACY 5 5

usually know each other well.

Modern societies are vastly different. Individuality is accentuated, roles are
mixed, and individuals are members of many, diverse groups. Tolerance of differ -
ences runs parallel with equality and transitional professional ties. Relationships
are based on objective, calculated conditions, and the world is seen as rational.
“Sometimes he wonders vaguely whether any part of him will live on after death,
but basically he has narrowed his view of the world by putting on a secular, mate -
rialistic pair of blinders.”
In premodern society, social status is more important than power or wealth be -
cause he who has high social standing shall achieve both political influence and
wealth. Obedience to traditional rituals is more important than the execution of
legal rules. Skill and education are significant as status symbols but less important
than family background. In modern society the complete opposite is true; the arena
for competition is not the “social scene” but the marketplace.
The main political tasks in traditional soc ieties are control over territory, me-
diation between social groups, and mobilization of manpower for war. The inter -
ests of powerful families or clans dominate in many informal ways. Power is lim-
ited only by rules of tradition, and these rules are the basis of the legitimization of
the political order. Modern societies have differentiated political institutions and
mechanisms to represent and mediate between competing social interests. There,
power is limited by constitutional provisions and legitimized by elections. The
main problem is the integration of functionally specialized organizations.
3.2 Arbitrary and Creative Implementation of Law (Flexible Laws)
Realistically, a society undergoing rapid social change does not have time to
justify and equalize relations between different social sub -systems. This has many
visible effects, but we shall emphasis only two: ( 1) formalism and (2) the distortion
of organizational principles in the state apparatus.
In most societies undergoing rapid social change, social behavior does not con -
form to legal norms. Legal rules are treated as obstructions to be by -passed infor-
mally. The standard explanation for this variance is that the enforc ers make infor-
mal exceptions because they do not have—and do not want—the necessary
information to make rational decisions. Problems relating to the ambiguous nature
of rules are compounded by the extraordinary mix ing of traditional myths with
rational standards. Officials borrow rituals from their ancestors while, at the same
::me. imitate the legal processes set up by their former colonial government de -
pending on what is appropriate to the given circumstances. Since there is little
broad-scale agreement on the basic norms of society, and many groups remain un -
assimilated into the nation, it is extremely difficult to enforce standard legal for mu

las. Control must be grabbed: through coercion, violence, money, or charismatic

rule, but rarely through constitutional processes.Governments come and go, con-
stantly trying, through legislation, to improve a desperate situation, but failure re -
sults not from “imperfect regulation” or “lack of experience,” but from corruption
of the entire mechanism which implements the laws. “The people subject to -regu-
lation become indifferent to the prevalence of non -conformity with policy. Policy-
makers, exasperated with an intractable situat ion, try to correct it by drafting more
rules and passing more laws; this approach rem ains as formalistic as their
predeces- sors.
The shape of institutions and the formulation of regulations and laws are identi -
cal to standard foreign or international examples, but in implementation, the dif -
ference is obvious. Precise regulations and consistent interpretation give way, in
fluid situations, to exemptions. Eventually, exemptions granted to friends, compa -
triots, clans, sects, or due to corruption and bribery, swallow the rule. The violent
reactions of visionaries and progressives to illegiti mate authority result in anti-
corruption campaigns. These campaigns are always superficial, short -lived and
touch only tangential roots of the problems. The proclaimed goals of moderniza -
tion, international standards of regulation, and democratic reforms a re completely
out of sync with the actual circumstances 2 " and the campaigns are more a ritual
than a serious, and adequately provisioned (in money, time and labor force) under -
taking. The results, naturally, are disappointing.
The newly-prescribed rules often are simply decoration too complex to be en -
forced, and thus “ritualization” and re -interpretation in practice differs from what
is written. Rituals and imitations of exemplars from modern countries are highly
developed, but cultural patterns are based on friendship and family ties, not on ra -
tional choice and legal provisions. Actually, without re-interpretation, the state
cannot function; thus, this is the way the society adapts the abstract proclamations
to reality.
H. McCurdy, PUBLIC ADMINISTRATION: A SYNTHESIS, p. 322 (Cummings 1977).

F. Riggs, ADMINISTRATION IN DEVELOPING COUNTRIES, p. 17 (Houghton Mifflin, Boston 1964).
211
“In societies where formal economic and administrative models provide
relatively accurate images of reality, it is practical to study the model s—
including those on the administrative side—laws, and regulations, since these
provide good evidence of practice, and changes are followed by corresponding
changes in practice. But where the formal models are removed from reality, the
study of legal and administrative models becomes increas ingly ‘legalistic’; that
is, it provides a less accurate picture of reality and an increasingly ineffective
technique for changing it.” F. Riggs, supra note 19.

The important consequence is that the discretion of the officials is greater.

Rules are loosely interpreted and subject to “kadi -justice” 3: the free, arbitrary act of
mercy or personal favor. 4 In this situation, the meaning of corruption is completely
inadequate; people help each other, often without expecting cash rewards, but be -
cause they are bound by kinship. Moreover, gifts or money payments are not ex-
cluded, but are part of the ritual of manifesting “friendship.” These rituals are im -
perative for the functioning of the administration; they are perceived as normal
and an “unavoidable phase in development,” and sometimes are off ered as proof
of the inferiority of legal systems. However, it is not a case of superiority or
inferiority, but rather, of finding the best possible way of adapting a formal legal
system to a culture and social environment not ready for it.
3.3 Distortion of Organizational Principles
Max Weber and his many followers agree that bureaucratic organization in its
pure form resulted from specific cultural and political developments in the West . 21
In other cultures and systems, does a different model exist, or just a n undeveloped
form of the Western model with distorted principles?
The organizational model in many developing societies is based exclusively on
personal ties and paternalistic leadership rather than on a hierarchical structure
and a division of labor. Administrative goals are based not on the social and
political needs of society, but on the personal whims of its leaders. Power is held
by only a few socially acceptable individuals. The leaders, irrespective of their
institutional positions, are the real fulcra of the administrative syste m. No classical
imperatives of organization are present: specialization is minimal, the leaders are
the experts for all questions. They move easily between the administrative
branches, and professional education is non-existent or diplomas are ritualized.
Rules are not written to be obeyed, but instructions from the top create
administrative policy. Communications are ritualized and personalized, while
information is consciously kept within small groups in the organization. There are
no guarantees of permanence; fast po-
3 “Kadi-justice...follows the schema: ‘it is written...but I say unto you.’” Gerth,

Mills, from M. Weber, ESSAYS IN SOCIOLOGY, p. 219 (Galaxy Books, New York 1958).
“Nowhere is this more apparent than in the enforcement of rules. In short, there
are rules for everything and there are rules for nothing. Formally, Sa la officials
had at their disposal a contusing battery of rules, which were applied
unmercifully to clients that the official did not trust. Because the rules were so
contradictory, the only way to make the government work was to suspend the
rules, which Sala officials would do for persons of sufficient stature or for
personal political advantage. In effect, every official action involved an ex ception
to a rule.” H. McCurdy, PUBLIC ADMINISTRATION: A S YNTHESIS, p. 323.
Gerth. Mills, from M. Weber, ESSAYS IN SOCIOLOGY, supra note 21.

small groups in the organization. There are no guarantees of permanence; fast

political changes, changes of leaders, purge campaigns, and personnel changes at
all levels are constant. Selection of personnel is subjective; the main princi ples are
personal loyalty to the leader, common local origin, family ties, party orientation,
but rarely expertise or professional efficiency. A successful career is not the result
of abilities but nepotism 5 and personal connections with the elite. Wages are
absurdly low but this is made up for by bribes, gifts, and privileges . 6'
Despite efforts to mobilize funds, the amounts available proved insuffi -
cient to provide adequate salaries for the growing hordes of office -holders.
The officials’ expectations concerning their real incomes escalated, as did
their claims for status and security. Pre-industrial governments, therefore,
were quickly confronted by major problems of official corruption, a phe -
nomenon which should be understood not moralistically but s tructurally. A
corrupted bureaucracy, virtually by definition, is one that does not do what
it is supposed to do, since illegal payments to officials are presumably not
made unless those who receive payments can and do contravene the intent of
the laws they are supposed to apply. Although formally salaried,
bureaucrats in such quasi-salary systems indulge themselves in self -
enrichment on a large scale. 7
It is difficult to conclude that such a model is inefficient, because there are no
policies or organizational goals. 8 The function of such an organization is not to
achieve manifest goals, but to maintain soc ial and political order. Corruption is not
a by-product or a result of the organization, but a constitutive part of the model . 9
Both obstacles to organizational efficienc y—flexible interpretation of law and
Sala model of organization—are not exclusively characteristic of pre-industrial so-
cieties. In ideal intellectual constructions, those problems occur in early phases of
development, but in reality the obstacles are a marginal, but important, aspect of
administrative functioning. The nature of the obstacles is visible not only in under
5 “In traditional societies nepotism does not exist. Incompatibility between

administrative and family duties made nepotism impossible. F. Riggs, PRIMITIVE
Society Revisited, p. 41 (Morristown, 1973).
6 Examples include access to low-cost housing, government automobiles, and
special canteens. The most sacred of sacred cows in Western personnel

administration—equal work—is monstrously difficult to achieve. H. McCurdy,
supra note 21, at 323.
2<
' F. Riggs, FRONTIERS OF DEVELOPMENT ADMINISTRATION, p. 85 (Duke Univ. Press, 1971). “The man
of a chamber (in the Sala model) may be humane or inhumane, just or unjust,
brave or cowardly, devout or impious, but their acts cannot be judged efficient or
inefficient.” F. Riggs, ADMINISTRATION IN DEVELOPING COUNTRIES, supra note 19 at 268.
2H “Die problematik liegt auf einer anderen Achse, namlich darin, dafi dir
zweckrational
konzipierte Biirkratie sich aus noch traditional orientiren gesellschaft nur schwer
herauslosen kann, so da sie Gefahr lauft, durch gegenlaufing institutionalisierte
Erwar- tungen, Z.B. “des ‘Freundesdienstes’ innerlich korrumpiert zu werden.”
N. Luhmanr.. ZWECKBEGRIFF UND Systemrationalitat, p. 219 (Suhrkamp, Frankfurt 1977).
CORRUPTION & DEMOCRACY 5 5

developed countries, but also in systems which experienced long ideological re -

pression (communist countries) and systems with fast polit ical, economic, or social
devolution. Ideological repression has similar effects on the legal system as tradi -
tional rules: instead of neutral, objective, and “faceless” order, rules were inter -
preted in the name of the revolution. Instead of goal -oriented organization, parallel
systems of party and informal bodies existed, “correcting” and controlling admini -
stration. Instead of professionalism and achievement, the main criteria for promo -
tion was devolution to the “party-line.” Selection of personnel was based on no -
menclature and not on knowledge, specialization was minimal because work was
not divided according to tasks derived from goals, but according to the logic of
ideological aims. “Cadres” were privileged to distribute and create work places.
Apparent equality in wages was “adjusted” by privileges for trust ed persons:
access to low-cost housing, government automobiles and special canteens.
4. Perspectives
Modern administration is like a clock. Whatever its size, it must tell the time of
day. Whether digital, mechanic, big or small, with or without chimes, expen sive or
cheap, the clock has to measure and show the t ime. We rely on clocks, we adapt
our lives to clocks; we sleep, eat, work, and make love according to the clock. We
mark our lives by the clock.
It is the same with modern administration. We expect that modern administra-
tion will obey, respect and implement the laws, and that all citizens, and indeed
the State itself, will submit to the rule of law and to due process of law. B ig or
small, expensive or rationalized, democratic or totalitarian, the State must achieve
politically defined goals, and act according to certain technical principles (such as
the Weberian model of organization). Citizens share the belief that the State w ill
act according to such principles, and these beliefs legitimize the regime . Our very
lives literally depend upon the State, not only to protect us from our enemies, but
to give us medical care, education, provide transportation, protect the
environment, and intervene in conflicts. All this is based on the technical
superiority of the State apparatus and the principles of work, legality, and
democratic legitimization.
But the clock cannot be expected to work properly if one moves the hands in
unpredictable ways or if the mechanism randomly changes the speed of the pendu -
lum. Similarly, state administration cannot work properly if the rules are
constantly changed and their implementation is conditioned upon personal
discretion, gifts, and corruption.
Why compare a state with a clock? In post -socialist countries, it seems, time is
expensive. Many citizens are interested in speeding up or delaying time, forgetting
that the mechanisms of the state have characteristics similar to a clock. Both are
sensitive mechanisms that are easily thrown off balance if they are tinkered with by
untrained individuals. Thus, just as I would not entrust an untrained laborer with
repairing my clock, the affairs of the state should not be entrusted to untrained,
inexperienced members of the nomenclature or elite social class.

PolitiCal Corruption in Poland
Jerzy Jaskierna"
Corruption in Poland is not a new phenomenon. The changes to our economic

and political systems have raised new expectations as well as new problems. I
would first like to talk about some of the problems associated with the election of
the Parliament.
Four years ago, in the first democratic elections, I ran for office and the cost of
the election was as much as five times the cost of just two years befor e. In 1991,
with the help of an organization and a political party, one could seek office without
a personal fortune. Now, the cost of a campaign is much higher. Television com-
mercials, which are extremely expensive, continue to raise the price of seeking of-
fice. It costs thousands of dollars for thirty seconds of either national or local tele -
vision time. It is now impossible to successfully run for office unless you are
independently wealthy. The political parties are very poor and it is impossible for
a person without the right connections to raise sufficient funds to compete.
Furthermore, there is a growing tendency for the electorate to support the
incumbent. The problem in Poland is not yet as big as it is the United States. But
our next election campaign will be even more costly and this will raise sensitive
ethical questions.
Perhaps an American professor can better describe to the conference “the Keat -
ing Five” scandal in the United States. As I understand it, five United States Sena -
tors received many thousands of dollars during their campaigns from donor bank -
ing institutions run by Charles Keating. After the elections, these Senators
approached high-level government agency officials, and asked them to protect
those banks after they collapsed. Af ter this became public knowledge, there was a
fierce debate about whether the Senators behaved properly or whether they set out
to influence the government agency officials because of the huge campaign contri -
butions they had received from the banks.
Developing ethical codes which prescribe what is and what is not illegal, or al -
low an individual to determine prospectively whether a certain course of action is
ethical or corrupt, is a very difficult task. In Poland, during the 1992 session, Par -
liament enacted a very strict anti-corruption law which includes two requirements
for all public officials. First, Members of Parliament, and other high -level govern-
ment officials, must comply with disclosure rules. These office-holders must dis-
close financial statements, bank account statements and other assets, including per -
sonal property and real estate holdings each year. This procedure allows the
Member of Parliament, Republic of Poland; Chair, Legislative Committee.
Institute for Constitutional 6c

government to compare what the office-holder declared at the start of his or her
term in office and what he or she has now. This process did not work to its full
exrent last year because Parliament was dissolved by the President; also, some of
the office-holders forgot to disclose or forgot to deliver their documents. This drew
criticism from the press during a strong campaign to oust incumbent Members of
Parliament because it created the impression that we were maneuvering to cover
up our illegal possessions. I suppose these disclosure regulations have started to
work, but more time must pass before a judgment can be made.
In that same 1992 law, there is also a restriction on Members of Parliament
holding certain other offices which may provide an opportunity for corr uption.
These offices include positions in state enterprises, public foundations and other
government institutions. The goal is to restrict a Member of Parliament or a gov -
ernment official from performing other functions that would conflict with the in -
terests of that person’s public office. Some say this is too harsh, but the Parliament
sought to avoid conflicts of interests or even the perception of conflicts of interests.
The mass media plays a vital role in fighting corruption. I believe the media is
the most important element in an anti-corruption campaign. The mass media in
Poland is a very good whistleblower. It is almost impossible for any high -level offi-
cial to engage in wrongdoing on a large scale and not be exposed by the media. A
weekly magazine run by Mr. Urban, the former spokesman for the government, is
one of the most popular newsmagazines in Poland and has been very successful in
exposing corruption.
Another aspect of the corruption problem I would like to discuss is the salaries
of the politicians. An office-holder with a secure financial situation can resist
bribes. Therefore, a public official’s salary should provide a decent living.
Currently in Poland, salaries are very low for both polit icians and members of the
judicial system. A Member of Parliament now receives about $400 a month, while
bank officers receive $2,000 or $3,000 and employees of international institutions
receive around $5,000 per month. The political climate is such tha t it is now
difficult to raise the salaries of government officials, including those of Members of
Parliament. The electorate is concerned that because these individuals work for the
people they should not be so rich as to be alienated from the masses.
Furthermore, if government officials are paid too much they w ill surround
themselves with very rich people and that will create an atmosphere for
corruption. Members of the U.S. Congress are surrounded every day by thousands
of lobbyists, some with enormous wealth. There, the opportunity for corruption is
limitless. But, both the lobbyists and the officials are restricted by established
rules.
In Poland, the Parliament is revered as an incorruptible institution. Any activity
that appears in any way suspicious is discouraged, such as going out to lunch with
someone outside the normal circle of colleagues. That is the tradition, but there are
::o written rules. I believe we should create a code of ethics because without rules
'Oir.r orricu’s will take advantage and Warsaw’s reputation will deteriorate.

POLITICAL CORRUPTION IN POLAND
There have been two cases that sparked the interest of the people. In one in-
stance, the chief of the ruling political party was accused of receiving a bribe from
an oil company in return for the issuance of a license. There is no final result in this
case but it unleashed an onslaught of public criticism of politicians and the party in
power at the time. Some suggested this was purely a political battle between the
parties, but it had a much broader impact on public perceptions. The second case,
the so-called “Free Trade Zone Case,” involved Parliament. A politician created an
official document stating that a free trade zone was to be created in the Lepanese
region. He even drew up guarantees from the government, but of course the zone
was not in fact created. However, the document was leaked to the press and, as a
result, international businessmen began investing in the region believing the zone
was established. It is a very interesting question whether this politician broke the
rules. He defended himself at trial by claiming that this was an act of goodwill,
based only on his desire to help the Lepanese region. He was acquitted, but many
still believe he received kickbacks from the industries in the region.
The most probable area of corruption is surely the privatization process. We
have no experience with this activity and curr ently there are no rules. A parliamen-
tary commission designed to oversee privatization has been established, but the
government is still criticized for not exercising enough control. Billions of zlotys
are involved and the public is furious that huge pers onal fortunes are ajnassing
from this process.
A second likely area of corruption is public procurement. Prior to the 1980’s,
there was investment money in Poland but bribes were required to obtain a con -
tractor because of limitations on the construction o f facilities. Now the situation is
reversed. There is no money but there are many contractors. There is a suspicion,
especially at the local level, that the cost of a public construction contract is ten to
fifteen percent more that it ought to be. It is ve ry difficult to prove that corruption
is involved because several relationships at the local level are difficult to check. A
new law regarding public procurement will soon be enacted by Parliament and will
require competition between different contractors.
A third area susceptible to corruption is the issuance of government licenses. It
is apparent that big money is involved in this area. Certain types of government
licenses are very valuable. These include licenses to operate a gas station and to
establish a new business.
A fourth area of concern which, interestingly enough, has not yet been dis -
cussed, is the health-care industry. In theory, health-care is free as a right of Polish
citizenship. But, in reality it is not free due to a lack of money in the s tate budget.
Currently, doctors and some health-care officials receive large government subsi -
dies. But these same health-care providers refuse to perform certain treatments by
claiming a lack of funds. Obviously someone is pocketing enormous sums of
money. To solve this problem I think a new health-care system is required; we
must decide whether Poland ought to have a private or public health -care system.
The debate in the United States regarding the Clinton plan is exactly the debate
required in Poland because that is the real issue: how to best establish a new
health-care system.

I would like to end my presentation with two points. Based on my experiences, I

am not so optimistic as to conclude that Poland will one day be free of corrup tion.
But I think this conference is a very important source of information from different
countries concerning their experiences with anti -corruption laws and procedures. In
moving to a free-market economy, it is important to look for models that deal with
similar problems. It is also important to survey different anticorruption systems so
that Parliament can effectively deal with this very sensitive and very dangerous
aspect of social behavior. I do not believe legislation will prevent corruption, but it
can change how we perceive and define corr upt behavior.
CORRUPTION: A CATASTROPHE TO DEVELOPING COUNTRIES
Peter Eigen*
No party to an international business transaction should request, demand, offer or make a gift in
any form, or extend any other advantage to, or for the benefit of any public official or, as he or she may
direct (and whether directly or indirectly), as an inducement for action or inaction by the official.'
Reality is quite different. Many businessmen and women find it quite normal to
offer or pay bribes to foreign officials or politicians, particularly in developing
countries, in order to get large contracts or to facilitate their implementation. Some
will openly admit this—often regretfully. Most will find ways to conceal this un -
comfortable reality from the world, and even from themselves, using complex ar -
rangements through representatives or middlemen, or euphemisms for bribes,
such as commissions, facilitation payments, useful expenditures, Werbungskosten,
sur- cout, regalitos.
The truth is that in many countries those practices have become the norm.
Companies who want to do business there feel that they have to follow the local
practice—“do as the Romans do.” Even some governments feel they have to sup -
port their exporters abroad and provide export guarantees, financing, and tax
credits for bribes—as long as they are not called that. Of course, many local politi -
cians and officials, particularly in poor countries with fragile laws and
institutions, easily surrender to the temptations. It was not only Oscar Wilde who
could “resist anything except temptation.” 2
My point is not to allocate blame between the public and the private sector,
between the North and the South, nor in this case, the East and the West. The point
is to present to you a phenomenon that has engulfed us all, even in industrial ized
countries—remember the dramatic events in Italy and Japan. Corruption has
become one of the most devastating obstacles to economic and social development
in the developing world. Corruption is a cancer, a vicious circle feeding on itself.
Even for the most ethical entrepreneurs, it seems very difficult to escape without
losing business to the less scrupulous—a true prisoner’s dilemma.

Chairman of the Board of the Directors, Transparency International, Berlin.
1
Article II (1) of the TI Standards of Conduct. This article is based on the earlier
and similar statement made by the International Chamber of Commerce in
Article 2 of its Rules of Conduct Extortion and Bribery (1 977).
: Oscar Wilde, LADY WINDERMERE’S FAN.
Institute for Constitutional <5c Legnhtu e ?
Budjpes:.
I want to present to you an initiative that believes there is a wide and powerful
consensus, particularly in the business community, against corruption. It believes
that building a coalition and designing programs and practical actions against cor -
ruption is urgently needed. This initiative has resulted in the establishment of an
organization called Transparency International (hereinafter T I). This organization
will focus on large-scale corruption as it affects the developing world.
A New Organization and its Mandate
Transparency International was launched in the Spring of 1993. T I is already

generating wide interest among people concerned with the abuse of public power
for private profit throughout the world. In increasing numbers of countries, the
media, non-governmental organizations, and political leaders are calling for gov -
ernmental reforms to make politicians more accountable and the decision -making
process more transparent.
TI’s concern is a humanitarian one. Due to corruption, vast sums of money are
misallocated by public officials in dozens of countries. Funds originally ea rmarked
for new schools, hospitals, and institutions to serve the most needy are often chan -
neled into projects of negligible social value by officials receiving kick -backs from
commercial contractors.
Corruption is the enemy of democracy. Corrupt leaders cling to power, oppos-
ing efforts to open government, curbing personal freedoms and abusing basic hu -
man rights. Corruption crushes the potential benefits of free market forces. The
honest business person goes broke, the rules of a healthy economic system become
twisted, and companies addicted to paying bribes become rotten. In consequence,
prospects for economic progress, so vital to social development, are ruined.
TI focuses on the elimination of serious corruption in international business
transactions. In this context much of our initial work will focus on transactions
that are partly financed from public funds. This is key to strengthening good
governance and enhancing resource channels to countries in the South and in the
East.
Building on Earlier Actions
TI’s work, focused clearly on country-by-country individual actions and strate-

gies, builds on the base of earlier international efforts. The United Nations, the Or -
ganization for Economic Cooperation and Development, and numerous mu ltilat-
eral institutions have engaged, at various times over the last 20 years, in securing
agreements and forging resolutions specifically concerned with good international

business practices. The business community has actively supported self -regulation
against corruption at the international level. For example, the International Cha m

CATASTROPHE TO DEVELOPING COUNTRIES
ber of Commerce elaborated in 1977 a set of Rules of Conduct to combat
extortion and bribery.
In building on earlier initiatives, T I will be a catalyst for action, bringing the di-
verse interests under the umbrella of a single institution, securing meaningful un -
derstandings and ensuring follow up to key initiatives.
Corruption is a Global Phenomenon
Corruption is common in many of the leading industrial countries, whose aff lu-
ence and firm political traditions cushion, to a degree, the social and humanitarian
mass damage that corruption can inflict. Corruption is also widespread, causing
severe hardship, in developing countries and in the countries of Eastern Europe
and Central Asia that are now in transition from centrally directed political
systems. Few would dispute that corruption is a universal phenomenon.
There are no countries, rich or poor, that can claim to be entirely virtuous. T I is
not intent upon exposing villains and casting blame. TI is not interested in seeking
to attach blame to one particular political system or another, or in singling out
some countries as being more corrupt than others. TI is focused instead on initiat -
ing constructive actions to bring toge ther, in a coalition, members of governments,
the private sector, and development organizations, to join forces against corrup -
tion. TI will work with all governments, in rich countries and in poor, that demon -
strate the resolve to attack corruption and ha ve the demonstrable credibility to en-
sure that programs of action can be effectively implemented.
In some countries corruption is claimed to be part of the culture and the way of
life. TI disputes this. There is no country where the people consider it pro per that
those in positions of political power enrich themselves through illicit agreements
with commercial contractors at the expense of the citizenry. In this system the
bribe-giver is as guilty as the bribe-taker.
Demands for Facilitating Payments
To be sure, there are many countries in urgent need of fundamental civil service
reform. In these countries, the wages provided to many public sector workers are
so low that they fall below the minimum for survival. The worker, in turn, is com -
pelled in many cases to seek to supplement his or her income by demanding facili -
tating payments from private citizens. The authorities in these countries know all
about these “grease” payments and they turn a blind eye.
This form of corruption, played out daily with the poorest of poor people being
the hardest hit victims, aggravates social and polit ical conditions. Solutions here
must come in the form of political and administrative reforms. TI backs such e :-
CORRUPTION & DEMOCRACY 6"

forts, but, at the same time, recognizes that there are already many
development assistance agencies within numerous national governments that are
studying these problems and striving to initiate reforms.
TI Brings an International Dimension to Campaigns
TI’s priority, as a result, is with large-scale corruption and the deficiencies of

the institutions and practices that permit it. T I’s action focuses specifically on
corruption concerned with large international transactions. Its work will parallel
efforts by national authorities and non-governmental organizations whose prime
focus is large-scale domestic corruption. TI brings an international d imension to
such anticorruption campaigns.
However, TI does not purport to be a global policeman and catch those who
break existing rules. Rather, it aims to tighten rules and procedures to increase the
likelihood of detection and thereby raising the leve l of deterrence.
Establishing TI National Chapters
TI begins to operate after it has accepted an invitation from a government to

assist in the design of a national strategy to counter corruption in international
transactions. TI also seeks to establish nat ional chapters in many countries to
secure a bridge to groups focused on promoting anti -corruption policies and
monitoring the enforcement of international business regulations. TI also
establishes national chapters to serve as a growing base of support fo r the
organization’s international program of action. T I’s national chapters play a large
role in stimulating public awareness and understanding of the complexities of
corruption and the damage it causes.
Forming anti-corruption coalitions on a country by country basis is central to
TI’s program. It is equally important to enhance international education on this
subject. There are also too many countries where entrepreneurs can pay bribes
abroad and claim these as tax deductible expenses in their home countries. Laws
that permit enterprises to behave in this way encourage bribery. They poison the
environment of international business and make a mockery of public rhetoric by
political leaders on behalf of ethical government and investment agreements. TI
aims to raise public sensitivity to such important issues of national policy.
International Aid Agencies Encourage TI
Corruption has increasingly been recognized within the international develop -

ment assistance community as a major source of problems. This was not always the
case. To some extent, aid agencies sought to avoid confronting this complex phe -
nomenon. Donor governments were intent to use grants of aid to win foreign allies
and were therefore unconcerned with the integrity of the leaders who recei ved the
aid. Moreover, at that time, the scale of corruption was lower than is widely per -

CATASTROPHE TO DEVELOPING COUNTRIES
ceived to be the case today.
The establishment of TI has been encouraged by a number of development
agencies. They view TI as a non-bureaucratic facilitator of reform. Moreover, TI,
being unaffiliated with any country, is a neutral promoter of anti -corruption legis-
lation. Aid agencies hope TI will become a clearing house of expertise on the sub -
ject of corruption that will provide advice for dealing with particular as pects of the
problem.
Forging International Understanding
TI’s approach is evolutionary. TI has developed Standards of Conduct to serve

as the focal point for understanding corruption in international business transac -
tions. TI does not anticipate countries to immediately transform these Standards
into law. However, TI will not accept an invitation from a government unless it is
committed to working toward the application of the Standards and supports the
prime activities of the organization.
TI expects business and government participants to abide by the Standards in
countries where there is a consensus of support. Initially, this may be only a few
countries with enlightened governments, a few islands of integrity. These leading
countries will create momentum by their example and, with the support of TI,
strengthen transparency and accountability globally.
TI seeks broad and growing support to strengthen international efforts to
counter one of the biggest present threats to the a ttainment of decent living stan-
dards for millions of people in the majority of the world’s nations.
Basic Approaches
TI is undertaking actions to ensure it becomes well -known as a focus for efforts

to reduce international corruption. It provides expert se rvices. It is evolving as a
catalyst for governments looking for technical assistance in areas directly relating
to this subject, from investigation to book-keeping, from law drafting to law
enforcement. TI is developing a capacity to support studies and research of its own
in this area and be available to undertake, if so requested, special investigations.
TI recognizes that its long-term success depends on ensuring that it is a
genuine, global entity. It is, therefore, broaden ing its international contacts as
rapidly as possible. TI is working with the media in many countries, inviting
governments to learn more about its actions, securing contacts with executives at
multinational corporations, discussing forms of cooperation with non -
governmental organizations, and seeking views and guidance from established
development agencies and expert consultants and leaders in academia.
TI is also aware that its successes over time will depend on its independence. It
will seek ties to all parties engaged in internat ional business transactions, but it
will seek special relationships with none. It will make no secret of the sources of its
funds, the affiliations of its directors, and the approaches it uses to select and re -
cruit consultants.
CORRUPTION & DEMOCRACY 6"
TI seeks a wide array of partners—government agencies, international organiza -

tions, business, foundations, non-governmental groups, and individual s—who
share the goal of eradicating corruption. We urge you to become involved, by
bringing in your scientific experience, providing your research results, or by any
other means.
SUBSTANTIVE CRIMINAL LAW: CORRUPTION AND MONEY
LAUNDERING
Hans Nilsson
Introduction
The Council of Europe was founded in 1949 as a European organization for

intergovernmental and parliamentary cooperation. Its aim is to achieve a greater
unity between its members for the purpose of safeguarding and realizing the ideals
and principles which are their common heritage and of facilitating their economic
and social progress. 1 At present, the Council of Europe has 32 member States, of
which 23 are Western European democracies and 9 States are drawn from what is
usually described as Central and Eastern Europe. Hungary became the first of those
9 States to join the “European Democratic Area” in November 199 0, followed by
Czechoslovakia in February 199! and Poland in November 1991. Currently, appli-
cations for membership from 9 more States, including the Russian Federation and
Ukraine, are pending.
The conditions for the admission or a State to the Council of Europe are: 1) the
existence of a genuine pluralistic democracy and 2) adherence to the principles or
the rule of law and enjoyment by ail persons within the jurisdiction of a state of
human rights and fundamental freedoms as embodied in the Convention on Human
Rights and Fundamental Freedoms. The convention sets up two unique organs to
control human rights in Europe, namely, the Court and the Commission of Hu man
Rights in Strasbourg.
The Council of Europe has competence to deal with a wide var iety of questions
save military matters. In practice, since 1949 we have dealt with a wide range of
issues, particularly within the legal field. We have drafted more than one hundred
fifty Conventions and Agreements which form part of the European 'Treaty series.
Within the criminal law field, nineteen conventions and seventy -five recommenda-
tions have been adopted by the Committee of Ministers. Hundreds of reports have
been drafted by the European Committee on Crime Problems which is the body
within the Council of Europe that has been discussing crime and crime policy since
1957. Perhaps the best known of all Conventions are the European Convention on
Extradition and the European Convention on Mutual Assistance in Criminal Mat -
Head, Section on International, Civil, and Commercial Law, Council of Europe,

Strasbourg. The opinions expressed in this report are those of the author and not
necessarily those of the Council of Europe.

PANEL IV: SUBSTANTIVE CRIMINAL LAW
Article 1 of the Statute of the Council of Europe.
Institute (or Constitutional 6c LcgisLua ; /
Ihicurci- -- ters. The Convention on Laundering, Search, Seizure and Confiscation of
the Proceeds from Crime will become an important convention in the fight against
corruption.
The Definition of Corruption"
It is appropriate to begin by considering the definition o f “corruption” since we

do not all have the same thing in mind when we speak about it. In fact, there are
probably as many definitions of corruption as there are lawyers.
This summer, the Council of Europe organized the 19th Conference of the
European Ministers of Justice. The topic of “Administrative, Civil, and Penal as -
pects of the Fight Against Corruption,” which includes the role of the judiciary,
was chosen as a theme this year. The preparatory documents of this Conference
state that for the purposes of the preparation of the topic:
The notion of corruption is to be understood in its widest sense, extending to
all fields of activity, both private and public, and to all persons invested with
private or public functions who acquire an undue advantage lin ked to the ex-
ercise of such functions.
There are, of course, very precise legal definitions of corruption in the criminal
codes, but those definitions are not harmonized in Europe, and many people do not
use the word “corruption” m the strict, narrow sense of the criminal law. More over,
in several, or perhaps most of the criminal codes m Europe, the word “corruption''
is not even used. Instead, the Codes use a functional approach, that is, defining the
separate offenses of bribery, trafficking m influence, or the purchase of votes. The
word “corruption" is often used a* a generic term to describe several of those
offenses in commentaries to the criminal codes or in textbooks written by
academics.
It is the wide, non-legalistic notion or corruption that the Council of Europe is
interested in fighting. Since it stands tor the protection of democracv, the rule of
law, and human rights, the Council believes that corruption, in all its forms, consti -
tutes a threat to these values. If corruption, m the wide sense, is allowed to spread,
it will decay the foundations of our institutions and jeopardize our societies. Cor -
ruption is a kind of “moral and financial gangrene" which, once it has taken hold,
will keep society from functioning normal ly and lead to the decomposition of the
norms and values of democratic societies. Criminals use corrupt practices to gain
advantage and control over democratic institutions. Corruption may also be seen in
a much more innocent perspective; for instance, the official of the ruling party who
See Gardiner, Coping with Corruption in a Borderless World, Proceedings of the Fifth
International Anti-Corruption Conference (Kluwer 1993).
takes advantage of his position in the Party, perhaps to obtain a larger apartmen t
or a better car. Ultimately, corruption has to do with moral s—-some call it honesty.
Corruption has been described as: “decomposition; moral deterioration; use of cor-

CORRUPTION AND MONEY LAUNDERING
rupt practices [bribery etc.); perversion [of language, text, etc.] from its origina l
state; deformation [of word]”; and “corrupt” as “rotten, depraved, wicked, influ-
enced by bribery.”
Substantive Criminal Law
As previously mentioned, the substantive criminal law differs to a great exten t

from one country to another. I w;i! desenbe some differences, while noting some-
common features."
In different States, various offenses may hr encompassed by provisions relating
to corruption or corrupt practices taken m the widest sense. The United Nations
Manual on Practical Measures Against Corruption hits several offenses for use as
anti-corruption tools:
1. Theft offenses (including theft, conversion and other forms of appropriating
State property for private use).
2. Abuse of position (including any planned, att empted, requested or successful
transfer of a benefit as a result of unjust exploitation of o fficial status).
3. Conflict of interests (including conflicts between official dut v and pnvare
self-interest).
4. Disclosure obligations (including obligations to disclose financial assets, rela -
tionships upon entering a government position, income or business activity). Such
obligations to report or disclose information would be enforced by the crimina l law
as sanctions against non-disclosure or false reporting.
5. A particular form of disclosure relates to the financing of political parties
where they are obliged to report on the receipt of money for the financing of po -
litical campaigns. Non-disclosure of such contributions or receipt of more money
than allowed may ultimately lead to criminal sanctions .’
The offenses mentioned in relation to the preparatory work of the Council of
Europe Ministerial Conference span a wide range of corrupt pract ices, possibly due
Oxford Concise Dictionary, 7th Edition, 1982.

In doing so I have, to a certain extent, drawn upon material currently being
gathered : the 19th Ministerial Conference of the Ministers of Justice. The
material is not pubhc. See the documents of the Eighth UN Congress on the
Prevention of Crime ara : Treatment of Offenders, Havana 1990, doc. A'CONF.
144/8.
ro the broad definition adopted by the preparatory committee. The following of -
fenses are examples (all concern countries from Central and Eastern Europe):
Country A
1. Extortion
2. Abuse of confidence
3. Fraud
CORRUPTION fic DF. 91

4. Abuse of public service against the interests of others
5. Taking bribes
6. Giving bribes
7. Acceptance of undue advantages
8. Trafficking in influence
Country B
1. Corruption
2. Indirect corruption
3. Abuse of power of public officials
4. Negligent abuse of power
5. Disrespect of rules relating to technologies and controlled merchandise
6. Abuse of rules relating to economic relations
7. Abuse of information in commercial relations
8. Public procurement offenses
9. Interventions in the independence of courts
10. Offenses in relation to bankruptcy and settlement of debts
Country C
1. Receiving bribes (at the initiative of the third party)
2. Qualified bribery (at the initiative of the public official)
3. Qualified bribery in reward of handling a case against the law
4. Giving bribes
Country D
1. Bribery (asking or accepting an advantage or being i n agreement with re-
ceipt of the advantage)
2. Active bribery (giving or promising advantages)
3. Trafficking in influence
4. Bribery in the economic sphere or in connection with social organizations
5. Demanding or accepting an advantage for publication or concealment oi
the publication of something in the public press
6. Misuse of authority
Country E
1. Abuse of official authority
2. Illicit participation of officials in commercial companies or financial ac tivi
ties

3. Official negligence
4. Acceptance and solicitation of bribes
5. Forgery
It is not possible to go into a detailed analysis of the scope and definition of
these corruption offenses in this paper, as it would require a thorough study and
knowledge of the legislation in the countries concerned. Howev er, it is possible to
draw some general conclusions.
First, from the point of view of comparative law, it is important to define
clearly what is meant by corruption when investigating the phenomenon. If a wide
definition is chosen, a number of offenses whi ch are not traditionally connected
with a hard core definition of corruption will be included in the definition; for in-
stance, fraud and offenses connected with bankruptcy. If, on the other hand, a nar -
row' definition is chosen, several offenses which, ob jectively speaking, should be-
long in the hard core category of corruption oifenses may be left out (for instance,
the offense of demanding an advantage in return for non -publication in the public
press).'’ On balance, I prefer the general approach since it is only through a severe
attitude that the legislator may effectively deal with the problem.
Second, whether it is necessary or useful to define ‘'corruption’' is questionable.
It could be argued that it is counterproductive to spend time reaching an agreement
on a general definition when it is more practical to adopt a functional approach. It
has proved nearly impossible to arrive at common definitions in the similar areas of
international computer’ and economic crimes.* Although it has been contested
(rightly, I think) whether the definition of “laundering ” constitutes a "real'' defini-
tion, a significant exception in this respect has been the definition of a money -
laundering scheme in several international instruments . ’ It still needs to be
adapted if enacted into national criminal law.
A third conclusion is that important differences exist between different coun -
tries’ methods of dealing with the phenomenon of corruption. In all States, corrup -
tion in its active and passive forms (i.e., giving and taking bribes in public life)
seems to exist. But the breadth of the offenses varies to a great extent. While some
countries punish active and passive corruption committed in the private sector, this
practice is virtually unknown in other countries. Great differences also exist in the
Cf. Country D, offense 5.

See Recommendation No. R (89) 9 of the Committee of Ministers of the Council of
Europe on Computer Related Crime.
See Recommendation No. R (81) 12 of the Committee of Ministers of the Council
or Europe on Economic Crime.
See the 1988 UN Convention against Illicit Trafficking in Narcotic Drugs, Article
3 ami the 1990 Council of Europe Convention on Laundering, Search, Seizure and
C'onfisc : of the Proceeds from Crime, Article 6.
definition of the categories of persons within the public sector who may become
perpetrators of the offense or, in the case of passive corruption, may become the
target of the offense. The differences are even greater within the private sector.
A fourth conclusion is that several differences exist between the various coun -
tries within “hard core” corruption offenses. Such differences may be relevant as to
the persons subject to punishment, and whether attempt and complicity are pun -
ished, and the sanctions imposed.
Finally, it is important to keep in mind that corruption is not only a matter of
criminal law. On the contrary, the corruption offense in itself is closely linked with
civil and administrative law and therefore must be seen in a wider co ntext. The
public official who is corrupt may be liable for administrative or labor law sanc -
tions. Similarly, the company which seeks to gain advantage within the framework
of public procurement may be liable for administrative or civil sanctions; for ex -
ample, invalidation of the offer or the contract. There is a ciose link between the
laws on unfair competition and corruption in that s ome countries have criminalized
acts committed in this area. Examples include: incitement to break contracts with a
view of getting the contract for oneself; breaches of confidence; and, the unlawful
disclosure of trade secrets. 10 It is therefore not advisable to deal with the issue of
corruption in the narrow context of criminal law but the matter must be regulated
more comprehensively, which is also the approach taken by the Ministers of Justice
of the Council of Europe for their forthcoming conference.
The “Hard Core” Corruption Offense
For the purposes of this paper, it is of some interest to examine aspects of the
primary corruption offense, namely, giving and taking bribes. The following con -
duct is punished as active corruption in Sweden:
Any person who gives, promises or offers any bribe or improper remunera -
tion whatsoever, to any employee or any other person belonging to any of
the categories mentioned in Chapter 20, paragraph 2 in respect of his serv ice,
is guilty of bribery and shall be punished by a fine or by imprisonment for
not more than two years. n
The passive corruption statute reads:
See, for example, Articles 4 and 23 of the Swiss Federal Code against unfair
competition. Chapter 17, paragraph 7 of the Swedish Criminal Code. A detailed
description of the Swedish legislation, with a summary in English, is found in
Cars, MlJTOR OCH BES- TICKN'ING, 2nd Ed. (Liber. 1978).

Any employee who accepts or requests any bribe or improper remuneration

or a promise of any bribe or improper remuneration, in respect of his service,
is guilty of bribe-taking and shall be punished by a fine or by imprison ment
for not more than two years. The same shall apply if the employee committed
the offense before taking up or after leaving service. If the offense is regarded
as serious, it is punishable by imprisonment of not more than six years .
This chapter is applicable to the following persons: 1) Persons engaged in cen-
tral or local government; 2) Any person whose assignment is governed by any
statutory regulation; 3) Persons serving in the military forces; 4) Other persons
vested with public authority; and, 5) Any person acting as fiduciary or other kind
of agent in legal or economic matters.
Thus, since 1978, the Swedish legislation has, in this respect, extended criminal
responsibility to parts of the private sector. The reason for this change is that both
the public and many parts of the private sector have similar tasks and terms of em -
ployment. Moreover, the public in general should be protected against the damag -
ing effects of corruption in business because financial and other important
decisionmakers are often concentrated in the private sector. However, it is worth
noting that, with respect to corruption in business, the provisions on improper
advertising and selling in the Marketing Practices Act may be used instead of the
criminal law.
What constitutes “ i m p r o p e r " remuneration will be of central importance in the
application of the Swedish legislation. To a great extent, the issue will depend on
custom and public opinion, which do not give much guidance in a particular case.
The National Tax Agency proudes some guidance in its various directives on de-
ductible entertainment expenditures. 1 he official instructions of the National
Health Service to the employees of hospitals on receivi ng gifts also sets some
boundaries. In general, such instructions are usually extremely strict and do not
allow for more than the occasional flower or lunch, unless there is a special rela -
tionship between the persons involved. It is clear here that the courts are faced
with different and difficult situations.
When studying the European legislation, it appears that the two types of cor-
ruption are basically two sides of the same coin; one perpetrator offering or prom -
ising the advantage and the other perpetrator accepting the offer or the promise.
Usually, however, neither o t the two perpetrators are punished for complicity in
the other offense. 1 '
The benefit gained is often material m nature, but, depending oil the legislation
and practice of the country, may also be non-material. What is important is that the
Chapter 20, paragraph 2 of the Swedish Criminal Code.

A relatively common feature in man) - countries is that attempt is
punishable as se\ the completed main offense.
offender or another person (for instance, a relative) is placed in a better position
than he was before the commission of the offense and that he is not entitled to the
benefit. Such advantages may consist of loans, food and drinks, a case handled
within a swifter time, better career prospects, etc. The act of corruption may be a
C ORRU P ’ I ION L) F .\
positive one or may consist of an omission.

The criminal codes of the member states of the Council of Europe usually have
two different categories of offenses—misdemeanor or felony—depending on who
initiated the commission of the offense. A distinction is also made depending on
whether the act which is solicited is a part of the official’s duty or whether he is
going beyond his duties. For example, corruption may be punishable if an official
receives a benefit in return for dealing with a case more quickly, but such punish -
ment could be limited to a misdemeanor since it was still his duty to handle the
case. If he should not have handled the case at all, the official would be liable to
having committed a felony which carries a heavier penalty.
Several countries extend the scope of the criminal codes’ application to all pub-
lic officials on the basis of the need to ensure fairness in the public service and to
uphold confidence. Other countries limit the application to certain categories of
officials, such as elected officers, judges, members of Parliame nt, and prosecutors,
among others.
Financing of Political Parties
A question discussed to a great extent in several countries during recent years

concerns the rules applicable to the financing of political parties. This general
interest arose partly from recent events m Italy where some 140 members of
Parliament may soon be prosecuted. ' In France, former minister Jack Lang’s
election to the National Assembly was invalidated because he transgressed the
rules on financing.
Amazingly enough, however, the replies of 19 countries to a Council of Europe
questionnaire indicated that the ma jority of these countries do not have any provi -
sions regulating the financing of political parties. Indeed, it appears that financial
donations to political parties is totally unregulated, unless such donations fall
under the general provisions on corruption (which will not apply m most cases
since many of them are limited to public officials). Th is is an area where the law
will, most likely, evolve to a great extent ove r the next few years.
In Canada, some aspects of illicit financing are covered, such as the intention to
promote political candidates or to influence political elections to attain or retain
As far as I know, the members are accused of other crimes as well as the illegal
financing of political parties.

government contracts. M A recent proposal in Germany will criminalize bribery of

members of Parliament, including the European Parliament, and the Lander and
regional authorities, but no specific offense to regulate donations to political
parties is expected."’ In the Netherlands, some parties have internal guidelines, but
neither the parties nor their officials fall under the general criminal law. In
Iceland, it is prohibited for political parties to receive gifts or financial assistance
from sources abroad. The Swiss Criminal Code deals with some aspects of the issue
but these articles mainly concern what may be entitled “electoral corruption,” such
as buying votes. 1
Apart from Italy and France, it seems that Hungary has considered this issue in
most detail. 1 ' The main rule is that no financial contribution may be made to, or
accepted by: political parties, a public body, a state enterprise, an economic ass o-
ciation in operation with the participation oi the state, and a foundation receiving
budgetary assistance from the state. It appears that private entities are not subject
to this prohibition. Financial contributions from another state’s government may
not be accepted. The State Audit Office is responsible for enforcing the reporting
and prosecution provisions of the act.
In the Czech Republic, the political parties are obliged to submit their annual
financial reports and to specify their receipts, donati ons, heritage, and funds
received from the government. 1 If the value of a donation exceeds 50,000 Czech
crowns, it is mandatory to specify the donor's name and address and the seat of the
legal entity. This offers a mechanism to monitor the rece ipts of donations, although
it is not specified whether the criminal law plays a role in this scheme.
Responsibility of Elected Persons
The question of criminal responsibility of elected persons, an issue similar to fi -

nancing political parties, has been widely deba ted in Europe, partly due to exten-
sive press coverage of certain “affairs.” The general debate in France raised by the
AIDS-contaminated blood scandal ultimately led to a change in the provisions of
the French Constitution regarding the limits of criminal responsibility of elected
politicians and of their right to trial by a special court. The less serious, but
equally spectacular, “affair” involving the president of a French football team has
raised further issues—still unresolved—concerning Parliament. Similar media
events have
Section ill of the Canadian Criminal Code.

' The legislative process was not finished in November 1993, according to the most
recent information available. r Articles 281, 288 and 3)5.
Act XXXIII of 1989 on the operation and management of parties.
According to the Act 424/1991 on political parties and political movements.
occurred in Italy, Greece, and other parts of Europe, not to mention the former
CORRUPTION & DEMOCRACY' 9"

Panel IV: Substantive Criminal Law
totalitarian regimes in Central and Eastern Europe.

The substantive criminal law offenses involved are usually of an “ordinary” na -
ture, in that they belong to the common criminal code of most nations and usually involve
“ordinary” citizens. But sometimes such offenses are clearly of a political nature
and may, particularly in a society in transition, raise difficult issues of the limits of
the criminal law versus political responsibility. In a general sense, and taking into
account the wide definition which I have previously advocated, those offenses are
closely linked with corruption and may include, for instance, high trea son,
political espionage, abuse of power, embezzlement of public funds, theft of state
property, and the abuse of inside information.
A number of issues regarding criminal policy need to be addressed in this re-
spect, in particular: are elected persons subject to ordinary criminal laws,
including the criminal procedural law, or are special substantive and procedu ral
rules required to deal with elected persons suspected of having committed
“ordinary” offenses? The de facto answer in most countries is that special rules, both
substantive and procedural, exist for trying elected persons. Moreover , some
countries have created offenses which are designed to stop the types of corruption
usually committed only by (or on behalf of) elected persons (or political parries).
With respect to substantive criminal law, the following examples are no rewortin :'
In Portugal, the President, the Members of Parliament and ir.embers of the gov-
ernment may be prosecuted for active and passive corrupt ion in accordance with
the criminal code.' 1 A recent change in the code increased the number of criminal
offenses applicable to these people. It now includes: embezzlement; refusal to do
justice or apply the law; refusal to accept a court decision; improper intervention
in a case; prejudicing legitimate interests; and, abuse of pow ers.
In Slovenia, Members of Parliament are subject to prose cution for passive and
active corruption.
In Hungary, Members of Parliament, the President and members of the gov -
ernment, inter alia, are considered to be official persons and thus liable for prose -
cution on the basis of the criminal code for, inter aha, misuse of authority. 10
In Malta, special provisions exist relating to the briber }' of Members of Parlia-
ment. 2 ’ The Electoral [Polling] Ordinance specifies a number of "illegal practices”
and “corrupt practices” in connection with the elec tion of Members of Parlia
10
Following the Law No. 34/87 of 16 July 1987.
~ 2 Section 137, item 1 of the Criminal Code.
Section 118 of the Criminal Code.
9 8 CORRUPTION & DEMOCRACY

ment. 11 These include the payment of certain expenses through election agents,
payments for the conveyance of voters to and from the polls, undue influence, and
bribery.
In Cyprus, Ministers and Members of Parliament may be prosecuted for having
acquired property by abuse of power.
In Germany, anyone offering, promising or providing to another any gift or
other benefit in return for his/her not voting, or voting in a particular manner, is
punishable, and anyone requesting, or accepting any gift or other benefit in return
for his not voting in a particular manner is similarly punished.
With respect to procedures, the following examples may be given:
In Portugal, 2 ’ the Parliament must, with regard to one of its members or a mem-
ber of the government, authorize arrest and provisional detention and decide on
the suspension of the Member. If the Member is prosecuted for a case involving a
higher penalty, as in the case of corruption, the suspension is automatic. Corrup -
tion cases are tried by normal courts, but special rules apply to the President and
the Prime Minister, including the right to be tried separately, strict application of
the legality principle, and only trial by the court is allowed. Specia l rules also
applv to the investigation procedure. The investigation is conducted by
Parliamentary Commissions, vested with the power.-, of judicial authorities.
In Switzerland, a decision by the Federal Chambers is necessary to open up
criminal investigations against parliamentarians /' For urgent provisional measures,
a four-member Parliamentary Commission will give the authorization. There are no
special courts or procedures concerning corruption offenses.
In the United Kingdom and Sweden, no special rules apply to corruption o f-
fenses.
In Lithuania, no special rules apply, but Members of Parliament and the Presi -
dent may only be removed from office by a qualified majority (3/ 5ths) of the Par-
liament (Seimas).
In Germany the investigations and proceedings of elected persons are permit ted
only with the consent of the body which elected them. A similar rule applies in
Luxembourg and Iceland with respect to Members of Parliament.
In Finland and Norway, crimes committed by members of the government (and
Members of Parliament in the case of Norway) are tried in the High Court of Im-
" 4 Chapter 102 of the 1984 Revised Ed of the Laws of Malta.

Article 160 of the Constitution.
Law No. 43/77 of 18 June 1977.
Article 14 of the Law on the Responsibility of the Confederation.

peachment, a special court designed solely for the purpose of trying such persons.
In Finland, the President or Parliament makes the decision to charge the per son.
Parliament selects six judges and the other judges are drawn from the senior
judiciary. Offenses committed by members of Parliament are tried in an ordinary
way, sometimes by the Appellate Court in the first instance.
In the Netherlands, a special jurisdiction exists for Ministers and Members of
Parliament.
In Cyprus, a Member of Parliament may be arrested, prosecuted or imprisoned
only with the consent of the Supreme Court (except where the offender is caught in
“flagrant delit” and the offense is very serious.
In Hungary, an Member of Parliament may only be arrested in cases of
“flagrant delit” and criminal proceedings, including taking o t coercive measures,
may only be initiated or continued with the consent of Parliament. Similar rules
exist in the Czech Republic and in Slovenia.
Corruption, Money Laundering, and Organized Crime''
At first glance, one might ask what does corruption have t o do with money
laundering? In a narrow sense, laundering is the concealment of the illicit origin of
the proceeds from a crime. Corruption is the bribery of a civil servant or a person
employed in a private company or the acceptance of such a bribe. Howev er, as has
been previously explained in this paper, the two have a great deal to do with one
another.
The definition of money laundering in the UN Convention Against Illicit Traffic
in Narcotic Drugs and Psychotropic Substances '' includes the conversion or
transfer of property for the purpose of assisting any person involved in the
commission of the predicate offense ’’ evade the legal consequences of his actions.
Provided that the act is committed with intent (which in many legal systems would
include dolus eventualis) and that it is committed while knowing that the property is
proceeds of the offense, this definition of laundering will most likely encompass
acts which in
Certain aspects of this part of the paper wer e presented to the Fifth International
Anti- corruption Conference in Amsterdam in 1992.
’ Concluded in Vienna on 19 December 1 988, Doc. ly'Conf. 82/15. This was used as
a model by the Council of Europe in drafting the Laundering Convention and the
Directive of the European Communities on Preventing the Use of the Financial
Svstem for the Purpose of Money Laundering. Directive 10 June 1991,
O.J.Eur.Comm. (I. 166) 177 Predicate offense means any criminal offense as a
result of which proceeds were generated that may become the subject of a money
laundering offense. Convention on Laun dering, Search, Seizure and Confiscation
of the Proceeds from Crime, Article 1(e).

many states could be defined as “corruption” on the part of the person receiving
the money.
Similarly, an act of corruption may be included in the other part of the
“mandatory” laundering offense which makes criminal the concealment or
disguise of the true nature, source, location, disposition, movement, rights with
respect to, or ownership, of property, knowing that su ch property is proceeds from
illegal acts. I'he same holds true for the acquisition or possession of property,
knowing at the time of receipt that such property was proceeds from illegal acts.
The reasons for this link are not only due to the wide definiti on of laundering,' 1
but also due to the interrelationship between corruption and laundering as under -
stood in a wider sense. This in turn is due to the fact that the two phenomena are
part of what is usually termed “organized crime.” One of the most common defini-
tions of organized crime is that the criminal group meets the following criteria: 1)
the group is characterized, more or less, by a hierarch ic structure and, more or
less, a constant composition; 2) in the group a system of sanct ions is in force
(threats, ill-treatment, executions); 3) the gams and profits of the crime are to a
certain extent invested in “legal activities” (white washing); 4) more than one type
of criminal act is committed by the group; and, 5) the group bribes civil servants
and/or staff of private enterprises.
There is a profound link between corruption, laundering and organized crime
and political stability and respect for democratic values and ideals. This kind of
criminality undermines belief in the economic system itself. Abuse of this confi-
dence is subsequently transferred to political structures and ultimately raises ques -
tions about the function of the rule of law. Th is is clear by looking at how the
enormous wealth and power of South American drug cartels have jeopardi zed the
stability of entire governments. The Financial Action Task Force has estimated that
as much as US$ 85 billion is available in the United States and Europe alone from
drug proceeds. This poses a threat to soc iety, leaving it vulnerable to ultimate c on-
trol by criminal elements. It is therefore important to research, discuss, and
analyze this type of criminality. It is particularly important in the context of the
emerging
It has been argued, by many experts who participated in the work of the
Financial Action Task Force, that the definition of laundering is not a “real”
definition but rather a description of economic behavior. 11ns is probably true,
but it may be asked how the description will affect the legislation. If the
legislator does not include in the legislation al! the elements of the laundering
offense, will the obligation created by the two convention^ and the directive be
met?
Prof. C.J.D.F. Fyna nt and J.R. ban den Brink, I.ochem Geo rga nt see rde misHa ae
STRAFRE CHTELIJK P0l.niEBEI.EID (ORGANIZED CRI ME AND CRIMINAL P 0I ICE POLICY'. I - ' - , quoted in
the report by Mr. P. Stoffelen to the Parliamentary Assembly of the
G u:::c: : Europe, Doc. 6557, 10 January 1992.
10
1
CORRLPTI ON DtM
democracies of Central and Eastern Europe, which are now being targeted by or -
ganized crime.
A questionnaire submitted to the Ministries of Justice asked whether there was
reason to believe that there is a connection between corruption and organized
crime. Hardly surprising, several countries answered in the affirmative; but a
number of countries did not link the two. Several countries cited corruption among
law enforcement authorities as resulting from a clear strategy by organized crime.
In other countries, the fact that corruption takes place within the framework of an
organized criminal activity is considered an aggravating factor. It has been stated
that corruption is one way of preparing new ground tor organized crime (for in-
stance, when it is moving into a new country or another part of a country).
Corruption, Money Laundering, and Organized Crime in Central and Eastern

Europe
In Central and Eastern European countries , judging from the answers to the
questionnaire, it is clear that a link exists between organized crime and corruption.
One reason which may be advanced is that the defin ition of '‘organized crime” is
slightly different in this region and encompasses man }' crimes which are
considered to be of a more “ordinary” nature in the countries of Western Europe. I
have a sense, based on extensive travel in most Central and Eastern European
States, and talks with law enforcement officers, judges, and senior persons in
government, that nearly all types of criminality in Central and Eastern Europe are
considered organized in some way. For instance, those I met often repeat that at
least 4,000 organized crime groups now operate in the territory of the Russian
Federation and are spreading their networ k throughout Central and Eastern
Europe. However, when examined more closely, most of these groups consist of
only a few persons with relatively small resources, and operate in limited areas.
Although such groups may be equally dangerous to society, I do not believe they
are comparable to Italian organized crime groups.
In my opinion, laundering is particularly dangerous to a society in transition
from a centralized economy to a market economy. A society in transition needs,
above anything else, money; drug cartels and the mafia have plenty of money. The
drug cartels need to hide that money, to invest it into “fully legitimate
businesses.” Many privatized enterprises are purchased with laundered money.
The launderer can thus invest in property, often at a low value, and, by investing
in cash intensive businesses such as restaurants and hotels, expect a high return on
his investment. Moreover, the investment is a vehicle for further money
laundering.
In addition, it is extremely difficult for the society in transition, which for 40 to
70 years has lived under a state-command economy and a totalitarian regime, to
accept certain methods to control money laundering which are currently being im -
plemented in Western societies. For example, there is an obligation to report sus -
picious transactions in the European Community Directive on Money Laundering .
Reporting obligations are a sensitive political issue and it is understandable that a
new democracy would hesitate to adopt such legislation. E lowever, it is probably
one of the best instruments so far conceived to defeat money launderers.

The countries of Central and Eastern Europe have a challenge to meet, and it is
important that we do our utmost to help them in this task. One way of giving
assistance is to provide an appropriate regulatory framework an d to exchange
views 011 the subject. The Council of Europe, for instance, organized a large
international conference on money laundering in Central and Eastern Europe this
year and will provide technical assistance through the Demosthenes program,
where special seminars on economic crime and money laundering are being carr ied
out in the concerned countries.
Conclusions
Certain measures should be taken to combat corruption, money laundering, and

organized crime. I recommend the following with regard to money laundering to
any government in Central and Eastern Europe:
1. First, it is important to make money laundering a criminal offense. Such
an offense must be drafted as precisely as possible and must take into account the
international instruments in this area, including: Article 6 of the 1990 Council of
Europe Laundering Convention; Article 3 of the 1988 United Nations Convention
against Illicit Drugs Trafficking; the 1991 EEC Directive on Prevention of the use of
Banks for Purposes of Money Laundering; and the 40 Recommendations of the
Financial Action Task Force.
2. When criminalizing money laundering, it is not wise to limit the
laundering offense to proceeds from drug trafficking, terrorist offenses or similar
offenses, but should include serious offenses in general, for reasons of policy and
prevention.
3. Measures of prevention and detection should be taken to prevent dirt v
money from entering into financial institutions, such as, banks, insurance compa -
nies, and exchange houses. For instance, banks should be required to know their
customers and should be required to avoid suspicio us transactions. They should
also be obliged to report any such suspicious transactions to the law enforcement
authorities.
A similar obligation is found in Article 3 of the Council of Europe Laundering

Convention.
4. The law should provide procedures for the confiscation of proceeds from
criminal activities. Such confiscation coul d consist of property or the value of such
property.

5. The law should allow law enforcement authorities special procedures to

investigate money laundering. It should be possible to conduct searches and seiz -
ures of banking, commercial, and other financial records. Bank secrecy should not
prevent criminal investigations.
6. Banks and other financial institutions should be required to keep a record
of their transactions.
7. It is advisable to join and implement the Council of Europe’s Laundering
Convention, the United Nation’s Convention Against Il licit-Trafficking and to con-
form to the 1991 EEC Directive and the 40 Recommendations of the Financial
Action Task Force.
8. Any measure taken to investigate and punish money laundering should be
based on law.
9. The rights of innocent third parties should be protected. They should have
the opportunity to assert these rights before an independent and impartial court,
in accordance with the European Convention on Human Rights.
10. The law should provide for enforcement of decisions by foreign judicial
authorities, on the basis of bilateral or multilateral conventions and treaties.
11. A system through which the authorities control the establishment of banks
and other financial institutions should be established. Such institu tions should be
supervised on a continuing basis.
These 11 Recommendations could form an entire legislative program in order
to combat money laundering. A similar program could be specifically designed to
combat corruption. If such programs were put into effect, I am confident that both
corruption and money laundering will be efficiently fought because both phenom -
ena walk hand in hand. Where there is one, the other is not far away.
CORRUPTION AND PROCUREMENT RULES
Andre Newburg*
I have been asked to discuss institutional mechanisms that have been imple -
mented to overcome corrupt practices and about the underlying policy considera -
tions. The procurement procedures of international financial institutions are an
important contribution in this regard. They also contributed to institution building
and the training of officials and business executives. The procurement policies and
rules of the European Bank for Reconstruction and Development (EBRD) set out
the procedures to be followed in bank-financed operations. The most extensive
rules apply to public sector projects. I will return to these procurement rules
shortly.
The contribution from the international community in the fight against corrup -
tion has been limited. International initia tives to get states to prohibit bribes and
related illicit payments have not been very successful. In all Organization for Eco -

PANEL VII: OTHER INSTITUTIONAL MECHANISMS
nomic Cooperation and Development (OECD) countries, both the offer and the
acceptance of a bribe involving a civil servant or pub lic official are criminal of-
fenses. Most countries do not, however, outlaw bribery actions by their nationals
or enterprises that take place abroad. All seem eager for other countries to prohibit
extra-territorial bribery, but are reluctant to do so thems elves before all other
countries have done so.
The United States Foreign Corrupt Practices Act of 1977, as amended by the
Omnibus Trade Act of 1988, is generally recognized as the most comprehensive
effort by any country to suppress bribery outside its bor ders. The anti-bribery pro-
visions apply to every business organized or hav ing its principal place of business
in the U.S., and also to foreign firms whose securit ies are traded on U.S. stock ex-
changes. American business people complain about the lack of a level playing field
as long as business in other countries are not similarly restricted. The present U.S.
administration has taken a strong lead in promoting an international convention in
which the OECD states undertake to criminalize bribery abroad. Ho wever, at pres-
ent, only Sweden and Norway seem to support the U.S. initiative in the relevant
OECD working group.
International cooperation to combat drug-related money laundering and insider
dealing has been more successful. The 1980’s saw a UN conventio n and a European
Community directive on money laundering and the establishment of the Financial
Action Task Force to monitor the OECD countries’ effort in this area.
General Counsel, European Bank for Reconstruction and Development.
Institute for Cons:::',-.:: .

Harmonization of national criminal law is, of course, only one remedy among
several. Developing business ethics through international codes of conduct is also
important. The International Chamber of Commerce issued a code in the 1970’s and
Transparency International, which was launched in 1993, has also formulated a
code. International codes may be incorporated into domestic codes enforced by
trade associations and other business organizations.
Establishing a sound foundation for public admini strative law and practice on
the national level is obviously very important. Decision -making should follow
clearly formulated procedural rules with a high degree of transparency. There are
surprisingly different traditions of public administration in Europ e. The public’s
right to information and access to documents of the public administration have the
status of constitutional principles in some countr ies (e.g., Sweden since the eight-
eenth century), while in others (e.g., the UK) this right is not accorded any legal
recognition. The post-war period has brought pressure for stricter procedural
rules, including publicity and transparency. In this area, the former communist
states have a certain amount of catching up to do.
This certainly applies to public procurement, which is the most fertile ground
for corruption in all systems. Here, the transparency and procedural rules of public
administration must be supplemented by detailed procurement procedures

PANEL VII: OTHER INSTITUTIONAL MECHANISMS
founded on principles such as public competitive bidding. The aim of preventing

corruption coincides with the broader goals of economy and efficiency. An
important element in the public sector’s adaptation to a mixed economy is the
introduction of competition in public procurement. Furthermore, open and fair
procedures for awarding public sector contracts for goods, works, and services
help to create dependable and stable markets for efficient private enterprises.
The GATT Agreement on Government Procurement establishes a framework for
procurement regulation and practice. Its aim is liberalization and expansion o r
world trade. The framework may also serve to improve efficiency and accountabil -
ity in a domestic context.
The EBRD’s role in the transformation of public administration systems wi !!
mainly be through the projects it supports. Its procurement procedures are an im -
portant contribution. Article 13 of the Agreement Establishing the EBRD provides ,
“the Bank shall, in all appropriate cases, make its loans and other operations con -
ditional on international invitations to tender....”
The EBRD’s procurement policies and rules have much in common with thos e
of other international financial institutions such as the World Bank. However, th e
Bank’s rules adhere to the GATT rules and do not limit procurement to donor or
member countries. In this respect, the EBRD rules reflect the tendency toward lib -
eralization of international trade. Another feature of the EBRD rules is the strong
focus on transparency.

CORRUPTION AND PROCUREMENT RULES
The most extensive EBRD procurement rules apply to public sector opera tions—
those which are for the benefit of a government or a state -owned or controlled
entity, except entities that are operating autonomously in a competitive market
environment. In addition to economy and efficiency, the public sector pro curement
rules require transparency and accountability which affects the choice of
procurement method, documentation and other procedures. The EBRD requires
public sector clients to obtain goods, works and services through open tender pro -
cedures. There are few and limited exceptions to this requirement.
The procurement rules apply to goods, works and service contracts financed in
part or in whole by the EBRD; also, the contract value must equal or exceed ECU
200,000 for goods and services and ECU 5 million for works. For goods and works
contracts under these threshold values, the Bank encourages clients to follow the
rules, but they may use other local procedures that are consistent with the princi -
ples concerning competition, transparency, economy and efficiency.
The normal process for public sector procurement involves several steps and a
detailed procurement plan. The client must determine what is to be procured, by
when, what standards are needed, and which specific procurement procedure is
most suitable for each contract. Clients are encouraged ro prepare and use
standard documents for each type of procurement. The procedure is specified in
the EBRD’s project appraisal report and the legal documentation.
After the procurement plan has been cleared by EBRD, the client must publish a
General Procurement Notice in the domestic and international trade press and of -
ficial gazettes. Open tendering for individual contracts is advertised in the same
manner. Tender notices are sent to those who responded to the General Procure -
ment Notice and to local representatives of foreign countries that are potential
suppliers of the goods and works required. Publication of notices in the UN’s De-
velopment Business and the Official Journal of the EC is encouraged.
Open tendering is the preferred procedure for contracts in the public sector.
Selective tendering, where preselected firms are invited to submit tenders, may be
allowed by the EBRD under certain circumstance s—for instance, where the product
is highly specialized and complex or where there are only a limited number of
suppliers of the particular goods or services. Single tendering, where a single firm
is invited to present its tender without prior public notification, may be allowed by
the Bank in exceptional cases—for instance, as an extension of an existing contract
or when a product can be supplied only by a single supplier because of exclusive
capabilities or rights.
For small value contracts of off-the-shelf items or standard specification goods ,
the EBRD may agree to a simplified procedure with written quotations from at
least three suppliers. The Bank may also agree to competitive tendering u nder loca.
procedures in certain circumstances, such as when the tender is unlikel v to 3t:r.ic:
foreign interest.
Detailed requirements for tender documentation include languages, standards
and specifications, tender prices, payment terms and procedures, t ime limits and
forms of contract. The rules pertaining to tender opening, evaluation, contract
award, contract administration, and EBRD monitoring and review are indeed very
C ORRU PT ION ; X D E 1
" "
PANEL VII-. OTHER INSTITUTIONAL MECHANISMS
detailed, but in the experience of international financial institutions with a lon ger
history than the Bank, they are necessary to guarantee a satisfactory level of open
competition.
The EBRD does not require the application of equally rigorous procurement
rules in private sector operations. The Bank encourages competitive tendering
methods, particularly for large contracts, but it appreciates that private sector en -
terprises often follow established commercial practices other than formal open ten -
dering for their procurement. However, the EBRD monitors the relationship be -
tween the client company and its sponsors to ensure that the client’s best interests
are pursued when, for instance, a shareholder is a major contractor and arm’s
length dealing is necessary to avoid conflicts of interest. The Bank also requires
clients to follow detailed procurement rules for consultant services; these rules
also apply to its own procurement of consultant services.
The procurement rules of the EBRD and the international financial institutions
may generally appear to be cumbersome. The first encounter with these rules for
civil servants or businessmen may be quite painful without earlier exposure to
similar procurement regimes. But experience with EBRD projects is good training
for civil servants in the process of establishing a national procurement reg ime.
You may find a discussion of procurement rules and policies uninspiring. But I
am convinced that it is through this kind of regulation and practice that corruption
can best be deterred. The procedures may be unwieldy, tedious, and demanding,
but the process is necessary in all societies and especially in societies going
through a period of transition affecting both public life and business, as in the
former communist states.
pant—perhaps more particularly in the United States than in Europe. But it must
be added that corruption and inefficiency seem to be declining in the United
States. In countries like Britain it seldom appears in any substantial form ....
Corruption is universal and the democracies have had their share, but it is
hardly a quality found in democracies alone.” E. J. Meehan, J. P. Roche, M. S.

PANEL VII-. OTHER INSTITUTIONAL MECHANISMS
Stedman, THE DYNAMICS OF MODERN GOVERNMENT, p. 23 (McGraw Hill 1966).

L
’ Statistics of “white collar” crimes and “crimes without victims” are unreliable. Corruption is a crime which is
surrounded by secrecy and therefore never, or only rarely, detected and reported to the authorities, or otherwise
officially recorded. Research in England shows that such crimes are a normal practice of top management in industry.
Research by
E. H. Sutherland, and more recently by V. LeVine, or A. Pizzorno and D. della Porta, emphasize that corruption is not
recorded in official statistics, actors are not prosecuted, and effects are not clearly visible. This is not true for the United
States, Germany, Italy, and Japan, and for developing, communist, and post-socialist countries. See, for example,
E. H. Sutherland, WHITE COLLAR Crime (New York 1949); V. T. LeVine, Transnational Aspects of Political
Corruption, in Heidenheimer, CORRUPTION, pp. 685 - 701; A. Pizzorno and D. della Porta, Geschaftspolitiker in
Italien: Uberlegungen im Anschluss an eine Studie uber politische Korruption, Kolner Zeitschrift fur Soziologie und
Sozialpsychologie, pp. 439-465, Vol. 45, no. 3 (1993); E. Blankenburg, R. Stadham- mer, H. Steinert, Political Scandals
and Corruption IN American History; J. von Klaveren, Corruption: A Special Case of United States; R. Roth, Eine
Korrupte Republik? Konturen politischer Korruption IN der Budesrepublik, Suhrkamp, pp. 201-234 (1989); R.
Ebbinghausen and S. Neckel, Anatomie DES politischen Skandals (Suhrkamp, Frankfurt 1989).
"Staat im Sinne des rationalen Staates hat es nur im Okzident gegeben.” M. Weber,
\Y:rt>chaft und Gesellschaft, Kiepenheuer & Witsch, Koln, p. 1034 (1956).
These examples are not intended to be exhaustive, but merelv to provide an idea
of some special features of the legislation of some select countries.

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TRADITIONS OF CORRUPTION

It is very dangerous to suddenly speak of Eastern Europe as a unified space.

Professor of Law, Central European University, Budapest.

Institute for Constitutional & Legiihtr. e

44 CORRUPTION & DEMOCRACY

“Corruption is the most infallible symptom of constitutional liberty .” 1

1.1 False Problem: Betrayed Revolutions

Revolutions offer a rare opportunity to study the circumstances in which people

Professor of Law and Director, Center for Legal Consultations, Zagreb

Institute for Constitutional Legislative

1.2 Real Problems: The Burdens of Post-Socialism

48 C ORRU PTION fic D E M OCRA CY

CORRUPTION & DEMOCRACY 49

2. Corruption: Causes and Remedies

Corruption is not a social phenomenon which can be explained by a simple

50 C ORRU PTION fic D E M OCRA CY

Social scientists emphasize that corruption in post -socialist countries must be

2.1 Corruption as Market Interaction

Corruption in its manifest form is visible through individual interactions. It is

PB = (Expected benefit/EB) + (Guaranteed benefit/GB)

“Komplexitat in dem angegebenene Sine heifit Selektionzwang, Selektionzwang

UNTERSCHIEDLICHEN ERWARTUNGKONSTELLATIONEN IN DER HANDLUNGSITUATION, KOLNER ZEITSCHRIFT FURSOZIOLOGIEUND

CORRUPTION & DEMOCRACY 51

the formulation of a sophisticated “sociological proverb” that occurs in mutually

2.2 Corruption and the Normative Regulation of Interactions

Interaction between individuals is not random; it is regulated by norms of mu -

52 C ORRU PTION fic D E M OCRA CY

The perception of reality is a construction of human conscience, and this per -

3. Corruption as a Cultural, Legal, and Organizational Phenomenon in Premodern

CORRUPTION & DEMOCRACY-

CORRUPTION & DEMOCRACY-

tures and political systems, corruption is not an isolated phenomenon but an

54 C ORRU PTION fic D E M OCRA CY

3.1 Differences and Dimensions of Development

Very often, sociologists (e.g., Durkhei m, Tonnies, Redfield, Parsons) contrast

Samuel Pepy’s diary!). W. Brauneder, Die Korruption als Historisches Pbanomen, in C.

CORRUPTION & DEMOCRACY 5 5

usually know each other well.

3.2 Arbitrary and Creative Implementation of Law (Flexible Laws)

57 C ORRU PTION fic D E M OCRA CY

las. Control must be grabbed: through coercion, violence, money, or charismatic

H. McCurdy, PUBLIC ADMINISTRATION: A SYNTHESIS, p. 322 (Cummings 1977).

CORRUPTION & DEMOCRACY-

The important consequence is that the discretion of the officials is greater.

3.3 Distortion of Organizational Principles

3 “Kadi-justice...follows the schema: ‘it is written...but I say unto you.’” Gerth,

58 C ORRU PTION fic D E M OCRA CY

small groups in the organization. There are no guarantees of permanence; fast

5 “In traditional societies nepotism does not exist. Incompatibility between

special canteens. The most sacred of sacred cows in Western personnel

CORRUPTION & DEMOCRACY 5 5

developed countries, but also in systems which experienced long ideological re -

60 C ORRU PTION fic D E M OCRA CY

Corruption in Poland is not a new phenomenon. The changes to our economic

Member of Parliament, Republic of Poland; Chair, Legislative Committee.

Institute for Constitutional 6c

62 C ORRU PTION fic D E M OCRA CY

CORRUPTION & DEMOCRACY 63

I would like to end my presentation with two points. Based on my experiences, I

64 C ORRU PTION fic D E M OCRA CY

A New Organization and its Mandate

Transparency International was launched in the Spring of 1993. T I is already

Building on Earlier Actions