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The rule of law is strong in Iceland, and the tolerance for corruption is low. Although isolated cases of corruption do occur, it is not an obstacle to business. Iceland’s General Penal Code (GPC) criminalises the acts of giving and receiving a bribe, abuse of office, trading in influence and fraud. It establishes criminal liability for individuals and companies, and forbids bribery between businesses and foreign public officials. While there is no distinction made between bribes and facilitation payments, the illegality of gifts and hospitality depends on their intent and the benefit obtained. Since the financial crisis, a number of fraud scandals have been uncovered in the financial sector, revealing conflicts of interest between businesses and political figures, as well as abuse of public funds. This has exposed institutional weaknesses and raised fundamental questions about the integrity of the governing institutions. The government has initiated a large number of investigations into the collapse, as well as legal and regulatory measures to counter abuses in its financial system.
The Icelandic judiciary is free from corruption and political influence, and no allegations of corruption have ever been made involving judges (FER 2013; European Commission 2012). Companies consider the judicial system non-discriminatory, highly independent and effective in protecting property and contractual rights (ICS 2015). While the judiciary is not seen as a corrupt institution (GCB 2010/2011), only about one third of citizens express confidence in the system (GRECO, Apr. 2015).
The reliability of Icelandic police services to protect companies from crime is considered very high (GCR 2015-2016). The government has effective mechanisms to investigate and punish abuse and corruption (HRR 2013). The police sector is not seen as a corrupt institution, and citizens indicate that bribery almost never occurs when interacting with the police (GCB 2010/2011).
The Icelandic regulatory system is transparent, efficient and competitive. Although bureaucratic delays can occur, corruption is not seen as a challenge to doing business (ICS 2015). Iceland is a member of the European Economic Area (EEA), meaning that most commercial legislation and directives of the European Union are in effect. It is relatively easy to deal with government administrative requirements (permits, licences, reporting, etc.), and companies report that irregular payments and bribes almost never occur when obtaining public utilities and licences (GCR 2015-2016).
Corruption in the Icelandic tax administration is not reported to be a problem when doing business, and companies should note that Iceland’s Income Tax Act prohibits bribes from being tax deductible. Low corporate tax rates and low energy prices are among the primary incentives for attracting investors, but following the bank crisis which created a large fiscal gap for the state, the government has raised taxes to generate revenue (ICS 2014).
Corruption at the Icelandic border is not considered a problem when importing and exporting, and the efficiency and transparency of the border administration is very high (GETR 2014). Companies also rank the burden of customs procedures as very low (GCR 2015-2016). Exporting and importing in Iceland requires one and a half times the cost of the OECD average (DB 2015).
Corruption in Iceland's public procurement is not a problematic factor to doing business. Companies report that irregular payments of bribes almost never occur in relation to the awarding of contracts and licences; however, favouritism may taint the decisions of procurement officials when deciding upon contracts (GCR 2015-2016). Transparency is occasionally a concern in the procurement process, but regulations are continuously being improved (ICS 2015). Companies can be debarred from bidding on public tenders if they have been convicted of a criminal offence. Businesses are recommended to implement procurement due diligence procedures.
Iceland’s General Penal Code (GPC) criminalises the acts of giving and receiving a bribe, abuse of office, trading in influence and fraud. It establishes criminal liability for individuals as well as companies, and forbids bribery between businesses and of Icelandic and foreign public officials. The government has been criticised for not taking effective actions against foreign bribery. For instance, the Penal Code does not effectively criminalise bribery of officials in foreign state-owned entities, and the obligation on officials to report foreign bribery is not clarified (FCPA Blog, Apr. 2015). The code does not distinguish between bribes and facilitation payments. The illegality of gifts and hospitality depend on their intent and benefit obtained, and whether the act has lead to an undue advantage or improper influence of a person’s decision-making. Sanctions range from thirty days to three years imprisonment for active bribery (domestic and foreign), and a maximum of six years for passive bribery. A company can be held criminally liable and ordered to pay fines for corruption offences committed by individuals acting on their behalf. Other legal anti-corruption measures include codes of conduct for government staff and ministers to regulate conflicts of interest, and require those affected to report illegal activities. A code of conduct for MPs has been developed and adopted in July 2015 (GRECO, Apr. 2015). It is reportedly in line with the code of conduct of members of the Parliamentary Assembly of the council of Europe (GRECO, Apr. 2015). The Rules on Financial Accounts of Political Parties regards the disclosure of accounts and donations made to political parties and candidates. Under the Public Procurement Law, economic operators can be debarred from participation in government procurement if they have been convicted of a criminal offence, including bribery and corruption. Iceland is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC), the Council of Europe’s Criminal Law Convention against Corruption, and the Group of States Against Corruption (GRECO).
Freedom of expression is guaranteed and protected under the Constitution, and the Freedom of Information Act 1996 guarantees access to government information. Iceland's media environment is diverse and operates without government restrictions and interference. A parliamentary resolution established the International Modern Media Institute (IMMI), which spearheads the Icelandic Modern Media Institute and aims at transforming Iceland into a global safe haven with unprecedented transparency and legal protection for the press, bloggers and whistleblowers (FotP 2015). While the IMMI has managed to codify a stronger protection for sources, most of the institute's who proposed changes are either pending or incomplete. Iceland’s media environment is considered 'free' (FotP 2015).
Many civil society groups operate freely and enjoy extensive government cooperation (FitW 2015), but there is no active cooperation between civil society and government agencies involved in the fight against corruption (HRR 2013).
- World Economic Forum: Global Competitiveness Report 2015 - 2016.
- US Department of State: Investment Climate Statement – Iceland 2015.
- FCPA Blog: 'Frozen: Iceland's cold shoulder steams OECD anti-graft group', 13 April 2015.
- GRECO: Fourth Evaluation Round - Compliance Report Iceland 2014.
- World Economic Forum: The Global Enabling Trade Report 2014.
- Freedom House: Freedom in the World – Iceland Country Profile 2014.
- Freedom House: Freedom of the Press – Iceland Country Profile 2014.
- European Commission: Iceland Report 2013.
- GRECO: Fourth Evaluation Round: Corruption prevention in respect of members of Parliament, judges and prosecutors, 28 March 2013.
- OECD: Follow-Up to the Phase 3 Report & recommendations, January 2013.
- US Department of State: Country Report on Human Rights Practices – Iceland 2013.
- European Commission: Iceland Progress Report 2012.
- Transparency International: Global Corruption Barometer 2010/2011.