FINANCIAL INSTITUTIONS
ENERGY
INFRASTRUCTURE AND COMMODITIES
TRANSPORT TECHNOLOGY
Shipping and Corrupt Practices
Intertanko Presentation
Philip Roche
Partner
Emma Humphries
Associate
14 June 2011
UK Bribery Act 2010
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Introduction - the UK Bribery Act?
Why is shipping considered a risk?
Key features of the Act
Facilitation payments
Complying with the Act and Adequate Procedures
Compliance – what do you need to do?
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Bribery Act
Why is it important to you:
1. Jurisdiction – companies doing business or part of
their business in the UK
2. Counterparts
3. General International Change in approach
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General Change in Approach
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OECD Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions
15 February 1999.
The 34 OECD member countries and four non-member
countries - Argentina, Brazil, Bulgaria, and South Africa have adopted this Convention
The Convention permits countries to move in a co-ordinated
manner to adopt national legislation making it a crime to bribe
foreign public officials. It provides a broad definition of bribery,
requiring countries to impose dissuasive sanctions and
committing them to providing mutual legal assistance.
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2009 Recommendation for Further Combating Bribery
of Foreign Public Officials in International Business
• Adopt best practices for making companies liable for foreign bribery so that
they cannot avoid detection, investigation and prosecution for such bribery by
using agents and intermediaries, including foreign subsidiaries, to bribe for
them;
• Periodically review policies and approach on small facilitation payments.
These are legal in some countries if the payment is made to a government
employee to speed up an administrative process;
• Improve cooperation between countries for the sharing of information
• Provide effective channels for public officials to report suspected foreign
bribery and for protecting whistleblowers from retaliation; and
• Working with the private sector to adopt more stringent internal controls, ethics
and compliance programmes and measures to prevent and detect bribery.
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Typical Bribery in the News
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Corruption in Shipping
• May 2010 City of London Corporation Survey on
avoiding corruption risks in the City
• Identified the maritime and shipping industry as
one of the most ‘high risk’ industries likely to be
affected by the Act
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Key Features of the UK Bribery Act
• The new UK Bribery Act comes into force in July 2011
• Guidance
– SFO 2009 paper “Approach of the Serious Fraud Office to
dealing with overseas corruption”
– MOJ Guidance on “Adequate Procedures”
– MOJ circular on Bribery Act
– Joint Legal Guidance for Prosecutors
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Key Features of the UK Bribery Act
Two major categories of risk:
• Actual corrupt practices
– Bribery
– Address Commissions
– Brokerage commissions
• Facilitation payments
– Day to day “oiling the wheels”
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Key Features of the UK Bribery Act
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The general bribery offences
• someone offers, promises or gives another, or
• requests, agrees to receive or accepts
• a financial or other advantage
• in connection with a person performing a function
improperly
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Improper performance is the breach of an expectation
that the function will be performed in good faith,
impartially or as a result of a position of trust.
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No corrupt intent required.
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The offences extend to “private bribery”
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Key Features of the UK Bribery Act
Bribing a Foreign Public Official (FPO)
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someone pays or offers an advantage to a FPO
with the intention of influencing the FPO
in order to retain or obtain a business advantage
when such payment / advantage is not permitted or
required by written law
Note: No need for improper performance of function
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Key Features of the UK Bribery Act
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Facilitation Payments
• Not permitted (contrary to FCPA exception)
• Written law is relevant, not local custom
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Key Features of the UK Bribery Act
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Failure of commercial organisations to prevent bribery
• Corporate entity commits an offence if it, or anyone
associated with it, bribes another person in order to
retain or obtain a business advantage.
• Outward bribery only
• Associated person is widely defined: includes anyone
who performs services for or on behalf of the company
• This could be employees, agents, brokers, subsidiaries,
JV entities, JV partners
• Strict liability offence. Only defence is that the company
has adequate procedures in place to prevent bribery
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Key Features of the UK Bribery Act
Strict liability of the Company for acts of bribery done
by associated persons
• New offence of ‘failing to prevent bribery’
• Liability without fault
• Only defence – “adequate procedures”
• Fines – Aon - £5.5m
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Key Features of the UK Bribery Act
• Extra-Territoriality
– General and FPO bribery offences: if any part of the
offence is committed in the UK or if committed overseas
by a person with a close connection to the UK
– Corporate bribery offence: it is irrelevant where the
acts/omissions which form part of the offence take place.
– Applies globally to companies who carry on any part of
their business in the UK
– UK management companies
– UK chartering brokers/insurance offices
– Companies with UK agents/distributors?
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Facilitation Payments
Counterparts
• oil majors
• banks
• purchasers of businesses
• commodity traders
• energy companies
– BG Clause
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Counterpart Risk and Expectation
Many major global corporates will set the UK Act as
the “gold standard” for anti-corruption requirements
of counterparts
An example from a shipping contract;
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Energy Major Contract for Services
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Contractor represents, warrants and covenants that it and its
Representatives have not Offered and will not Offer with respect
to any Matters any Advantage to any Public Official which would
violate Applicable Corruption Law.
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Energy Major Contract for Services (2)
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Contractor represents, warrants and covenants that it and its
Representatives have not Offered and will not Offer with respect
to any Matters any Advantage to any Public Official which would
violate Applicable Corruption Law.
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“Advantage” means any financial or other advantage, payment,
gift, promise or transfer of anything of value.
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Energy Major Contract for Services (3)
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Contractor represents, warrants and covenants that it and its
Representatives have not Offered and will not Offer with respect to any
Matters any Advantage to any Public Official which would violate
Applicable Corruption Law.
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“Advantage” means any financial or other advantage, payment, gift,
promise or transfer of anything of value.
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Applicable Corruption Law" means all of the laws, rules, regulations and
other legally binding measures relating to bribery, corruption, money
laundering, fraud or similar activities:
- of [relevant country of operation];
- of the country of incorporation of Contractor and Contractor's
ultimate parent company and of the principal place of business of
such ultimate parent company;
together with the provisions of the United Kingdom Bribery Act 2010
and the United States Foreign Corrupt Practices Act of 1977….
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Facilitation payments
• Oiling the wheels
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Customs officials
Port State Control
Stevedores
Port/Canal Authorities
• Hospitality
•Firm view of SFO that these are an “advantage”
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How to ensure compliance
• Only defence is to show that “Adequate
procedures” have been implemented
• Local consultants/agents should not be engaged
without thorough due diligence
• Beware of standard business practices which are
affected by the Act i.e. client hospitality, facilitation
payments, allowing agents to arrange business
• ‘Tone from the top’ – adopt a zero tolerance
culture
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How to ensure compliance - continued
• Risk assessment – regular and thorough
• Policies and procedures must be clear and practical
• Effective implementation across the business
• Monitor and review compliance
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Goals of Risk Assessment
Risk Assessment (Per MOJ Guidance)
“The commercial organisation [must] regularly and
comprehensively [assess] the nature and extent of
the risks relating to bribery to which it is exposed”
– A tailored approach
– Focus on:
• Internal risk
• Country risk
• Partnership risk
– Ongoing responsibility
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Goals of Risk Assessment
Identify ongoing risk
Assess identified risk – severity and likelihood
Pragmatic and cost effective approach
Risk Mitigation – a risk assessment should inform (1)
the development, implementation and maintenance
of effective anti-bribery policies and procedures (2)
remedial steps.
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Key Features of the UK Bribery Act
Adequate Procedures: “Six principles”
6. Monitoring
and
Review
5. Effective
Implementati
-on
1. Risk
Assessment
Six
Principles
4. Clear Policies
& Procedures
2. Top Level
Commitment
3. Due
Diligence
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Anti-Bribery Policy
Statement – zero tolerance approach
Head of Compliance
Scope of Policy
Reporting – whistleblowing
Training
Monitor and Review
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FINANCIAL INSTITUTIONS
ENERGY
INFRASTRUCTURE AND COMMODITIES
TRANSPORT TECHNOLOGY