Topic 11: CORRUPTION AND BRIBERY

INTRODUCTION TO OIL AND GAS

CORRUPTION AND BRIBERY

EXPORT CONTROL

US, OECD and UK

1970s USA – SEC investigation 400 companies – illegal payments around $300m

However, US trade disadvantage – so negots with OECD.

1997 33 countries signed up OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions

Starting point is therefore the US law: Foreign Corrupt Practices Act 1977.

5 points:

Corrupt Influence: intent to influence or induce

Payment or offer of payment: money or anything of value: actual payment not necessary

Business purpose: to obtain or retain business

Recipient: foreign officials or politicians or political parties

Payer: US territory or nationality: A foreign company or person is now subject to the FCPA if it causes, directly or through agents, an act in furtherance of the corrupt payment to take place within the territory of the United States.

Example: Vetco Gray:

2002: US and UK subsidiaries fined by US authorities $5.25m each in respect of $1m illegal bribes in Nigeria. Further $5.9 to be paid as interest and restitution. $10.5m civil penalty – to be deemed paid if the fines were paid.

2007: VG Controls Inc and VG Controls Ltd (UK company) and VG UK Ltd (UK company) fined respectively: $6m, $8m and $12m respectively and required to subject themselves to independent compliance audit. Fines in respect of payments of approx $2.1m spread over around 378 payment in Nigeria (around 5-6000 each). Not big payments. Paid through freight forwarding and customs clearance companies to speed up the transit of employee and equipment into Nigeria.

Two further points therefore:

Facilitation

Use of third parties
Facilitation payments are allowed: for permits, licenses, processing documents including visas and work permits, providing police protection and supply of amenities (water, electricity etc), loading and unloading cargo.(list from US Dept of Justice and Dept of Commerce guidelines)payments

Wonder where VG went wrong?

Use of third parties.

Can also argue the payment was lawful in the country it was made.

Sanctions: fines to company of $2m; individuals up to $100k and 5 years in jail (alt fine can be up to twice the benefit that was sought by making the corrupt payment)

Also

Loss of federal business (and likely state business too)

Loss of confidence of suppliers

Inability to participate in federal procurement programmes

Denial of export licenses

Also: eg from competitors, private action for 3x damages under the Racketeer Influences and Corrupt Organisations Act#p#分頁標題#e#

Red Flags

Qualifications of partners
Business experience
Business Links
Connections
Reputation
Clientele
Payment patterns
Payment fluctuations
Unusual or unexplained payments (esp cash)
High commission rates
Lack of transparency
Government Links
UK

Public Bodies Corrupt Practices Act 1889: bribery of a public official created a criminal offence

Specifically, the Act prohibits a person covered by the Act, whether by himself, or in conjunction with any other person, from corruptly soliciting or receiving, or agreeing to receive, for himself, or any other person, any gift, loan, fee, reward or advantage whatever as an inducement to, or reward for, doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed, in which the public body is concerned. A person may also not corruptly promise, or offer, any gift, loan, fee, reward, or advantage whatsoever, to any person, whether for the benefit of that person, or of another , as an inducement to or reward for doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed; in which the public body is concerned.person

Prevention of Corruption Act 1906:

This Act deals with the corrupt transactions of agents. Agents are prohibited from corruptly accepting or obtaining, or agreeing to accept or attempting to obtain, from any person, for themselves, or for any other person, any gift or consideration as an inducement or reward for doing or forbearing to do any act, or for showing or forbearing to show favour or disfavour to any person, in relation to his principal's affairs or business.
2.7 It is an offence for any person corruptly to give or agree to give, or offer, any gift or consideration to any agent as an inducement or reward for doing or forbearing to do, or for having done or forborne to do, any act, or for showing or forbearing to show favour, or disfavour, to any person in relation to his principal's affairs or business.
2.8 It is also an offence for any person knowingly to give to any agent, or for any agent knowingly to use, with intent to deceive his principal, any receipt, account or other document, in respect of which his principal is interested, and which contains any statement which is false or erroneous or defective in any material particular, and which to his knowledge is intended to mislead the principal.
Prevention of Corruption Act 1916
This Act creates a presumption of corruption in certain cases prosecuted under the 1889 and 1906 Acts. If it is proved that any money, gift or other consideration has been paid, or given to or received by a person in the employment of Her Majesty, or any Government Department or public body, by or from a person, or agent of a person, holding or seeking to obtain a contract from Her Majesty, or any Government Department or public body, the money, gift, or consideration shall be deemed to have been paid or given and received corruptly as such inducement or reward as is mentioned in the Act in question, unless the contrary is proved. #p#分頁標題#e#
The jurisdiction of the criminal courts of the United Kingdom was territorially based and this policy was endorsed by the Government following an inter-departmental review, which reported in July 1996. Though that review proposed guidelines, which were approved by the Government, which could be used to evaluate exceptional proposals to take extra-territorial jurisdiction, it seems unlikely that corruption would fall within the scope of such exceptions.
The offence of corruption, by its nature, can take place in more than one jurisdiction. The courts have held that, in England and Wales, provided one element of a corrupt transaction (the offer, acceptance, or an agreement to accept) takes place within the territory of England and Wales the courts will have jurisdiction over the offence. There are indications that the extent of the statutes are not widely understood, notably in the commercial sphere. It has been suggested that the jurisdictional extent of the offences should be set out on the face of any new legislation, for the sake of clarity. In Scotland there is no case law dealing directly with the question of the extent to which the Scottish courts can assume jurisdiction over offences of corruption where some of the relevant activities have taken place abroad. Express clarification in statute would therefore appear to represent an improvement on the current position in Scotland.
There have been suggestions in some international fora that this jurisdictional basis does not give the United Kingdom sufficient reach to regulate and control the activities of its nationals and companies who may be engaging in corrupt activities overseas. But the reach of the United Kingdom legislation would catch any corrupt act where an element of the corrupt transaction took place in this country.
HENCE:
Part 12 Anti-Terrorism, Crime and Security Act 2001: extends the above to jurisdictions with no connection to UK and to persons with no connection to UK.

Implementation of UK’s OECD obligations

The 1906 Act uses the term principal and agent. Though agent is defined widely as including "any person employed by or acting for another" it is debatable as to whether it extends to trustees, particularly of a private trust. The 1889 Act is restricted to public bodies and therefore acts, for example, of members of a local authority, who might be bribed to vote in a particular way at a caucus meeting, which had an effect on public policy, are probably not covered by existing statute law, though the common law offence of bribery may apply.
The term "corruption" does not only apply to bribery. As has been stated the 1906 Act applies to offences involving false documentation. There may also be situations where persons use their position to obtain an unfair advantage for themselves or another, which may fall within the common law offence of Misuse of Public Office. For example; if an officer of a committee of a local authority influenced or encouraged a member to vote in a particular way, the acts would be corrupt but bribery would not necessarily be involved. #p#分頁標題#e#
It is for discussion as to whether existing statute or common law adequately covers these activities. fairly

The offences created by the 1889 and 1906 Acts cover broadly similar ground, but there are differences in the detail of the offences. The 1889 Act is clearly concerned only with public sector corruption. This is reflected in the penalties available under the Act which extend to loss of voting rights and eligibility to hold public office. However, the 1906 Act, though it appears to be aimed principally at private sector corruption, in that the offences are described in terms of agents and principals, also, by virtue of section 1(3) applies to servants of the Crown, or to officials in any public body. However members of public bodies (as apposed to officials) appear to be excluded from the ambit of the 1906 Act.
There are two further points of difference between the two Acts which are noteworthy. The 1906 Act extends to cases involving false documentation; there is no equivalent provision in the 1889 Act. Also the 1906 Act refers to attempts to obtain gifts etc, whereas the 1889 Act refers to soliciting of such gifts. This may be significant in that the solicitation of a gift may not necessarily be regarded by a jury as anything more than merely preparatory (and therefore not an attempt under the provisions of the Criminal Attempts Act 1981) to the obtaining of such a gift. It would be a question of fact in every case.
In order to overcome these difficulties it might be thought appropriate that there should be one offence of corruption which applies to the public and private sector alike and that the offence should be defined in such a way as to include all the conduct currently covered by both existing Acts.
It is certainly arguable that the boundary between the public and private sectors is less rigid today than it used to be. Many public sector functions are now carried out by private contractors or have been privatised completely. There are also numerous instances of public bodies wholly owning companies which trade as commercial entities - such as direct labour organisations.
In the light of the above the Government believes that there may be some justification in the suggestion that has been made for having a single offence of corruption. The additional penalties available under the 1889 Act could, if there is general support for their retention in any amended legislation, be applied at the discretion of the court where the court believes that it is in the public interest for the offender to be subject to those measures.

Much of the concern expressed about the existing statutes relates to the archaic language and formulations, which remain extant, and in particular, to the definition of the offence of corruption as acting "corruptly".
The courts have taken a robust attitude to suggestions that it is difficult to interpret the term "corruptly". In R v Wellburn and others (1979) 69 Cr App R 254 CA, the Court of Appeal approved the direction of the Recorder of London that: "Corruptly is a simple English adverb and I am not going to explain it to you except to say that it does not mean dishonestly. It is a different word. It means purposefully doing an act which the law forbids as tending to corrupt."#p#分頁標題#e#
(It is suggested the reasoning is somewhat circular!)
The court pointed out that the mischief aimed at by the modern statutes dealing with corruption is to prevent agents and public servants being put in positions of temptation.
A person does not have to show favour in consequence of having received a gift, the prosecution have merely to prove that a person received a gift as an inducement to show favour, for that gift to be corrupt (R v Carr (1957) 40 Cr App R 188). A person who accepts a gift knowing that it is intended as a bribe is guilty of an offence even if he does not intend to carry out what is expected of him (R v Mills (1979) 68 Cr App R 154 CA).
There is therefore, a considerable body of case law which clarifies the definition of corruption. However recent work in international fora, in particular the Council of Europe, has focused on attempting to define the behaviour which is corrupt. Though none of this work has yet been completed, one example of a possible definition is:
the intentional promise, offer, or gift by any person, directly or indirectly, of an advantage of any kind whatsoever to a person, as undue consideration for themselves, or for anyone else, to act or refrain from acting in the exercise of their functions, or the intentional request or receipt by a person, directly or indirectly, of an undue advantage of any kind whatsoever, for themselves or for anyone else, or the acceptance of offers or promises of such advantages to act or refrain from acting in the exercise of their functions.
The "mens rea" in this example is the intention to provide or receive an undue advantage. The assumption is that if, in the circumstances of the case, the advantage reaches a level where it might affect the actions of the person in question it is undue - and therefore corrupt. Trifling advantages such as small gratuities or Christmas presents, would not usually fall within the ambit of an offence described in this way.
But this definition is clearly related to bribery and does not include false documentation (covered by the 1906 Act) or improper influence. Separate definitions would be needed to cover these acts. Possibilities include, for false documentation:
- knowingly preparing or using an invoice which incorrectly describes a transaction, or reason for a transaction;
- knowingly failing to record a payment where there is a requirement to so record;
- knowingly preparing or using accounts which include false invoices or other records.
The concept known to several continental jurisdictions as trading in is perhaps better described in the United Kingdom as misuse of office. A possible definition of this offence might be: #p#分頁標題#e#
- for a person to influence intentionally, directly or indirectly, a decision, in order to gain an undue advantage for himself, or any other person.
The proposed UK Corruption Act has been shelved.influence