Global investigations
What’s new in the fight against
bribery and corruption?
Geoff Nicholas
Adam Siegel
Maxim Kulkov
Peter Yuen
27 March 2012
Freshfields Bruckhaus Deringer LLP
Today’s agenda and speakers
Introduction
UK Bribery Act update
Geoff Nicholas
US FCPA update/global enforcement
trends Brazil/India update
Adam Siegel
Russia update
Maxim Kulkov
Partner, London
T +44 20 7832 7773
M +44 7801 781 985
E geoff.nicholas@
freshfields.com
Partner, New York
T +1 212 277 4032
M +1 646 508 6394
E adam.siegel@
freshfields.com
Partner, Moscow
T +7 495 785 3083
M +7 985 769 3776
E maxim.kulkov@
freshfields.com
China update
Peter Yuen
Partner, Hong Kong
T +852 2913 2665
M +852 9353 8124
E peter.yuen@
freshfields.com
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UK Bribery Act update: a reminder of the key provisions
General offences
• Offering, promising or giving a bribe
• Requesting, agreeing to receive or accepting a bribe
• Bribing a foreign public official
Specific offence
• Corporate offence – failure to prevent bribery
Penalties
• Individuals – up to 10 years’ imprisonment and/or an unlimited fine
• Corporations – unlimited fine
• Debarment from public contracting
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UK Bribery Act update: whom does the UK Bribery Act
apply to?
An entity ‘doing business’ in the UK is liable for ‘bribes’ paid on its behalf
by its ‘associated persons’ unless it has adopted ‘adequate procedures’ to
prevent the conduct
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UK Bribery Act update: the outstanding issues
Facilitation payments
Liability for third parties and likely impact
Extraterritorial reach?
• Government guidance as to scope:
- ‘demonstrable business presence’ in the UK
- UK listing?
- non-UK parent of UK subsidiary?
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UK Bribery Act update: the SFO’s approach
First prosecution under Bribery Act (October 2011)
Launch of ‘SFO Confidential’ (1 November 2011)
UK proposals for deferred prosecution agreements
Use of civil recovery orders (eg Mabey Engineering (Holdings) Ltd)
‘People in the SFO are out there now actively looking for evidence of
bribes that are being paid. This is a very high priority for us. Any
companies that may have comforted themselves with the thought that
nothing is going to happen will have a rude awakening when they start to
see what the SFO is able to do in the future.’
(Richard Alderman, Director, Serious Fraud Office, 4 September 2011)
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US FCPA update: a reminder of the key provisions
• Any corrupt act, in furtherance of
• An offer, payment or gift of any money or thing of value
• To any
- ‘foreign official’ or
- other person for a foreign official
• To obtain or retain business or gain improper advantage
• Acts within and without the US
• For ‘Issuers’ and ‘Domestic concerns’ any act anywhere in furtherance
• Any enterprise or individual for an act in the US in furtherance of corrupt
scheme
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US FCPA update: accounting provisions
FCPA amended ’34 Act to require US public companies to:
• Keep accurate books and records
• Establish and maintain a system of internal accounting controls
Accurate books and records
• Issuers and subsidiaries
• Even facilitation payments must be recorded accurately
Adequate system of internal accounting controls
• Issuers and subsidiaries
• Important focus of SEC, particularly post-SOX
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US criminal and civil fines imposed on corporations
2004-2010
$m
2000
1800
1800
200
1600
81
56
48
58
Panalpina
365
ENI
338
Technip
137
Alcatel Lucent
Pride
Shell
ABB
1400
1200
893.4
1000
193.4
800
644
65
600
Daimler
502
185
400
Siemens
800
284
KBR
155.1
200
28.2
0
36.3
28.2
36.3
2004
2005
579
400
87.2
87.2
2006
218
155.1
2007
BAE
2008
2009
2010
JGC
Corporation
2011
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US FCPA update: enforcement trends
Heightened enforcement:
• SEC and DOJ
• Increased staffing co-ordination and new SEC FCPA Unit
• Budget increases give SEC and DOJ additional resources to increase FCPA
enforcement activities
• Focus on specific industries
• Major fines
• Cases against individuals
Self-reporting expected
Robust and verified compliance expected
Focus on consultants, distributors, JVs, agents
More whistleblowers (Dodd-Frank)
DPAs, monitors and major disgorgement
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Global enforcement trends: the stats
3
4
of pending
FCPA
investigations
relate to
emerging
markets
26%
of all ongoing US FCPA
investigations involve
the oil and gas sector
8top10
of the
bribery penalties
(totalling $2.2bn) were
paid by European
companies
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ongoing investigations
in Germany
$181m
total bribery settlements
in Nigeria with
international companies
19%
of international
bribery
enforcement
activity involved
extractive industries
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Global enforcement trends: TI progress report 2011
Key
Active enforcement
Moderate enforcement
Little/no enforcement
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Global ABC enforcement trends
• Cross-border co-operation of multiple regulators
• Increase in action and results (especially US, UK and Germany)
• Increased focus on individuals
• Increase in follow on actions
• eg Nigeria, Greece, Turkey
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Where has the US government focused its attention?
Key
Countries most frequently
involved in FCPA
investigations
13
Brazil: legislative changes and enforcement trends
Current law
• Contained in a series of provisions in domestic federal and state laws
Legislative changes
• Draft Bill 6826/2010 – intended to strengthen dramatically foreign bribery laws
Key provisions include:
• prohibiting bribery of foreign public officials
• corporate liability
• increased sanctions (fines range from 1–20% of company’s gross revenue)
Enforcement trends
• Active investigations involving international companies
• July 2011 – major scandal involving Brazilian Ministry of Transportation
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India: legislative changes and enforcement trends
Current law
• Contained in a patchwork of different laws
Legislative changes
• ‘Jan Lokpal’ Bill aimed at tackling domestic corruption
• Key provisions include:
• Creation of independent agency to investigate and prosecute domestic
officials/judges/politicians
• Investigations to be completed within one year/trial the following year
• Increased focus on foreign bribery: Foreign Public Officials Bill introduced into
Indian Parliament (22 March 2011)
Enforcement trends
• Supreme Court of India’s recent decision to cancel 122 mobile phone licences
on the basis that allocation process favoured certain companies that bought
licences at bargain prices
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Russia: an overview of relevant laws and regulations
Anti-corruption treaties to which Russia is a signatory
• UN Convention against Corruption, since 8 June 2006
• The Council of Europe Criminal Law Convention on Corruption, since 1
February 2007
• OECD, since 17 February 2012 (for the details see OECD Phase 1 Report dd
16 March 2012 at www.oecd.org/dataoecd/10/40/49937838.pdf)
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Russia: legislative changes
Recent amendments to the Russian anti-corruption laws
On 4 May 2011, Russia enacted Federal Law No. 97-FZ:
• It is an offence to bribe not only Russian public officials but also foreign officials
or officials of public international organisations (UN, IBRD, etc.)
• Administrative liability for legal persons has increased significantly. For
example, for an especially large bribe (over RUB 20m) the fine is 100 times the
amount of the bribery, but not less than RUB 100m (app. $3.5m)
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Russia: legislative changes
Legislative initiatives
• Oblige officials to declare their expenses
• Impose a criminal liability on legal persons
• consider offer/promise to give/take a bribe as a completed crime
• eliminate an ‘effective regret’ defence as it applies to foreign bribery
• Make the process for lifting immunity for persons alleged to be involved in
foreign bribery more effective and transparent
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Russia: enforcement trends
Recent examples/areas of focus for enforcement activity
• Public procurement
• Obtaining state permissions/licences/certificates
• Customs violations
• lobbying
• privatisation of state and municipal property
• federal and municipal land lease (Mayor of Stavropol case)
• avoidance of administrative investigations/penalties (tax, customs, anti-trust,
construction, fire, sanitary inspections) (Magtitsky case)
• unlawful judiciary (Krasnodar judge case)
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China: an overview of relevant laws and regulations
Bribery and corruption legislation
• Criminal Law – bribing of private persons and state workers
• Anti-unfair Competition Law – commercial bribery
• Various implementing, provisional rules and regulations and notices issued by,
among others, SAIC, Supreme People’s Court and Supreme People’s
Procuratorate
• Various internal party rules issued by China Communist Party
20
China: legislative changes
• Amendments to the PRC Criminal Law (VIII)
• Issued on 25 February 2011 and effective on 1 May 2011
• Adds a new paragraph to Article 164 criminalising bribing a ‘foreign public
official or officials of an international public organisation’ to seek unjust
commercial benefits
• Unclear to what extent this amendment is intended to have any extraterritorial
effect on PRC corporate entities
• First time the PRC government has stated its position on offering bribes to
‘foreign public officials and officials of international public organisations’
• On 22 November, the government issued supplementary provisions setting
threshold amounts of RMB 10,000 if the bribe is made by an individual and
RMB 20,000 if the bribe is made by an organisation
21
China: enforcement trends
• China has taken a tough stance on some recent bribery cases with sentences
including the death penalty for recipients of bribes
- in November 2011 the president of Shanghai Pharmaceutical was sentenced
to death with a two-year reprieve for accepting bribes totalling more than
US$1.8m and embezzling another US$5m
- in August 2011 the vice-chairman of China Mobile was sentenced to death
with a two-year reprieve for accepting bribes totalling more than US$2.5m
- in November the head of Beijing Capital International Airport admitted to
taking US$785,000 in bribes. His verdict is expected shortly. His predecessor
was executed two years ago for accepting bribes of US$4.2m
• More than 60,000 people in China have been sentenced for bribery and
corruption since 2008
• In 2011, 10,542 investigations into commercial bribery were opened
• China is becoming more co-ordinated internally in its fight against corruption
• A nationwide database of corruption convictions has been created and can be
accessed by application
22
China: enforcement trends
Effect on foreign business in China
• China’s steps to combat corruption and bribery are not limited to government
officials. China has prosecuted foreign employees of foreign companies
• In 2010 four Rio Tinto employees, including an Australian, citizen, were charged
with a range of offenses including bribery and received prison sentences
ranging from 7–14 years and were heavily fined
• In 2010 Toyota was fined US$20,850 for offering rebates to dealers for pushing
customers to Toyota’s financing company over local banks for loans
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Legislative and enforcement changes: what does it mean
for you?
Significant differences in anti-bribery
and corruption legislation and
enforcement (even within G20)
Enforcement levels key
Active
Moderate
Little
Country
ABC legislation
score (/16)
UK
14.5
South Africa
14
USA
14
China
13.5
Turkey
13
Republic of Korea
13
Russia
12.5
Brazil
12
Canada
12
France
12
Mexico
12
Germany
11.5
India
11.5
Saudi Arabia
11.5
Italy
11
Argentina
10.5
Australia
10.5
Indonesia
10
Japan
9.5
24
Legislative and enforcement changes: what does it mean
for you?
25
Legislative and enforcement changes: what does it mean
for you?
Need to monitor developments in light of
• Ongoing review/revision of existing anti-bribery and corruption legislation
• Changes in policy on enforcement activity
Implement global anti-bribery and corruption compliance policies
• But you also need to reflect local law requirements and risks in the jurisdictions
in which you operate
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Bribery Watch
for more information contact briberywatch@freshfields.com
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Questions?
Freshfields Bruckhaus Deringer LLP
LON20048353
This material is for general information only and is not intended to provide legal advice.
© Freshfields Bruckhaus Deringer LLP 2012
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