First EU Corruption Report

Corruption continues to be a challenge for Europe which deserves greater attention in all EU Member States, according to the Commission’s first ever EU Anti-Corruption Report, published on 3 February 2014.

Estimating that corruption costs European economy around €120 billion euros (understood in the report as impact on officially reported GDP, although this is not made explicit), the Commission’s first Report on the issue finds that despite EU Member State efforts in recent years, results are uneven and more should be done, not only to prevent but also to punish corruption.

The Report follows-up the Commission’s 2011 Communication on Fighting Corruption in the EU in which the Commission announced that it would monitor and assess Member States efforts. The first-ever Report finds that the nature and scope of corruption varies from one Member State to another and that the effectiveness of anti-corruption policies is quite different.

The Commission’s Report recognizes that the responsibility for tackling corruption remains a national one and so seeks to promote high anti-corruption standards across the EU. The Report therefore presents an overview of corruption trends in the EU with a special focus on public procurement.

Twenty-eight individual Chapters, for each of the EU’s Member States, identify national issues that deserve further attention, and highlight good practice (see Part II of our analysis).

The EU Anti-Corruption Report is divided into six chapters:
1) The results of the Eurobarometer survey on experience of corruption in Member States;
2) The political dimension of corruption practices;
3) Control mechanisms and prevention;
4) Prosecution and punishment of corruption activities;
5) Specific risk areas and
6) Corruption in public procurement (including recommendations).

The Report is completed by an Annex detailing the methodology the Commission used to carry out its analysis and the next steps envisaged by the Commission.

1) Eurobarometer Surveys

The general outcome of the survey is that Member States share different experiences when it comes to corruption.

Low experience of bribery:  Denmark, Finland, Luxembourg, Sweden and UK were those Member States that indicated that were rarely expected to pay a bribe (less than 1 % of cases). In countries like Germany, the Netherlands, Belgium, Estonia and France, the actual number of people having had to pay a bribe is limited to around 2 %, while in Portugal, Slovenia, Spain and Italy, personal experience of bribery by the respondents is also rare (1-3 %).

Higher experience of bribery: In Croatia, the Czech Republic, Lithuania, Bulgaria, Romania and Greece between 6 % and 29 % of respondents indicated that they were asked or expected to pay a bribe in the past 12 months.

Concentration of bribery in certain sectors: In some countries a relatively high number of people indicated that they had personal experience with bribery, but with a clear concentration on the healthcare sector, including Hungary (13 %), Slovakia (14 %) and Poland (15 %).

2) The political dimension

Although anti-corruption policies have become more visible on the political agenda in most Member States, the absence of anti-corruption strategies in some Member States which are facing systemic corruption problems turned out to be an issue of concern. In some of these Member States, a national anti-corruption strategy was recently adopted, while in others no such strategy is not in place yet.

Political accountability

Integrity in politics is a serious issue for many Member States. Codes of conduct within political parties or elected assemblies at central or local level are the exception more than the rule.

Financing of political parties

The Commission Report found that there are still important shortcomings with regard to the supervision of party funding, since proactive supervision and dissuasive sanctioning of illegal party funding are still not regular practices across the EU.

3) Control mechanisms and prevention

Use of preventive policies

The implementation of preventive policies against corruption has had different results in Member States. For some, the implementation of these policies has been fragmented and has therefore failed to produce positive results, while in other Member States prevention has been effective due to the fact that prevention programmes are in place and are considered as a priority by most central and local authorities.

External and internal control mechanisms

Some Member States focus on law enforcement and prosecution bodies or on anti-corruption agencies that are seen as exclusively responsible for addressing corruption in the country. The Commission Report stresses that, while the role of these above mentioned institutions is of outmost importance, deep-rooted corruption can only be efficiently addressed though control mechanisms throughout the public administration, at central and local levels. The Commission Report has also found that in many Member States internal controls across the country (particularly at local level) are weak and uncoordinated.

Rules on conflict of interest

The Council of Europe has defined conflict of interest as a situation ‘in which the public official has a private interest which is such as to influence or appear to influence, the impartial and objective performance of his or her official duties’.

Regulations and sanctions which apply to conflicts of interest vary across the EU. The level of scrutiny is also different from one Member State to another: some countries have independent agencies that monitor conflicts of interest, but the capacity to cover these situations countrywide is limited and follow-up of their decisions is insufficient, while others have an ethics commission in charge of such verifications that reports to the Parliament.

4) Prosecution and punishment

Criminal law

The Commission Report on anti-corruption indicates that criminal law against corruption is largely in place in Member States, in line with the standards of the Council of Europe, UN and EU legislation. However, the way the Framework Decision 2003/568/JHA on combating corruption in the private sector has been transposed in Member States is uneven and there are still certain problems when it comes to the transposition of provisions concerning active and passive bribery.

Efficiency of anti-corruption agencies

The effectiveness of anti-corruption agencies vary in Member States: in some of them, these agencies have produced successful results thanks to a number of reasons including independence and absence of political interference or merit-based selection and promotion of staff. In other Member States, anti-corruption agencies that investigate politicians face direct or indirect pressure.

Law enforcement, prosecution and judiciary

Efficiency of law enforcement and prosecution in investigating corruption is another parameter that varies widely across the EU. In some Member States, outstanding results can be seen in this area while in others successful prosecutions are rare and investigations or judicial procedures remain lengthy. The Commission Report also highlights that in several Member States there appears to be a lack of judicial determination and capacity to tackle complex or sensitive corruption cases, as suspended or weak sanctions for corruption appear are quite frequent.

5) Specific risk areas

Petty corruption

Petty corruption usually refers to low-level, small-scale corrupt practices. According to the Commission Report, petty corruption remains a widespread problem but only in a few Member States where numerous anticorruption initiatives have failed to tackle petty corruption.

Corruption risks at regional and local level

Corruption risks are found to be higher at regional and local levels where checks and balances and internal controls tend to be weaker than at central level. There are considerable variations within some Member States when it comes to good governance and effectiveness of anticorruption policies at regional or local level: in many Member States, wide powers of regional governments or local administrations are not matched by a corresponding level of accountability and control mechanisms.

Most affected sectors

Urban development and construction, healthcare and tax administration are among the sectors that are the most vulnerable to corruption.

Foreign bribery

Although a significant number of successful prosecutions and a high level of sanctions have been noted in some Member States with regard to foreign bribery cases, there is still a number of Member States which faces insufficient or non-existent prosecution of foreign bribery.

State-owned companies

In some Member States, shortcomings exist with regard to the supervision of state-owned companies where legislation is unclear and politicisation prevents the pursuit of the public interest.

6) Special Focus on Public Procurement

 Being a sector in which a significant level of financial flows is generated (approximately one fifth of the EU’s GDP is spent every year by public entities buying goods, works and services), public procurement is particularly prone to corrupt practices and activities. The Commission Report has dedicated a separate chapter for public procurement as a sector that is most vulnerable to corruption.

Results of Eurobarometer surveys on corruption

According to the 2013 flash Eurobarometer survey on corruption relevant to businesses, more than three out of ten (32 %) companies in the Member States that participated in public procurement say corruption prevented them from winning a contract. This view is most widely held amongst companies in the construction (35 %) and engineering (33 %) sectors. More than half of company representatives from Bulgaria (58 %), Slovakia (57 %), Cyprus (55 %) and the Czech Republic (51 %) say this has been the case.

Risk areas and patterns of corruption

The most frequent problems occurring in the public procurement sector in Member States concern the following: tailor-made specifications to favour certain bidders, splitting of public tenders in smaller bids to avoid competitive procedures, conflicts of interest affecting various stages of procedures and concerning not only procurement officials but also higher level of contracting authorities, disproportionate and unjustified selection criteria.

According to a 2013 study on identifying and reducing corruption in public procurement in the EU, there are four main types irregular practices concerning 96 cases in which corruption allegations have already been confirmed through final court decisions: (1) bid rigging (in the form of bid suppression, complementary offers, bid rotation and sub-contracting) when the contract is ‘promised’ to one contractor with or without the consent of public officials; (2) kickbacks, when the public official requests or accepts a bribe which will be accounted for in the tendering process, including administrative processes; (3) conflict of interest; (4) other irregularities including deliberate mismanagement/ignorance when public officials do not carry out proper checks or follow the required procedures and/or tolerate or ignore overt deliberate mismanagement by contractors.

According to the Commission Report, construction, energy, transport, defence and healthcare sectors appear to be most vulnerable to corruption in public procurement.

General Conclusions and Recommendations

The Commission reports progress as to the implementation of anti-corruption policies in public procurement within the Member States, but it still remains an area of risk. The Commission Report further stresses that integrity standards should be further strengthened.

The specific recommendations made by the Commission Report to tackle corruption in public procurement are the following:

(1) Ensuring systematic use of corruption risk assessments within public procurement, by developing, based on risk assessments, tailor-made measures for particularly vulnerable sectors or by implementing targeted anti-corruption policies for regional and local administrations;
 
(2) Implementing high transparency standards for the entire procurement cycle as well as during contract implementation, by ensuring common minimum standards of transparency at the level of regional and local administrations and enhancing transparency in public procurement procedures;
 
(3) Strengthening internal and external control mechanisms for the entire procurement cycle as well as during contract implementation: According to the Report, this could be achieved through measures such as by ensuring sufficient capacity of public procurement review bodies, consultative organs and oversight bodies, as well as courts of audit or by carrying out checks on ownership of bidders and subcontractors;
 
(4) Raising awareness about the need and know-how for prevention and detection of corrupt practices at all levels of public procurement,  by developing for example detailed guidelines on prevention and detection of corrupt practices and conflict of interests in public procurement; and
 
(5) Strengthening sanctioning regimes by ensuring the application of dissuasive sanctions and effective follow-up mechanisms for repealing decisions.

7) Annex

The Annex to the Report describes the methodology used by the Commission in its compilation of the Report’s findings and covers not only the scope of the Report, the sources of information, as description of the preparatory process and supporting tools but also the assessment methodology and use of indictors and an explanation of the synergy with existing monitoring mechanisms and benchmark for assessment as well as the measures to address corruption.

Next Steps

As follow-up to the report, the Commission states that it wants to engage in a “constructive, forward-looking debate” on the best ways to address corruption, notably on the points that it has identified in the national reports.

The Commission also expresses its hope that its Report will begin a wider debate about anti-corruption measures with active participation of the Member States, the European Parliament, national parliaments, the private sector and civil society, at both at EU level and in Member States.

The Commission will set up an experience-sharing programme for Member States, local NGOs and other stakeholders to identify best practices and overcome shortcomings in anti-corruption policies, raise awareness or provide training linked to the issues for attention contained in the report. The experience-sharing programme will be launched based on feedback received from stakeholders on the specific needs that it could address.

The Commission also states that it will analyse feedback in relation to this first report, particularly on any gaps and errors, and draw lessons for the second report. The methodology will also be reviewed, and additional consideration will be given to the possibility of developing new corruption indicators. Finally future work will look into issues like how the measures suggested in this first report were implemented, and take effectiveness of the experience-sharing programme.