The Shortcomings of the Anti-Corruption Agency Bill

What is your opinion on the anti-corruption agency bill that was approved by the previous cabinet yet withdrawn by the incumbent one for reworking?

The basic idea behind thebill is to bring together the Law on the Prevention of Conflicts of Interest and an updated version of the Law on Political Party Financing. The agency would be tasked with enforcing precisely these two laws, although the Law on the Prevention of Conflicts of Interest would be formally supplanted by the law creating the agency, which would contain all its provisions. Essentially, the agency would be there to combat political corruption and state capture. It can therefore be concluded that administrative corruption would be left to other institutions, mostly the police and prosecutors.

Furthermore, the agency would be in charge of enforcing the National Strategy on Fighting Corruption and the accompanying Action Plan. The agency would also have the authority to participate in the drafting of legislation related to corruption.

Yet this concept is not without its problems. First of all, the anti- corruption body is to lose its advisory role (which the existing Anti- Corruption Council was supposed to have), which certainly is not a good thing. It is not only a question of whether a body has the authority to take part in the drafting of anti-corruption legislation. It is much more important for such a body to be involved in the preparation of legislation and policy making since it is precisely the lack of adequate policy, protectionism, and state intervention that are conducive to corruption. Right now, the agency would be party to
this process and therefore would not be in a position to advocate these ideas (liberalization and deregulation) that help curb corruption.

In principle, there is nothing wrong with the agency being in charge of enforcing the National Strategy on Fighting Corruption. What is wrong is the Strategy itself. The document is nothing more than an inconsistent wish list. As far as consistency goes, the first paragraph states: "Corruption is equally detrimental in all societies at all levels of development. In societies en route to democratic transformation the problem is even more pronounced..." So which it is? Does corruption pose the same kind of danger to all societies (first sentence) or is it a bigger problem in countries undergoing transition (next sentence)? A strategy that starts like this cannot get you very far. As its goal the strategy gives the following: "Reducing corruption and achieving a level of corruption awareness equal to that of the well-developed European countries." The cynic would ask: Italy or Finland? There is a world of difference. Either way, this vague goal will supposedly be attained once 16 smaller goals are out of the way. Yet with so many, you can't really talk about priorities and some are extremely unclear and unconvincing. For example, one of the goals is "the permanent elimination of conditions that give rise to and encourage corruption." But if you could actually achieve this, then your problems would be over: not only would corruption disappear ("the elimination of conditions"), but it would never return ("permanent"). The only problem is that we don't know how to go about eliminating these conditions.

Finally, if the agency doesn't have an advisory role in policy making, it loses the ability to influence state policy and has no way to effect "the permanent elimination of conditions that give rise to and encourage corruption."

All of this indicates that the agency will be there to implement the conflict of interest and political corruption regulation, while having little authority to do anything else, especially affect state policy that creates conditions that give rise to and facilitate corruption. The result is a large void in the anti-corruption campaign, especially since once the agency is established, the Anti-Corruption Council will cease to exist.

What about the Anti-Corruption Council?

The Anti-Corruption Council was established in October 2001 as an expert advisory body to the cabinet. According to the cabinet decision that created it, the Council has a clear job: "The mission of the Anti-Corruption Council is to evaluate activities aimed at combating corruption, approach the cabinet about measures to improve the efficiency of this campaign and supervise their implementation, and initiate the adoption of regulations, programs, acts, and other measures in this field." In lay-terms, the Council is not authorized to deal with specific cases of corruption and is supposed to focus on "measures", "regulations", and "acts" that are conducive to corruption. Secondly, the Council does not have investigative powers and is a purely advisory body, which is what councils are all about. Thirdly, the Council is supposed to advise the Serbian cabinet.

It is therefore surprising that the Council initially spent a good portion of its time debating its mission, especially in regard to the investigation of concrete instances of corruption. It was clear the pro-investigation faction that won out and the Council de facto changed its mission and redirected it at investigating what it considered to be cases of corruption. This is most readily seen in the Council's reports, at least those available on its website: 62.5 percent (15 out of 24) are related to investigating specific instances of corruption.

In addition, the Council's reports show that the Council addressed violations of the law including robbery, fraud, and similar crimes, as well as violations of rights by the failure of one side to meet its contractual obligations and not corruption as a specific type of crime.

Finally, investigation requires a specific skill set, trained personnel, and special powers. It's no wonder that in every major country investigations are handled by a special division of the administration such as police, investigative judges, and prosecutors offices. They possess the necessary know-how, trained personnel, and authority. Conversely, the Council doesn't meet any of these conditions for conducting successful investigations. It therefore comes as little surprise that the Council's efforts have failed to produce the results expected by the investigation camp within the Council itself.

The majority of the Council's activities were aimed at privatization, a process that began in 2001. The Council has looked at a number of different privatization cases and analyzed privatization legislation. It concluded that loopholes in the law could facilitate corruption. At the same time it takes this as a proof that there actually was corruption in privatization. Furthermore, it made no attempt to determine whether other privatization models were better or worse in this respect, let alone consider whether keeping companies in state ownership might be a better choice corruption-wise. In other words, there was no analysis of the privatization process in regard to the expense of any te available options.

It appears that in its analysis of the privatization process, the Council focused its attention on privatization revenues, which means that its working hypothesis is that corruption reduces privatization revenues. As a result, the Council paid no attention to other privatization- and corruption-related issues such as how corruption affects the choice of buyer, whether privatized companies improve, whether changes in ownership structure encourage owners to restructure and invest and so on. Yet the Council has decided that the only aspect that affects the public interest is privatization revenue. Hence the Council's concern that corruption could result in companies being sold for rock-bottom prices. At the same time it pays very little attention to money owned by companies being privatized, which end up being paid by the new owner.

It's interesting that the Council's attention has been directed solely at post-2001 privatization. Earlier cases didn't interest the Council even though it was these sales that led to the dispersion of ownership that created a wealth of problems and irregularities that arose when the new owners arrived to take over their new companies. Questionable arrangements, which fueled suspicions of corruption, were far more common in the pre-2001 period. This also applies to takeovers through the purchase of stock held by the state Share Fund.

Only in 2006 did the Council put together three reports summing up its activities within the formal constraints of its mission. In these reports the Council voiced objections to three corruption-related laws (Money Laundering Prevention Law, State Auditing Institution Law, and Corruption-Prevention Law). Unfortunately, these reports are very brief (about two pages each), and their findings are trivial, as are the proposed improvements.

The Council has been very active in communicating with the public in the last three years and most of this communication has fallen on the shoulders of Council Chair Verica Barac. One gets the impression that she didn't have much of a problem with this. Obviously, the Council thinks very highly of her statements to the media since they are available on the Council's website. Most of these statements were made in response to various scandals (the majority of which, such as corruption in the Customs Service, were discovered by someone else), privatization, or the actions of the executive.

The Anti-Corruption Council has largely discredited itself through its own actions. Given that a new institution will probably be formed soon and replace the Council, it won't start from scratch. Instead, it will first have to swim back to the surface.

Are the Conflict of Interest Prevention Law and the committee tasked with its implementation doing a good job?

Although, strictly speaking, this law isn't aimed at fighting corruption but tackling embezzlement and partial decision, the Conflict of Interest Prevention Law does restrict certain mechanisms of corruption. However, a large part of the law dealing with the holding of multiple offices affects neither corruption nor conflicts of interest. Are anybody's interests truly harmed if the energy minister is also a board member of the national power utility? This is the old communist policy of discouraging multiple duties, but in a different form and with a different justification.

As far as scope is concerned, the law covers a large number of officials. On the one hand, this is a flaw because the Committee for the Prevention of Conflicts of Interest has to spend a great deal of its resources on creating and maintaining a database on public officials. On the other hand, many people in decision-making capacities are not encompassed by the law. By this I mean members of various committees set up to issue state contracts and so on. This law does not apply to them. In addition, the law doesn't apply to people who don't actually make decisions, but can affect decisions that are
made such as advisers to the prime minister and deputy prime minister, and advisers of ministers.

Experts' biggest objection to this law is that it doesn't pay much attention to MPs since they are exempt from many of its provisions. Many of the law's provisions are absurd, such as Article 6, Paragraph 1, which states that "officials are prohibited from influencing decisions... in a way that would benefit their own interests or those of another party." Almost every decision has an impact on the interests of someone (otherwise it would be irrelevant), so it's unclear how that can be avoided.

In its report the Committee has said that almost every official provided the required information, with the greatest level of noncompliance observed in the case of local officials, which is not surprising. Yet a key thing that is missing is a report on the validity of the submitted information and whether anything has been done to check that information (say, in cooperation with the Tax Administration), and what these checks have discovered.

As far as penalties are concerned, they are too lax. The penalty for first offenders is some kind of warning, which happens when an official is found to have violated the law. The next level, a public statement acknowledging that an official has violated the law in the case of an elected official and a public call for resignation in the case of other officials, is also where it ends. Stricter punishment is needed, such as requiring offenders to pay back all money earned by violating the law, or the confiscation of property acquired by a person while in office that the person cannot verify was procured in a legal way.